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Terry J. Lundgren, the chief executive of Macy’s, strode through the women’s shoe department of the company’s flagship store in Manhattan’s Herald Square, determined to find a bargain.
With the lean build of an athlete and the immaculately coifed gray hair of a television anchor, Mr. Lundgren cased the floor and dashed over to a display table of classic shoes, aimed at women in office jobs.
“Look at this great-looking boot for $69!” he exclaimed, holding out an unadorned black boot with a low heel.
Briskly, he made his way to the area dedicated to mainstream designer shoes.
“You can see the price points elevate as we go,” he said, stopping at the store’s Coach department to point out a black leather boot with a gold buckle. “You can get a low boot at Coach for $229,” he said, reading the price tag.
A mischievous expression came over his face as he stepped into Macy’s in-store Gucci shop.

“Let’s do another low boot here,” Mr. Lundgren said, holding aloft one made of buttery black leather and decorated with Gucci’s signature gold bit. “This one would be $995. This would be your escalation.” 
Macy’s Herald Square occupies a singular place in American retailing. Established more than a century ago, the store now encompasses nearly an entire city block. The extensive real estate has always been central to its mission: offering a vast array of goods at prices so varied that everyone can afford to buy something. Even today, to keep price-conscious customers coming back, the store often runs clearance-sale ads with coupons in Sunday newspapers.
But now Macy’s is revamping the look, product mix and infrastructure of its flagship store to better cultivate less price-conscious shoppers with greater profit potential. One sought-after group is big-spending foreign tourists looking for prestige brands like Gucci. Another target audience is millennials — people born between roughly 1980 and 2000.
The reframing of the Herald Square store’s mission is part of a corporate strategy, known internally as “My Macy’s,” to tailor the product assortment at each of the 789 Macy’s stores nationwide to theneeds and wants of local customers.
In practical terms, that means the Herald Square store stocks more smaller-size slim-fitting suits than, say, a Macy’s store in Minneapolis, to accommodate a large contingent of Asian tourists. The flagship also carries a much wider array than regional Macy’s stores of Ralph Lauren Polo, Tommy Hilfiger and Michael Kors — the kind of classic American clothes that customers from abroad like to take home. For the huge numbers of shoppers who commute to Manhattan for work, the store also stocks a wider variety of black leather tote bags than stores elsewhere.
The hyperlocalization comes as Macy’s tries to differentiate itself not only from other traditional department stores but also from e-tailers like Amazon. Coupled with other strategies, like enabling customers to order products online for in-store pickup, the local approach seems to be paying off. In the 2013 fiscal year, revenue at the company grew to $27.9 billion, compared with $23.5 billion in 2009.
Still, it is one thing for managers to modify products at regional Macy’s stores and quite another to pivot an enterprise as mammoth as Macy’s Herald Square.
At around 2.2 million square feet, including stockrooms and offices, it is one of the largest stores in the world. It generates about $1 billion in annual sales, according to estimates from industry analysts. (The company does not release sales for individual stores, but Mr. Lundgren said he did not dispute the estimate.) Even in an on-demand culture where people are inclined to shop online, the store draws about 20 million visitors a year.
To elevate that bricks-and-mortar experience, executives are remaking the store in a fittingly gargantuan way — with a four-year, $400 million overhaul. By the time the renovation is completed next year, the store will have gained an additional 100,000 square feet of selling space.
“I’ll make this claim,” Mr. Lundgren said. “There has never been a store in the world that has ever had a $400 million renovation over four years.”
One of the showpieces of the makeover is the women’s shoe department, an acre of retailing that reflects the rebranding of Macy’s Herald Square as an upscale global shopping destination. Although a few sections at the back of the department sell midpriced shoes, much of the floor now spotlights higher-end merchandise.
Standing in front of the Macy’s in-store Louis Vuitton shop, Mr. Lundgren couldn’t resist doing another price check. He glided across the plush champagne carpeting and picked up a black pebbled-leather boot.
“That would be $1,160. It’s simply $1,100 more than the first boot we looked at,” Mr. Lundgren said. “We have to have a broad appeal to a diverse group of individuals to be the size that we are.”

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