Executives advise retail chains on post-recession growth

Top retail executives at a conference Thursday said department stores must offer shoppers more reasons to stop in and need to expand their presence online and in new kinds of locations, like airports.

"We have to be nimble without being as certain," said Roger Farah, president and chief operating officer at Polo Ralph Lauren Co.

Farah was addressing more than 300 executives on the first day of a two-day department store summit organized by Saks Inc. and the Intercontinental Group of Department Stores, a trade group.

Attendees represent 36 countries and many major companies including Macy's Inc., J.C. Penney Co. , Marks & Spencer, and Harrah's Entertainment Inc. and almost half are CEOs, chief operating officers or chairmen of their firms.

Department stores and their clothing suppliers were among the companies hit hardest as the financial crisis escalated in late 2008. And consumers' discretionary spending has not returned to pre-recession levels even though the spending environment has stabilized. Wendy Liebmann, CEO of consulting firm WSL Strategic Retail, said her research has shown that more than half of shoppers believe the downturn will last at least another year, maybe two, and 17 percent of shoppers surveyed said they expect it to last another three to five years.

"The recovery is fragile," said Steve Sadove, chairman and CEO of Saks Inc., which operates Saks Fifth Avenue. But he said the future is bright for department stores and noted that the industry is changing and learning to embrace innovation.

Farah said many department stores used to focus too much on merchandise with high profit margins and not enough on what customers wanted.

"We all need to develop frequency of need," he said. Opening at locations like airports also would increase foot traffic, he said.

Lew Frankfort, chairman and CEO of Coach Inc., said department stores must attract younger customers and embrace micro-marketing in "unorthodox ways."

Terry Lundgren, chairman, CEO and president of Macy's, said the Great Recession accelerated the company's moves to tailor its merchandise to local markets. That strategy helped push it to profitability in the first quarter compared with a year earlier.

The "My Macy's" plan puts decisions on what to stock closer to customers, and that has allowed Macy's to react better to local needs and put more experienced workers on sales floors.

In Washington, D.C., adding more career dresses and navy pumps helped boost sales, according to a video the company showed Thursday.

But the executives agreed the big growth area is the Web.

Michael McNamara, vice president of research and analysis for MasterCard Advisors' SpendingPulse, told the audience that more than 10 percent of department store revenue over the past five consecutive months is from the Web; that compares with 8 percent in the period two years ago.

Since the beginning of the year, overall online revenue has increased 15 percent compared to the year-ago period; at department stores, that number has increased 13.2 percent. And 13.6 percent of all apparel sold is now bought online compared with 7.9 percent four years ago.

SpendingPulse measures spending in all forms including cash.

Frankfort said Coach now has more than 750,OOO Facebook fans and more than 300,000 followers on Twitter.

The online sector has "moved up from the kids' table to the grownup table," said McNamara, and that means department stores must pay more attention to recruiting talent from outside the traditional retail sector.