NEW YORK — It’s a frigid January morning, two days after the presidential inauguration. The markets have opened lower again and another round of massive corporate layoffs has been announced.
Inside Bloomingdale’s 59th Street flagship, Michael Gould has just arrived in his spacious corner office after a daily walk through the store. The CEO, determined to focus on the good news of the day, quickly points out the steady stream of shoppers browsing the store.
“It isn’t like customers aren’t coming in, and it isn’t like we aren’t doing business,” he says. “The question is: how can we do it better than everybody else?”
Still, Gould readily admits that the challenges of running a department store have never been greater.
“This is the toughest climate any of us have experienced in our retail career,” he told Footwear News in an exclusive interview. “But our performance has been the best of the group we compare ourselves to, and we need to continue to do that. We need to figure out [how to motivate the customer to spend].”
Bloomingdale’s corporate office is adjacent to the store, up seven escalators and through a door partially concealed by bath towels. It’s an arrangement Gould finds convenient for his morning strolls, which give him a chance to have informal chats with employees. “We have a lady who works in the fragrance department — she’s probably the most passionate lady in the whole store,” he says in his heavy Boston accent. “She stopped me today to tell me about the computer training class she had yesterday.”
The CEO says he believes that staying in touch on that level is crucial to success. “The higher you get up the totem pole, the less you hear what’s going on.”
Gould has been communicating a lot in the past few months — and he wants to send the message that Bloomingdale’s is prepared to weather the economic storm and plans to emerge as a stronger competitor. To that end, he’s forging ahead with a number of key initiatives to expand the business.
Last fall, the lower-level men’s floor at 59th Street underwent a renovation and expansion of men’s footwear. A new gourmet hamburger restaurant is in the works, and the cosmetics department is in for a “colossal redo,” Gould said.
Beyond New York, the company has plans to roll out several Soho-style boutiques next year — starting with Santa Monica, Calif. — even though real estate challenges have caused some delays. And the retailer’s first international move is slated for February 2010, when Bloomingdale’s Dubai opens.
“We will not let this bump in the road deter us,” Gould said. “It will slow us down — no doubt about it — but it will not stop us from growing this business in an upscale way.”
FN: How long do you expect the recession to continue?
MG: I am not a forecaster, but certainly through this year and continuing through next year. I don’t think people will feel comfortable spending until the housing situation is on its way to a resolution … and without spending, we are never going to come out of it.
FN: Does the pressure of this environment strain your relationships with vendors?
MG: We are not going to win without great relationships with our resources. It doesn’t mean we always agree, it doesn’t mean we are successful in everything we try, but that’s our attitude. It’s not a zero-sum game; we both have to win. In this environment, it’s a matter of thinking outside the box. The same things are not necessarily going to work.
We can’t just be safe. I worry that as the resources are challenged on their wholesale and [in some cases] retail businesses, who will put the excitement in the stores? The worry is that manufacturers will cut back and the fall lines will be narrower. So what are the chances that the assortments in Neiman Marcus, Saks, Nordstrom, Bloomingdale’s, Barneys and Scoop are going to look even more similar?
FN: So how are you trying to differentiate yourselves?
MG: The buyers are seeing opportunities every day, and while it would be easier to stay on stock plan than to take a risk, playing a game of offense at this moment is vitally important. If we play defensively right now we are going to look timid.
FN: What are the long-term implications of the steep promotional activity in the marketplace?
MG: In the fall season, the highest-end department stores in this country put merchandise on sale that has never — or rarely — been on sale. So the customer is now saying, ‘I don’t need to buy anything at regular price.’ This a real paradigm shift going forward, and it has tremendous implications on our average unit price, our business, the margin.
FN: How are shoes performing against other categories?
MG: Our three-month trend is up slightly versus last year, which is probably more than you could say for an awful lot of [our competitors]. We are conservative for the spring, but we better not be conservative in our styling, and we are not going to bring in new price points that we don’t currently carry. We are not going to try to compete with a promotional department store. Last year, we planned shoes to have a double-digit increase for the year, and it’s still the second-highest sales plan for the spring season.
FN: What’s the highest?
MG: It’s children’s — I’m not sure that it should be, but it’s children’s if you want an honest answer.
FN: Your footwear assortment spans several tiers. What is your strategy there?
MG: Customers come to Bloomingdale’s to find the unexpected, what’s new. They do not come to Bloomingdale’s to find the highest-priced shoe you can buy. That doesn’t mean we can’t sell Dior, Jimmy Choo and Chanel [whose business has been great through the last number of years]. But what we represent is a much broader spectrum. One thing we’ve really tried to work on in the last seven years is being more approachable — and that’s a key word for us. I can sell high-end merchandise, but the store itself is approachable. Upscale is about taste, not price.
FN: Has that positioning protected you during the economic downturn?
MG: No, but it’s helpful. There’s absolutely a correlation to the highest-end store having the toughest problems. There’s a reason Wal-Mart and dollar stores are doing well. And that will intensify in the short-term.
FN: How do you rally your team in tough times?
MG: To me, leadership is about trust, which comes from being honest with people. Communication is something we talk about a lot here, how to let people know what’s happening and how to get feedback. Because the higher you get up the totem pole, the less you hear what’s going on. That’s why the president wants to keep his cell phone. If I just listen to my GMMs, I only have one story.
Another thing I feel very strongly about is recognition. There won’t be many buyers or merchandise managers or CEOs who made their numbers in 2008, but [we ask ourselves] what the things are that we can recognize. It’s about balancing hope and reality. It’s very difficult when you pull your computer screen up every day and you don’t see the increases you’ve been accustomed to. The president on inauguration day found a balance talking on one hand about hope and on the other hand about the challenges of the times. The challenges have never been greater and the opportunities have never been greater — and we have the same issue here.
FN: Do you view next year’s Dubai store opening as a major opportunity?
MG: We are very excited about it. We have an opportunity to build something with our [licensing] partners at Al Tayer that can try to replicate the 59th Street store. The resources are excited, it’s something different, and hopefully we’ll learn something. And hopefully we’ll build some new partnerships with some new people we don’t do that much business with. But one has to be very cautious because anything less than terrific success in Dubai is a negative reflection on the brand. … The store has to be more upscale than 59th Street, with more luxury designer brands.
FN: Who from the team is involved in the project?
MG: We have kept it to [President] Tony Springer, [EVP of creative services] Jack Hruska, [former CEO] Marvin Traub and me. Al Tayer’s merchandise people have met with our GMMs a number of times to talk about some of our resources and what’s working here. And all their support and non-merchandise people have met with our 59th Street people to talk about Bloomingdale’s operations, our systems, things like that. We made a wonderful choice with Al Tayer, we have a lot of creative oversight and we have a terrific personal relationship with [Al Tayer CEO] Shireen El Khatib.
FN: Do you have other plans for overseas expansion?
MG: Not in emerging markets, but we’ll continue to look at opportunities in the U.S. With all the challenges in the U.S. right now, real estate development has come to a grinding halt. But we are seeing more standalone opportunities for Bloomingdale’s, or opportunities to redo existing stores as we’ve done in a number of places with great success.
FN: Will the retail business be different a year from now?
MG: It will be different. The strong will survive and the weak will fall by the wayside. Undercapitalized people, people without great brand names and people without very clear strategies and missions will have very difficult times.