An Interview with Robin Lewis

Robin Lewis What do you think about the economy, how do you think it will be for the rest of the year?

Mike Gould I’m cautiously optimistic, but I’m always cautiously optimistic. You know, we’re in a business that if you’re a retailer and you’re not optimistic, you’re not a retailer. It doesn’t work. One of my beliefs, and one that I always tell the Bloomingdale’s team, is that my role is balancing hope and reality.

Where are our opportunities that are driving the business, and what is the reality of the moment? So to me, I think there are some really bright things in the economy right now. But I also think it goes back to the great comment by Charles Swindoll who said, Life is 10% what’s given you; 90% how you want to deal with it.”

For example, let’s take last March. It turns out to be the coldest March we’ve had in, I don’t know how many years, up against the warmest March in 100 years, a year ago. All right, that’s the 10% given us. So do we want to talk about that? Do we want to complain about it? It won’t do us any good. But that’s the 10%. So how you want to deal with it, that’s the 90%. So what do I think? I think there are so many good things out there right now. The Stock Market is obviously, touch wood, in terrific straits. The S&P is at an all-time high. The housing market has had an incredible comeback. Our car sales are at a high point over quite some period of time; so, you have to say there are a lot of good things going on.

RL What are the negatives?

MG The negative is the doubt about Washington coming together, whether it is on budgets, or the bigger uncertainty of world situations. When you read one day about North Korea that makes you think twice. When you see what’s going on in the Middle East that makes you think twice.

RL Does the jobs situation affect your customer that much?

MG I think the market affects our customer more. I can’t tell you we have this incredible empirical data that talks about that, but I think to our customer, and the upscale retail market, I think there’s no doubt the market has much more of an impact.

RL Tell us about your outlet store strategy.

MG We have 11 outlets and one more opening in Chicago in the spring; we’re going to get this format as right as we can before we start doing more. We’re looking to grow in what I call the top tier, like the Sawgrasses of the world, as well as Bergen, where we already are. It’s not a question of whether there is a business to be had in the outlets–with Nordstrom, Saks, Neiman’s, Polo, Coach and all the others–there’s an enormous business to be had.

RL Do you try to position them geographic-ally at a distance from your full-line stores?

MG Not by design. In Bergen, we’re a mile away from our store in Riverside Square, and Bergen is one of our two biggest outlets. It has a positive effect on both the full-line store and the outlet. There are some customers that will shop both channels. And it’s an opportunity for people who want to buy into the Bloomingdale’s brand at a lower price point, and then eventually work their way up. So it becomes an aspirational thing. So I think it’s the right location and for people really understanding what Bloomingdale’s stands for.

RL How do you merchandise those outlets?

MG It’s a relatively small number that we will transfer from the full-line store to the outlet. So the full-line store does not become the depository for the outlet. So some unwanted merchandise that might be marked down for the full-wall business, the outlet will pick it up. But that is less than 20% of our business. The balance is really bought in the market. Some may be made specially, but we still don’t have enough critical mass to do that in a colossal way.

RL Outlets are a form of discounting. Do you feel over the long term this might weaken the brand?

MG No because I think you have to look at who is powerful in outlets today. The best operators of the outlet today are Nordstrom, from a department store point of view; Polo, from a resource point of view, and Nike or Coach, from a vertical point of view. I think they’re being judicious. The thing isn’t about outlets. The customer in that market expects something because of the strength of those brands.

While outlets are a small part of our business right now, we think it could be a much bigger part. We think that one of the great opportunities that the outlets have is that we know that if we can put a store in an area, whether it’s an outlet or all full-wall store, we’re going to enhance our online business, because better than 80% of our online business is in zip codes where we have stores. So if we can find outlet stores in other parts of the country that don’t currently have stores, we believe that will also be a great boost to the online business, which has been very explosive.

RL What do you think the total percentage of business is coming from online?

MG We don’t quote the percentage, but it growing terribly fast and helping the four-wall business.

The thing to keep in mind is the omnichannel excitement that Bloomingdale’s can create. It’s what you feel when you walk into 59th Street, and can I get as much of that feeling in Century City, Aventura, King of Prussia, and Chestnut Hill. It’s the experience of product newness, ease of shopping, and the quality of the sales professional being able to talk to you about that product.

You put on a Canali suit and, well, it’s very nice. If you didn’t buy it on sale it’s in the neighborhood of $1495 or $1595 at the end of the season. Do I have a sales professional who will tell you why that Canali original price of $1700 is worth it? And the customer says, maybe I should get two of them.

RL What’s the experience of events?

MG We see it in everything we do. When we have events in our stores, that is the real Bloomingdale’s. In our recent monthly meeting when we reviewed every aspect of our business with our partners in Dubai, it was just so mind boggling to see what they do with events in that store in the Dubai mall. You’d absolutely think that it’s Bloomingdale’s 59th Street. I listened to the list of events they had last March and the excitement there was. No wonder the business is running double digits ahead. That’s what I think we need to be. I’m optimistic because we control it. We’ve got that 90%. The 10%, that’s the yucky weather. But the 90%, which is our attitude, is what are we dong to create an environment that says “Wow! I’ve got to go there!” It’s the Apple Store mentality.

RL Why do you think pure ecommerce players like Amazon, Google, eBay, (and Apple which did) are all looking at opening brick-and-mortar stores?

MG The customer that shops both online and in-store is worth somewhere between three-and-a-half to four times more than the customer shopping only one channel. Although I can’t speak for Amazon or anyone else, our life is about ‘how do I get the customer, any time, any place?’ What I want is my customer who is online at 11:00 at night to have the opportunity to come to Bloomingdale’s even though the store may only be open between 10:00 in the morning and 8:30 at night. When we did our Easter ad in the New York Times–it’s one of the three days in the year when we are closed–it says ‘Happy Easter to you and your family –we’re closed today.’ And at the very bottom, it says, ‘dotcom open all the time. So we are here all the time. And I think that is a very big thing about how we leverage the two businesses. Then how do we leverage the excitement? We had this incredible exclusive launch this fall season of the Tory Burch fragrance. How do we leverage that online? In the stores? Visually? Selling-wise? So how does one channel of the business help the others so that one plus one equals three? To me, it’s about excitement.

Today you can call Daniel or Shun Lee East in New York and they’ll deliver three-star take-out to your office or home. Anyone can deliver. So why come into a store? Why go to a movie theater when you can watch Netflix at home, for almost nothing? Because it’s all about the experience. That to me is what it’s about.

RL Speaking about experience, which you do all the time, and your brand, what else do you do to enhance the experience? What about the new technologies that are being used to today in-store?

MG I think one of the most fun things we had last fall was a window on 59th Street. Windows are great–you’re passing by for the moment. But where’s the engagement to move from a transaction to a relationship? How do we move our business? Which is something I’ve tried to do for 22 years, and we’ve made some progress. So when you talk about engagement, we had these windows about sunglasses. You could peer into the window, push a button and try on four to five pairs of glasses, and see how they looked on you. Yesterday, someone came in and showed me something in the beauty business. How you can use a computer to see how make-up looks on you. So I think those are the things that become interactive in the store that you’re not going to do online at home, because there’s a human element in the store.

Let’s face it. At Bloomingdale’s today, about 95% or 97% of what we sell can be bought online. So why come into the store at all? There’s a social aspect to it. What is it about the Apple Store? I think it’s the social aspect. I go and talk to someone about something at the Genius Bar or in the store; they really know what it is I need and I’m interacting with them in a very personal way. So we’re going to experiment with a number of different things. To me it all revolves around one thing. How is the store this interactive place that creates relationships? How is the store about something more than theater, but a sense of excitement? It’s about, ‘wow I didn’t expect that.’ It’s a place of discovery.

Bloomingdale’s has to be a place of discovery. Bloomingdale’s has to be a place that says, ‘Why am I coming here?’ I’ve got Louis Vuitton here; Saks has Louis Vuitton; Louis Vuitton has Louis Vuitton. I have Chanel; Chanel has it; Saks has it; and Bergdorf’s has it. Why here? What’s the relationship with the sales professional? We create an environment. We excite the customer with the question, what am I going to find here that I’m not going to find somewhere else?’ And that’s what is that unexpected. That to me is what Bloomingdale’s is all about.

RL Are you going to put a spa on the roof?

MG A group came to me and thought they could put a spa on the roof. We’re looking at a number of things in this building that could be very different than the way the building is today. But it’s premature to talk about them. There’s a Chinese proverb that in translation says, “Even if you’re on the right track, you can get run over if you just sit there.” So we’re in the business that says we\’re maybe on the right track, but for how long? What are we doing to move that bar up? What are those new things in the store? We put Magnolia in the 59th Street store, and it’s doing terrific. The space used to be a stockroom. We now have a multi-million dollar business. It’s about what is the unexpected!

RL Do you think that over time, as the online business increases, that you will allow the physical store to narrow the assortments or carry fewer inventories? And over time, do you think that it will shrink the footprint of the brick-and-mortar store? Or is this an issue more for the big boxers? And what about localization?

MG We have 32 doors and we try to look at our local markets and how to be more sensitive to their needs. We buy differently for different regions. Right now I can buy online and pick it up at the store; if you’re out of merchandise online, which sometimes happens, you can use your omni-inventory and ship it from a store that is less likely to sell that SKU. The result? I’m going to satisfy that customer. So I’m not sure the assortments in the stores should be smaller for just this reason.

RL Side question. Do you have any more international expansion plans?

MG We’re looking at some things but nothing to announce. The thing in Dubai has been enormously successful. It’s a different sort of arrangement with a partnership and it has been incredibly successful. We have a mind-boggling brand.

No European or Asian store has made it in the States. Years ago Galeries Lafayette tried it on 57th Street. Takashimaya didn’t work. You can’t come with a DNA. It’s very hard to translate the DNA to another culture. If you go to Dubai, and walk into the Bloomingdale’s there and don’t see the name above you, you would know it’s Bloomingdale’s, by the checkered floor and by the beat and the energy in the store. It’s the brand. Dubai is a place where the brand could be translated. So I think there are other places, yes, but I think it’s going to take time.

RL We talked about leasing space. You have some, what are those brands?

MG We have leased spaces for some apparel brands on the second floor, and we have Vuitton, Prada and Miu Miu. The concession operates the space in partnership with us. We think in an appropriate way, the apparel brands that we have brought in have given us a different composition and make it a more exciting store. We’re not like the Europeans. If you go to Paris and London, those stores are somewhere in the ballpark of 55 to 60% concession.

RL How’s the SoHo store doing?

MG It’s doing very nicely. We’re planning smaller stores for different reasons, we’re opening a store in Glendale, California, and at the end of October that is about 100,000 square feet. Our replacement stores in Stamford, Connecticut and Palo Alto, California in 2014 are about 120,000 feet, which is about the same size as SoHo. I think what SoHo was, was an incredible new contemporary bent for us. And it was the first time we looked at some of our biggest brands and didn’t put them in the store. When we opened that store, it was without Ralph Lauren, our largest apparel resource; without Ellen Tracy at its height; and without Estée Lauder. We just simply said we were going to be a contemporary store. And those big apparel brands just didn’t fit that model at that point in time.

Then eventually we put Lauder into the store, and it’s done very, very well. What SoHo taught us was that sometimes less is more. That the less we put in, the better the return was, and that we could really try to focus what we were for a particular market.

RL If you had a magic wand how would you change the pricing model and strategy? What would be a perfect world for a retailer? With crazy insane discounting and what came down at JCP, there is a lot of talk about the addicted consumer, the pricing situation and what it must cause enormous complications and costs within retail stores.

MG I don’t have a magic wand. I think it’s very different for different people. If you’re a vertical retailer like J.Crew or Abercrombie, you come to the end of the season and take a 70% markdown; and if you started anywhere between 70% and 75% initial mark-up, you’re coming out just fine. I think for someone who is not a vertical, it’s more complicated. One of the great problems is that the merchandise is overpriced right off the bat. So many of the resources build so much into their cost structure because they’re figuring out for the department store, the advertising, and the sales people they are paying for.

The question is what do you build into the price of your goods? I think it’s not a magic wand about pricing. To me it’s about flow of goods and buying better by size, by color, by locale, and about the flow of newness. We are buying less; we buy too much. Some of my best partners have the mindset of receipts. The more receipts I get, I’m fine, and if I have to take merchandise back, I’ll have my outlets to do it. It is all driven by receipts, so we slow the turn.

One of the more impressive things about Nordstrom is how they turn their inventory faster than anyone else. I figure pricing is the 10% you are given, and how you want to deal with it is the other 90%. What are we doing at the stores that excite the customer to buy at the regular price? What are we doing on the front end when the receipts come in? What are we doing about contacting the customer? When you buy the Canali suit, did we offer you the shirt and the tie? And by the way, the next time Canali comes in, does anyone call the customer and tell him I have a new assortment that just came in. I looked at it, and I know what you like, but I don’t see anything that’s good for you this time. The next time, wow, I got something and I’m going to send it to your house. You like it great, if you don’t like it, I’ll have UPS pick it up.

So rather than just talk about the pricing thing that will be here until time immemorial, what are we doing to make it an exciting store? What are we doing with the events? What are we doing with regular price with newness? So that on a regular basis we engage the sales associates to make a relationship with their customers, not just a transaction. That’s the way around the pricing thing. We can’t win on pricing at Bloomingdale’s. Maybe Walmart can, but I can’t.