On the Money

Macy's CEO: Despite Web, death of store experience 'greatly exaggerated'

Shop ‘til you drop

With more shopping shifting to mobile devices, is the in-store shopping experience under threat?

Black Friday brick and mortar sales showing signs of waning amid more shoppers using tablets and smartphones, but Macy's Chairman and CEO Terry Lundgren has a different take. Like the rumored demise of Mark Twain, Lundgren thinks the perceived death of the department store "is a statement that's been grossly exaggerated."

In an interview with CNBC's "On the Money," Lundgren pointed to the moment when Macy's opened for business on Thanksgiving night at the retailers' midtown Manhattan flagship store.

"If you saw the traffic when we opened the doors at 6 pm, flowing into stores like Macy's Herald Square, you'd say people definitely want to shop on that night and in a store like Macy's," he said. "So we feel great about what's transpired here."

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Nevertheless, online buying is clearly on the rise as many consumers seek to avoid the stampede of bargain-hungry shoppers—some of whom turn notoriously unruly. According to the Adobe Digital Index, which tracks retail websites found on Thanksgiving Day, online sales totaled one billion dollars. That figure is up 22 percent from last year.

Still, the Macy's CEO said his company is well positioned in both camps, online, and in-store.

"We are the seventh-largest internet company retailer in America, " Lundgren told CNBC. "The online business is a complete strength for Macys.com and Bloomingdales.com."

Still, he added the way consumers are shopping is "quite different than it was even five years ago."

"Consumers are starting the journey with their phone, doing their research," Lundgren explained, "then they come into the store to "try on the clothes, or touch that handbag, or have makeup applied, all those things that are more tactile."

Next, Lundgren says, shoppers "might buy it in the store or they'll buy it at Macys.com or Blooomingdales.com. That's what's changed."

He added: "the consumer likes that multi-dimensional experience today more so than ever. I think stores that are strong online, and strong in-store will be the winners of retail in the future."

Terry Lundgren, chairman, president and CEO of Macy's.
David Orrell | CNBC

Yet even before Thanksgiving, Macy's chief warned that inventory was up and that markdowns were likely.

He said another challenge for Macy's and other retailers has been the unseasonably warm weather that resulted in many consumers delaying winter purchases.

"I think it's been now documented that November has been warmest November in the Northeast in 251 years," he said. "So that's hard on the cold weather goods that we're all trying to sell."

But Lundgren told CNBC he was "encouraged" by a "great start" to the holiday shopping season. He said not just in the iconic New York store, "but across the country in our stores. The traffic was there. People were buying."

A Kohl’s department store in Jersey City, New Jersey.
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They were also watching, as the Macy's Thanksgiving Day Parade scored big ratings. Although down slightly from last year, the 89th annual event ranked as the top non-sports telecast so far this Fall, according to Variety.

CNBC asked Lundgren if he considered cancelling this year's parade after the Paris attacks and global alerts that followed.

Lundgren responded that he had been "asked that a few times, after 9/11 and after the financial crisis of 2008.The answer then as it is now, [is] absolutely not.

Times of national crisis are "a time when America needs to come together, and what better tradition to come together than over Thanksgiving and the Macy's Thanksgiving parade."

On the Money airs on CNBC Saturdays at 5:30 am ET, or check listings for air times in local markets.