JC Penny has a long history in the American retail storybooks, however recent management changes which have led to radical shifts in marketing strategy have left a company that seems to struggle with their identity. As a reactionary measure, JC Penny decided to do away with coupons and discounts that were reducing artificially inflated prices of items, and instead charge fair and reasonable prices that in theory, consumers would have paid anyway. No longer feeling the rewarding benefits of a discount or coupon, customers have reacted negatively to JC Penny’s new strategy as they feel like they are paying “full price,” even if it is what they would’ve paid with the coupon. According to Reuters, JC Penny’s sales dropped 26.6 percent last quarter, and their stock price has tumbled 50% so far this year, showing how dramatic this shift in strategy has impacted their financial performance.
However JC Penny leadership has remained dedicated to this new approach as part of a larger effort to rebrand the tired name, and they feel that they have made some inroads in achieving their ultimate goal. JC Penny’s Chief Creative Officer Michael Fisher, wants to introduce more mannequins displaying whole outfits, while at the same time removing the clutter and amount of merchandise that traditional department stores seem to have. The goal for Mr. Fisher and executives at the company is to ultimately transform JC Penny into “jcp” which represents a new, higher end, boutique driven retail model that will attract higher end brands and younger and hipper clientele.
The results of this new strategy are mixed however. Sales per square foot of the new boutiques have increased to $269 per square foot, which is about twice as large as the old JC Penny used to produce (this compares to $391 per square foot for Gap, and $6,060 per square foot for Apple). While foot traffic has declined slightly, JC Penny executives claim that it is going to take time for customers to get used to the new store, as well as take some time to get designers on board with the new strategy. In addition, initiatives such as the increase use of mannequins and the introduction of a house hold displays similar to that of IKEA are supposed to support the overall strategy and are intended to improve the shopping experience for the customer.
The jury is still out as to whether this strategy will work, and investors seem to be very bearish on the new strategy. Critics have argued that this brand revival is too little, too late, and that JC Penny is behind in the market in terms of being able to attract consumer retail dollars. This has not deterred company management as they are dedicated to this new strategy and believe consumers will come around with time. Only time will tell if JC Penny can whether this storm and become a new boutique destination retailer for consumers, or go the way of Borders, Circuit City, or Montgomery Ward and find this dramatic strategy shift has accelerated their path to their demise.