A ‘Penney’ for your thoughts…
There has been a lot of chatter in our industry circles — really, everywhere — about the recent big announcement from J.C. Penney CEO Ron Johnson regarding the iconic brand’s plans for the future. Anyone who’s visited a J.C. Penney lately — present company included — can see the brand needs to make some changes. They’ve been losing traction to competitors like Target and Kohl’s in recent years, and, in my opinion, have had some trouble defining themselves in a fairly crowded and competitive segment. Similar to the issues facing Sears, J.C. Penney seems to be suffering from an identity crisis.
I see this new strategy as less of a rebranding and more of a “reinvention.” It’s certainly about more than just changing the logo — although that’s happening also — to a newly stylized JCP (though simple is always better, I’m not 100% sure I like it). This plan has been characterized by some as an attempt to “rewrite the retail rulebook,” and, while I think that’s clearly a bit of an exaggeration, this is an ambitious step for a company that has traditionally been more, well … traditional. It might literally and figuratively pay off for them, but the brand is headed into uncharted territory here, and I have some questions and concerns about some aspects of the strategy.
Some of the highlights of the new plan include a smaller new store prototype; a leaner, dramatically lower and more intuitive pricing structure that will be as much as 40% lower than the current figures; a redesign of store layouts to feature a number of compartmentalized “shop-in-shops” for a smaller, but much more diverse list of global brands; monthly merchandising and marketing resets; and significant pared down staffing and infrastructure aimed at making the retailer leaner and more efficient. This is clearly a serious attempt to redefine who they are, and I can’t help wondering if they missed out on an opportunity to go “all in” and change their name. Even a sagging retailer like J.C. Penney has some strong brand equity associated with that familiar name, but I wonder if that is a good thing or a bad thing? I also worry about the lengthy timeline. The new store prototype won’t be rolled out until 2015, and many of these changes will be introduced gradually over the next 3+ years. I wonder if that might be a case of too much too late; big changes not happening quickly enough.
Overall I think the plan moves J.C. Penney in the right direction. If they can pull it off, there is a huge upside: developing their own niche and bringing in a younger customer base. I’m most optimistic about some of the structural and organizational changes. It’s a big and important step to trim thousands of redundant employees and essentially flatten the org chart. I’m also very excited about the plan to introduce more international brands. Given J.C. Penney’s current reach, that will mean greater consumer accessibility to a number of new brands in new markets. One of the challenges that I think the new JCP might have is successfully striking a brand balance and establishing a logical brand blend. Does Martha Stewart really go with Mango and Sephora?
So can Johnson work the same magic that he helped bring about at Target and Apple over the last two and a half decades? So far the reception in the world of retail and in the financial markets has been quite positive — J.C. Penney shares were up nearly 19% immediately following the announcement — but I’m a little reluctant to spike the football before we’ve crossed the goal line. I know one thing: it’s going to be fascinating to watch it all play out.
What do you think? Is this strategy going to be a game-changer for JCP? Will other retailers follow suit if JCP has success? What other retailers need to make big changes to improve their brand status?
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Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.
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