How Macy’s found its fit in the Hispanic market by Rick Wartzman @FortuneMagazine April 17, 2015, 6:35 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons If you step into a Macy’s these days, you may notice that some of the mannequins in the women’s department don’t look like most of the others. They’re a little smaller on the bottom and bigger on the top, and their legs are just a bit shorter. How these figures took their place on the retail floor says a lot about the way in which Macy’s has promoted diversity among its own workforce—and how, in turn, its employees are driving the company in new directions. (The Drucker Institute, which I run, has consulted for Bloomingdale’s, a unit of Macy’s.) In recent years, countless studies have touted the business benefits of diversity. Researchers from MIT and George Washington University, for instance, have discovered that moving from an all-male or all-female office to one split evenly along gender lines can increase a company’s revenue by about 40%. The Center for Talent Innovation has found that employees at companies whose leadership is more diverse are 45% more likely than less diverse businesses to report that the firm’s market share is expanding. And McKinsey has shown that companies in the top quartile for racial and ethnic diversity are 35% likelier to have financial returns above their industry medians. Why is this the case? To get a sense, it’s useful to peek inside a company like Macy’s and its launch earlier this year of a new brand called Thalia Sodi. Named for the popular singer and televnovela star who serves as the collection’s model and spokeswoman, it includes clothing, jewelry, and shoes. The genesis of the line goes backs several years when Macy’s began to mull Census data showing that the U.S. Hispanic population was growing four times faster than that of the country overall. To interpret the numbers, the company sought the advice of Laurene Gandolfo, a longtime Macy’s executive. “We wanted to understand: Who is this customer? And what are their needs?” she says. The Cuban-born, Miami-raised Gandolfo is no token hire. Women make up more than 75% of Macy’s total workforce, the company says, and more than 65% of those in management. About 60% of Macy’s employees are racial minorities, as is 35% of the company’s management team. (These percentages blow away the national averages.) Macy’s board is also extraordinarily diverse. Although Gandolfo was then working in home goods, she quickly zeroed in on the idea of a fashion brand for Latinas. It was an area, she felt, that Macy’s hadn’t done enough to cultivate. “We talk a lot about ‘white spaces’ in our company—markets that we’re not doing a good job serving,” says Molly Langenstein, Macy’s chief private brand officer. “Laurene was a key player in saying, ‘You need to look at this closer.’ She was able to see that there was a bigger opportunity here.” From the get-go, Gandolfo envisioned tying a celebrity to the brand. “I was such a broken record,” she says. “I was trying to describe what it’s like to connect with someone who looks like you. There’s an emotional piece that’s as important as the product itself.” After interviewing a handful of candidates, Gandolfo and her colleagues agreed that Thalia, who is well known among both younger and older consumers, was ideal. But they also recognized that creating a successful brand required much more than simply rolling out a big name. In the past, Macy’s had courted Hispanic women mainly by offering certain colors and patterns. “What the company had missed,” Gandolfo says, “was fit.” It’s something that, as a Latina herself, Gandolfo grasped—even though her own clothes tend to be more conservative than what the Thalia brand was shaping up to include. “I don’t dress the way our Thalia customer dresses,” she says. “But I know that customer.” To get to know the Hispanic female customer even better, Macy’s went deep. About 18 months ago, executives flew to Mexico City and visited 16 shopping centers in four days. They convened panels of consumers in California, Texas, and Florida. They met with developers of malls geared toward Hispanic Americans. They parsed sales statistics. And they scanned more than 20,000 bodies of potential customers, analyzing their physiques. Along the way, Macy’s also took advantage of its own diversity; it put together, as is its regular practice, internal focus groups. “We had Latinas in the building from all ages and backgrounds saying, ‘Here’s what I like.’ ‘Here’s what my cousins would like,’” Gandolfo explains. Gandolfo, meanwhile, drew on her Cuban roots to ensure that those designing the Thalia brand didn’t overlook another essential point: Someone with her heritage may well have different tastes than someone from, say, Puerto Rico. “I was pushing on the product side,” she says, “influencing my peers that Hispanics don’t only like bright colors and leopard prints.” The result is that, although the bulk of the Thalia collection is aimed to appeal to Mexican Americans, Macy’s consciously added breadth to the line, with muted color choices and a variety of sleeve lengths and necklines. Macy’s won’t break out sales or profits for Thalia Sodi, but executives say the brand is off to an excellent start. It is now being sold in 300 of the company’s 650 or so stores. By October, it will be available in 100 more, with another 50 to follow in January. In each of those stores, you will find mannequins, decked head to toe in Thalia-brand merchandise, that have been custom-built to look like the archetype from all of those body scans. Macy’s wants the line to say to Latina customers, “You will be comfortable in this,” says Langenstein. The Thalia line also sends another important message: When you’re trying to fill in those “white spaces” in the market, it’s crucial to have more than just white faces at your company. Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University. The author or editor of five books, he is currently writing a narrative history of how the social contract between employer and employee in America has changed since the end of World War II.