JC Penny: Adding Mannequins, Reducing Clutter

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.


11 thoughts on “JC Penny: Adding Mannequins, Reducing Clutter

  1. Another issue JC Penny faces in this somewhat sudden change in strategy is the time and effort it will take to reposition their current assets. This strategy is dependent on moving from bix box retail spaces into smaller more “boutique style” spaces. JC Penny has financial obligations related to the current big box locations. Their options are somewhat limited in terms of dealing with these obligations. 1) JC Penny can ride out thier leases, some of which may be as long as 20 years. These stores will continue to take losses during that time and hinder the image progession from JC Penny to “jcp”. 2. They can negotiate with landlords for an early termination agreement. Termination fees can be in the millions for big box spaces, and when you consider the number of stores JC Penny is currently running under the old format the total cost could be in the billions. These are losses that would hit right away and the newly positioned “jcp” stores would have to pick up the slack.

  2. personally, as a shopper, i am more inclined to shop at JCP than i was prior to the marketing campaign shift. some of the changes they’ve made that have worked for younger female shoppers i think are 1) they’ve introduced more chic brands such as MNG. MNG is a european clothing brand that is generally only available in higher end shopping centers such as the south coast plaza mall in orange county, california. 2) they’ve introduced a smaller sized sephora in the make up/perfume section of the store. sephora is a trendy beauty store that has become popular in recent years. (i think but am not sure this may be a european chain as well).

    that said, i can understand why customers now think that they’re not getting as good of deals because they don’t have coupons. perception is reality, isn’t it? i definitely agree that only time will tell whether or not their new marketing campaign will work though. i think it hinges on gaining sales from the younger generations, and right now the jury is still out.

  3. This was a very interesting post. I think about this retail environment as having two different types of competitors. There are corporations like Nordstroms, Von Maur and Bloomingdales that are generally associated with higher end, higher cost products. Then there are companies like Target and Walmart, while not entirely the same type of retailers, they have entered this market space with more affordable clothing products. It seems like JC Penny has somehow found themselves in the middle and they are struggling to create an identity in this market. I think they are making some rather bold strategic decisions, but I also think it’s time for them to make these changes given the circumstances.

  4. I give JC Penny a lot of credit. Having this new strategy is positioning the company to be unique to its current competitors. Retail operates on small margins and if you cannot compete with the likes of Target, Kohl’s and others, you will ultimately loose. I would like to see the ultimate plan, but I am assuming they are trying to get their stores situated first and will then begin with advertising. Changing people’s behavior is something that takes a long time to complete and it appears JCP is trying to do this one customer at a time. As Scott stated in his blog, they have already increased their sales per sq. ft. There is a lot of work to be done in terms of product selection and ideal store size, but if they are committed to this strategy as they appear to be, then ultimately the shareholders and vendors will follow the lead of the customer. The past several years, I have worked for a company that changed their strategy in retail and it is very tough with the learning curve, but very rewarding when it pays off. I cannot wait to see where JCP is in 3 years.

  5. Although the strategy for new positioning works on paper, companies (in this case JCPenny) often fail to fully account for one major factor; the consumer. Companies often believe consumers will be fully rational but this is rarely the truth. Instead of mailing out coupons or discounts, the products are now being offered at a lower total price. Most customers fail to recognize this and choose to pay the same amount for a good elsewhere because they had a coupon. For example, a pair of Levi’s jeans are now $40 to $45 at JCPenny, but else where stores (i.e. Carson’s or Macy’s) have sales or coupons which leave a pair of Levi’s around $48.99. Unfortunately for JCPenny, if they wish to maintain their competitive edge and improve upon their strategy, they must fish out the rational side of consumers.

  6. JCP is an interesting discussion within the retail world. From swithcing to Every Day Low Prices back to coupons/promotions, it’s gonna take consumers awhile to understand really what JCP is. Like many companies, JCP is struggling to connect their brand emotionally to consumers; they have come out with new heartfelt commercials to try to appeal their target consumers. JCP has began to redesign stores with start of the art technology to provide consumers with a more welcome environment. It will be interesting to see how the company pans out this year.

  7. This was quite an interesting read. In my personal opinion, JCPenny has fallen off the ladder, and I think it will be very difficult for them to make it back up there. I used to shop at JCPenny a lot but over the years, I’ve gone less and less. I am not even sure of the reason myself. The problem is that consumers feel more inclined to buy something if they feel that they have “saved money” on an item (even if they really haven’t). Consumers are more likely to buy an item that they feel that they have saved money on, than one that is straight up the retail price. I do not shop very often, and when I do it is because there is a sale. So yes, I will acknowledge that I do fall into that consumer group because frankly, I rather buy something and tell myself that I saved money on this item rather than paying the displayed price.

  8. What JCP has done is a very new and unique approach to retail. Doing away with coupons and selling items at their true retail value is something that no other store has done before. However, I am not surprised that this strategy has actually decreased sales. I think that consumers love the feeling of getting a product for “cheaper” which is what coupons allow for. At JCP, there is no thrill of taking a certain percentage off of the ticket price or being pleasantly surprised that the item is cheaper once you check out. Even though JCP has marked their prices down to what the item would cost with a coupon, it still wouldn’t have the same feel as if a consumer used a coupon. I think eventually once people get used to the new strategy, JCP could see a large increase in sales. This is something that is new and hasn’t been done before. It will take people some time to get used to. People need to realize that by shopping at JCP they are still saving more money than if they shop at a competitor and use a coupon. While JCP may be low in the retail industry now, I think their unique strategy will pay off big over time.

  9. JC Penny’s new approach was a great idea, but my question is who is their target market? From what I remember JCP use to be a “family” department store, at least for me, it was a store my mom, dad, brothers, and I all shopped at all in one day. But now with their new boutique look, are families still shopping there? To me it seems like they want to target young people, but they are not marketing to their target market appropriate. Along with this, they are placed in between high end stores like Nordstroms and low end stores like Target, which makes it even more difficult for them to define their market.

  10. I do not think this was a good approach in the sales strategy. The deals are what attract the majority of customers to JCPenny. When the customers use coupons on their purchases, they will have the satisfaction of finding a great deal. Even if the prices are marked low, it is still at its full price. People buy things they do not even need when they think it is a good deal. If JCPenny want to upgrade their stores, they should plan on marketing a new brand image to attract a broader range of consumers.

  11. While at home over the holidays I ran into the JCPennys for some basic T-shirts. When it can time to check out, there was one lady standing behind a very small stand with a big computer on it, that she only used for printing receipts. There was no space for customers to actually put their clothes because JCPennys is moving to remote checkouts that are completed by scanners hooked to iPhones. I think that they need to revaluate some of the changes that they are making, like this one, because the casher was trying to ring up, hold in her arms, and bag customers purchases with no counter space. When customers begin to see how long a the simple process such as checkout will take from the implementation of newer technology, I think they will return with much hesitance. JCPenny has stepped up their game in a lot of ways, but in order to stay competitive they need to pick and choose what changes to implement.

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