Does Back-to-School Represent a Turnaround for Penney?
Perhaps more than any of its chief competitors, J.C. Penney needs to have a strong back-to-school season. Aside from the season being Penney’s second biggest behind Christmas, the department store is looking to make up ground lost before, during and following Ron Johnson’s term as the company’s CEO.
One potential indicator that Penney is getting its business turned around comes from new research by Experian Marketing Services. It shows the chain’s website as second only to Walmart’s for back-to-school shoppers. Last year, Penney didn’t even crack the top 10.
The chain is touting its new Joe Fresh line for kids and emphasizing discounts on popular own-brands such as Arizona jeans and shirts. It also offers school uniforms, sneakers and other items that appeal to teens, tweens and their parents.
According to Experian, Penney got started earlier this year with its paid search campaign. A Google search on the term "back to school" conducted by RetailWire found Penney’s ad right behind others from IKEA, Comcast and Best Buy while ahead of Lands’ End. Another search, this time for school uniforms, had Penney at the top of the list followed by Zulily, Sears, Marks & Spencer, French Toast, Macy’s and Target.
Last year, Penney gave away free kids haircuts to draw shoppers to its stores. In the end, it was determined that haircuts didn’t translate into dollar sales and Penney chose to not repeat the back-to-school promotion.
Betsy Schumacher, senior vice president for children’s clothes, told The Dallas Morning News that she is much more interested in seeing if she and her team got the product mix right this year.
Ms. Schumacher, who joined the company about a year ago from American Eagle Outfitters and GapBaby before that, expressed optimism that they had.
"So much of it is fundamental retail," she told Maria Halkias of the Morning News. "We have the inventory. We have the denim. We have the extended sizes. We’ve revitalized our brands. We have new ideas on the floor. We focused the assortment."
While the news appears more positive for Penney, the chain still faces major challenges. Reuters has reported that CIT is no longer guaranteeing payments for future deliveries to the chain’s stores from small suppliers. Penney officials and representatives from the commercial lending firm met earlier in the week in an attempt to resolve the issue.
Discussion Questions
What do you take from the findings of the Experian Marketing Services research about traffic to jcpenney.com? Do you think Penney will deliver the types of back-to-school results it needs to convince stakeholders that a turnaround is in the works?
I’m skeptical about the Experian data and would like to see other studies backing it up. Just to cite one example, it’s hard to see why Target—a much bigger company with a more robust business in BTS categories—would be surpassed by JCPenney in its recovery mode.
The JCP turnaround story (and stock price) was unfortunately clouded yesterday by apparently incorrect reporting about credit issues. (Inaccurate reporting and the New York Post…enough said.) There is evidence that JCP traffic counts and comp sales are starting to improve against terrible 2012 comparisons, but there is also evidence in the stores that the company has a long way to go. Outside of a few pockets of merchandise strength, such as school uniforms, there is not enough conviction in areas like dorm room supplies, even in much-touted areas like the new Home Store.
Perhaps Experian Marketing Services could somehow justify that I am the sexiest man in the world right behind Prince William. Last year I did not crack the top ten. Can anyone express some optimism?
I was just thinking that I do not know a single human being alive that has said they were going to shop at, or have shopped at JCP. One time a year ago I walked in one of the stores. Didn’t get the fuss, and walked out. So the answer is NO, I don’t think there is a turnaround in the works.
JCP can get in line behind Sears and Kmart as dead retailers just waiting for the doors to close. Nothing is going to help this chain. If there was a breath of hope, they threw it out a year ago. Their decision to go back to the old department store model is a decision to dig its own grave.
And, like several of my colleagues, I don’t believe the data either.
SEO is more important than SEM by a factor of about 4X for most online retailers. There is a limit to the traffic you can afford to buy, particularly for highly competitive terms in the back-to-school category. Anyone can buy eyeballs in SEM simply by adjusting their budget and thresholds. That’s not going to win the game for JCP.
SEO, on the other hand, is earned and created through extensive work in advance of the season. Running a few common sense terms like “boys’ jeans”, “girls’ jeans”, “kids’ clothes” “girls’ clothes” and “boys’ clothes” through Google Adwords confirmed that the higher funnel words have enormously more traffic (but probably convert poorer).
JCP did not rank on page 1 for any of these terms except “boys’ jeans” where they ranked 8th. Perhaps the spot check is wrong. But if not, this is not a good indicator of the health of JCP’s online back-to-school business. Ranking in the top 4 for SEO on page 1 for high value target terms is critical. The lack of this cannot be offset by SEM…the economics simply will not support it.
The law of diminishing returns for highly competitive search terms during high traffic periods like back to school is harsh and punishing.
Yes, JCP has to get SEM right…and not just the ads noted by Experian, but the Google Shopping feed as well. At this point (August 1), SEO is not going to radically change.
Maybe I’m missing the relevant SEO search terms: I’m not an insider. But if not, this does not bode well for online volume at JCP.
The only thing I can say is that I like their ads. Will this cause them to turn around? The Jury is still out on that one but I can agree that they need BTS to succeed. IMHO
Doesn’t this make you think that their board acted too quickly in terms of the Johnson move? Maybe, if you hire someone to turn around your behemoth of a company, you should give them the time you actually promised them to make it work. Doesn’t bode well IMO, despite short-term results.
Not to pile on Experian—well, maybe pile on a LITTLE more—but “…Penney’s ad right behind others from IKEA, Comcast…” IKEA I can (sorta) explain with dorm furnishings, but Comcast? COMCAST?? It’s hard to have much faith in a study which seems to make no sense, no matter how correct it may be (or not).
As for JCP, what they really need is stop being seen as “really needing” something, i.e., they need to get out of the crisis-to-crisis mode where every sales/reporting event is seen as a do-or-die event. Admittedly that is difficult when the Grim Reaper is double-parked at the curb, but hopefully either a good selling season—whatever season that may be—or people’s tendency to get distracted easily will (finally) give them some breathing room.
I’m going to call this the clean slate effort by Penney.
The Penney website is easy to navigate and offers online coupons which will help convert search to sales so it is not surprising that it is one of the top retail sites receiving online traffic from back to school search terms.
As for Penney stores, I like the pull back to fundamental retail strategies as detailed by Betsy Schumacher.
Looks like Penney is prepared to deliver on a solid season of back-to-school sales, online and in-store, starting with a clean slate and working towards a turnaround.
I have been in J.C. Penney’s corner since Ron Johnson came on-board. Needless to say, that did not turn out well.
Maybe it’s the optimist in me, but I truly believe J.C. Penney has a shot if, as Ms. Schumacher states, they get the basics right. I love the push of their Private label brands — helps them compete on price since others won’t have the same items. What scares me is the condition of some stores. OOS’s are high, store shelves look empty and the floors and even walls are worn.
J.C. Penney first needs to get consumers back in the store; the online business sounds promising. Next they need to quickly improve store conditions. No one likes to shop in a store that looks tired and empty.
Final note: I love the new logo and believe J.C. Penney has a chance to differentiate itself from other retailers by carrying more brands Made In The USA. Talk up the facts about jobs they are keeping in the U.S. I am really surprised none of the large retailers have jumped on this trend. Maybe J.C. Penney will by Christmas.
One more big cheer for J.C. Penney!!!
While Experian is probably also a supplier to JCP and likely a beneficiary from any good news, the reality is that more traffic should covert to more sales, even if conversion isn’t what it should be due to JCP’s mismanagement over the recent past. Much of retail has to do with supply to meet demand, and they have the inventory and are back in promotional mode.
That said, results might be better than expected, but as Notcom comments, “the grim reaper is still double parked by the curb”! That business is still a train wreck and the recent stock performance and likely vulnerabilities from creditors is going to put a ceiling on how well the company will fare.
In my humble opinion, they had no choice but to dismiss Mr. Johnson. Their liquidity was and probably still is in difficulty and their business month over month was declining. Some of his ideas were good and are working and some were not right, and would not be right, for JCP.
In some respects this may have been simply because JCP is too old of a dog to be taught new tricks. I do not think so though. Walmart has taught the general US consumer to orient ONLY to price so people want bargains and want to feel like they are getting a deal. If JCP can do this, then perhaps they will have a good BTS season. I hope they have a terrific season. I am very worried about, and for, JCP.
They NEED to have a great BTS and they likely only have the possibility of a good BTS.
(American shopping will be much the lesser with their loss.) I wish them the BEST.