This morning my father called with investment advice-- buy jcpenney (not a typo, they have already changed to jcpenney) stock while it's only $35 a share.
It's not really a big secret at this point, since
Forbes published something in the same vein three hours ago. The main focus of "Why J.C. Penney Will Be The Most Interesting Retailer Of 2012" is the new company president, Ron Johnson-- the man that started the Apple retail division.
Here's the scoop on their new strategy: jcpenney will be cutting prices by 40% and reducing the frequency of sales, so as to encourage shoppers to purchase when they first see an item instead of waiting for it to go on sale. As far as merchandising, they are trading in endless racks of clothes for mini-boutiques organized by brand.
Coming from a retail background, I do agree that sales are just not worth it. It used to be that stores needed to clear out merchandise and could sell it at a loss or donate old styles for the tax deduction. You know, because brick and mortar stores only have so much space for inventory... and you are paying insurance based on your inventory, so merchandise just hanging out on a shelf actually costs the company money. Sale merchandise is also more likely to become damaged and unsellable as well, since customers think it is valueless. They'll step on it, hang it by the hanger hook, tangle clothing on the racks... horrid! By eliminating sales, jcpenney will need to condition their customer base again.
And let's be honest, a fair share of middle America only shops at jcpenney because they have sales. This significant fraction of their customer base will probably switch over to shopping at Macy's or Kohl's.
In order to implement this strategy and be successful, jcpenney needs to model itself after either H&M or Barneys. On the low end, shops like Topshop encourage "see it now, buy it now" shopping by carrying over the top trendy styles. jcpenney has already lined up a collaboration with Nanette Lepore, but some customers like myself will only make a trip to purchase a downmarket designer collaboration if it's one stop shopping for the day. Sorry, the only way I'm looking at Jason Wu's Target collaboration is if I am picking up cleaning supplies and some Pizza Hut breadsticks at the same time.
Or jcpenney will discover that they need to raise their prices, up the quality and carry bigger names to cater to a different customer: those that don't care about sales, they just want what they want. This is more the higher end department store customer that wants new styles at the beginning of the season and passes over last season's merchandise. I would say moreso the Barney's customer. The person that purchases items that never go on sale like Goyard tote bags. This customer has no interest in running around to different stores to compare prices. Can Ron Johnson attract this customer with clothing at a low price point?
What do you think? That jcpenney's strategy is so bold that it just might work?
