What will it take to fix J.C. Penney’s shrinking sales problem?

Discussion
Photo: JCPenney
Mar 03, 2020
Steve Dennis

Through a special arrangement, presented here for discussion is a summary of  Steve Dennis’ recent Forbes article. Steve is President & Founder of SageBerry Consulting and a senior Forbes Contributor. His first book Remarkable Retail: How to Win and Keep Customers in the Age of Digital Disruption — will be published April 14th.

J.C. Penney’s survival will not come from an improvement in margin rates, but an improvement in margin dollars — and that will require a big reversal of sales trends.

Penney’s turnaround will also not come from massive store closings. The vast majority of retailers that are in serious trouble (or have died in this age of digital disruption) have a customer relevancy problem, not a fundamental cost or too many stores problem. They seem to believe that a slightly better version of mediocre can be a winning long-term strategy.

Of course, executing a dramatic improvement in customer relevance won’t be easy. In making its journey from boring to remarkable, Penney’s faces (at least) four big challenges:

  • The middle is collapsing. The bifurcation of retail is a real and growing phenomenon, and it’s more and more clear that it’s death in the middle.
  • Little customer traction. Newish CEO Jill Soltau is rightly focused on getting basic operating and merchandising disciplines right, and some improvement is evident. But better is not the same as good. The amount of market share Penney’s has lost since Ron Johnson’s disastrous reboot nearly a decade ago is significant and its brand image is not exactly what Millennials will easily gravitate toward.
  • Significant investments are needed. Penney’s needs to steal significant market share by attracting large numbers of new customers and encouraging existing customers to spend materially more. Most of the ideas being tested in their Hurst, TX prototype are solid but hardly remarkable, and mostly just level the playing field. The ideas have to be far more radical, and big dollars will need to go into their stores and their e-commerce capabilities as well as toward delivering a more harmonized customer experience.
  • The problem is they think they have time. Penney’s has guided comparable store sales to be down 3.5 percent to 4.5 percent for fiscal 2020. If that is the best they can do we know where we will be this time next year: more cost-cutting, more store closings and more customers who won’t miss Penney’s when they’re gone.

DISCUSSION QUESTIONS: How would you rate the progress that J.C. Penney has made under Jill Soltau? Do you think the business needs a radical reinvention, or can it build on and tweak existing initiatives?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I wish the chain well, but I suspect its future will lie in a much smaller footprint across the country."
"Unless JCP figures out how to leverage their proprietary brands into some level of distinction and reason to shop, Primark will be happy to move in and change the name..."
"Test stores are great, but putting all the focus on one store won’t fix the mediocrity that’s happening everywhere else. And that mediocrity is what will kill them."

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20 Comments on "What will it take to fix J.C. Penney’s shrinking sales problem?"


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Bob Phibbs
BrainTrust

These are all good points from Steve. I would also say there is a dearth of energy around J.C. Penney. At least Johnson was upbeat about all the changes while he radically changed J.C. Penney for the worse. Soltau is no longer new, she’s been there 17 months and you don’t hear much of anything positive from her or her team. The test store was more hush-hush than celebrated. Until and unless they can crow about changes instead of whimper, customers will continue to go to Target instead.

Paula Rosenblum
BrainTrust

The moderate priced department store is a dying creature. Even the high-end stores are at risk, but mid-line? Too many other consumer options.

In many ways J.C. Penney wasted a decade: doing massive stock buybacks in 2011, then hiring Ron Johnson who might have had good ideas but no real clue how to execute them (without limitless funds), the re-hiring of Mike Ullman to get back to ground zero, bringing in Marvin Ellison to … do something (start selling appliances, I guess), and finally making the right move with Jill Soltau.

But we have to ask ourselves — is there a reason for J.C. Penney to exist? Even at the very beginning of the lost decade. What would be missing if it didn’t? And that’s the core problem. It’s stuck in the middle.

I don’t think there’s a radical reinvention to be had. I wish the chain well, but I suspect its future will lie in a much smaller footprint across the country.

Ricardo Belmar
BrainTrust

Paula, you’ve nailed it — a wasted decade where JCP needed to define their reason to exist. They didn’t, and customers moved on. Now they are trying to focus on “what their customer wants” but the problem is those customers are long gone. Their focus should be on what will it take to win new customers — what products and services can they offer to stand out? Until they answer that, they have no path.

Neil Saunders
BrainTrust
I like Jill Soltau. She approaches retail from the right direction — the point of view of the customer. The things she says are logical and it is clear that she has a lot of common sense. However, her approach was needed years ago before the rot set in. Given its present state, I am skeptical that J.C. Penney can be saved; and if it can it will be as a much smaller and very differently configured business. The bottom line is that there are too many weak stores that have no prospect of recovery because they are in terrible locations. The offer has been improved but taken in sum, it is lackluster and confusing. The majority of stores are too large, lack energy and need a complete refurbishment which the company can’t afford. And online isn’t drawing in shoppers in the way it should. On top of all of that the balance sheet is weak and provides little room for maneuver. If the consumer economy takes a tumble, retailers like J.C. Penney will, sadly,… Read more »
Dr. Stephen Needel
BrainTrust

Is J.C. Penney even still around? That was my first reaction! So I’d say they need to do some radical things to get me back in there. Maybe advertise?

Dave Bruno
BrainTrust

The problems at J.C. Penney are extremely challenging. I fear a total overhaul is required, beginning with their assortments. Their product lineup has languished in the “middle” for decades, with no clear brand promise of either value or unique style. And their store experiences have not kept pace with customer expectations. A comeback will require significant investments in both experiences and assortments. I sincerely wish them luck but fear they have a very difficult road ahead.

Richard Hernandez
BrainTrust

I believe Jill Soltau is making strides in changing a retailer that has tried different approaches over the past (and has not been too successful). I love the ideas about creating a new exciting store experience, but how to do you scale that across to company to translate into sales? Where does online shopping fit into this model? How will the marketing plan change to meet the needs of how people shop now?

Stephen Rector
BrainTrust

The squeeze on the “middle” of retail is a real thing and J.C. Penney is one of its biggest casualties. At this point, I don’t even know if a radical reinvention would change the course for the company. Agree 100 percent with Steve’s final point – that type of guidance for 2020 does not bode well for the company’s turnaround.

Tony Orlando
BrainTrust

J.C. Penney is not relevant anymore, and unless they hit a grand slam on an amazing idea they will close their stores. Retail is beyond brutal as margins continue to shrink with higher labor costs, extra incentives to retain the high performers, and the so called “free” delivery, which is a huge offer small stores simply cannot match.

Online buying of everything has increased and ordering your favorite pair of shoes or jeans, with free returns, makes shopping much easier than driving to a mostly empty mall. The money is simply shifting away from conventional stores, and I don’t see it changing back to the good old days, at least not in my lifetime. J.C. Penney’s is on life support, and someone needs to pull the plug.

Georganne Bender
BrainTrust

Admittedly I am not a J.C. Penney shopper, but I do frequent checks on the relatively new store that’s not too far from where I live. A trip last week found cars in the parking lot but not many people in the store.

Sephora is an in your face highlight when you walk in the door, but Sephora isn’t JCP. Many areas of the sales floor are empty as merchandise shrinks and aisles grow wider. Yellow and black signs that are out of place in a fashion environment scream special pricing, and the ladies apparel area is sea of overloaded H-racks, all of which are the same height. There’s nothing to make a customer want to wade in to shop. The checkout has been moved up front, in an awkward place along the front wall. When the lines are long it’s uncomfortable.

Test stores are great, but putting all the focus on one store won’t fix the mediocrity that’s happening everywhere else. And that mediocrity is what will kill them.

Richard J. George, Ph.D.
BrainTrust

Steve hits all the relevant points. Unless J. C. Penney can address each, J.C. Penney may be following Sears: “where Americans used to shop.”

Jeff Weidauer
BrainTrust

While Jill Soltau is doing the right “block and tackle” work, she’s not creating what J.C. Penney really needs: transformation and excitement. Absent that, it’s just rearranging the deck chairs.

Cynthia Holcomb
BrainTrust

Time to say goodbye. The marketplace moved on from J.C. Penney a decade ago. It is too bad, as I imagine a herculean effort is in play to save J.C. Penney. The market bid farewell to retailers of the past years ago. Sears, J.C. Penney and others were blindsided in slow motion, frozen in the glare of e-commerce. For over a decade now, the retail marketplace has been flooded with overwhelming consumer choice via online shopping. So much choice exists today, the market has taken to eating its own to the point of extinction for the many retailers and brands of the 20th century. J.C. Penney missed its chance for reinvention.

Craig Sundstrom
Guest

How does one “fix” getting older … or being short? One doesn’t, of course. Some things are irreversible.

As much as I was rooting for their success, I see no hope for them now. I think the only question is whether or not some kind of plan can be arranged to save the more viable stores — I assume there are some — presumably under another operator. But it’s hard not to see a train wreck coming, and likely taking down a lot of other (marginal) real estate with it.

Carlos Arambula
BrainTrust

It feels like organizing the deck chairs as the Titanic sinks.

Ricardo Belmar
BrainTrust
Steve is 100% right — J.C. Penney has no relevance to any customer base any longer. While they keep trying to change their assortment to bring that customer base back, those shoppers have moved on. JCP has been attacked from multiple fronts. It starts with Target, continues with all the specialty apparel brands in the mall, strolls through all the up and coming DTC and upstart disruptor brands, and ends with either Nordstrom’s for those few customers they had that “graduated” upmarket” or with all the off-price discount stores. Paula is right that they lost a decade — in that decade their price point, which may have been an advantage at the time, was eaten up by Target and all the off-price format stores. There’s no turning back from that — it’s too late. Here’s what I would focus on if I were J.C. Penney: 1) Close any store that doesn’t have a Sephora in it. Let’s face facts – those stores are in either C or lower end B malls that have no meaningful… Read more »
Jeff Sward
BrainTrust

I tried to think of what came to top-of-mind as a reason to shop at JCP. I got nuthin’. Same thought for Primark, and I have a clear picture of Product, Presentation and Price/value. JCP seems to have withered to a point of utter vagueness, absent a clear and compelling brand promise. They house national (shared) brands, but those well known brands are simply an exercise in “me too.” They provide no distinction. And some of their proprietary brands, like St. John’s Bay, do actually have good product. But JCP doesn’t manage them to get any credit or distinction from them. Unless JCP figures out how to leverage their proprietary brands into some level of distinction and reason to shop, Primark will be happy to move in and change the name on the front door.

Ricardo Belmar
BrainTrust

There’s a subtle hint in there for mall owners to start chasing Primark as their next anchor tenant in place of J.C. Penney! 😉

Jeff Sward
BrainTrust

Primark might have an abundance of site choices in the next couple of years. Or, flip side, locations being vacated are not malls Primark wants to move into. Decisions, decisions….

William Passodelis
Guest

I personally LIKE J.C. Penney and I am rooting for them. I think Jill Soltau and her team are solid good retailers and merchants. I wish them the best. I however am very fearful that the store I REALLY do like will NOT be with us for long — for so MANY reasons, as brilliantly already detailed above! I also worry about a LARGE debt which is unsustainable and I am afraid will suffocate J.C. Penney.

I was thinking about this the other day. I pictured floating angels in heaven and one yelling out “Hey James, You’re namesake store closed down,” and Mr. Penney’s otherworldly persona replying — “Well, 100 years isn’t a bad run. Nothing lasts forever.”

wpDiscuz
Braintrust
"I wish the chain well, but I suspect its future will lie in a much smaller footprint across the country."
"Unless JCP figures out how to leverage their proprietary brands into some level of distinction and reason to shop, Primark will be happy to move in and change the name..."
"Test stores are great, but putting all the focus on one store won’t fix the mediocrity that’s happening everywhere else. And that mediocrity is what will kill them."

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