The Transformation of J.C. Penney Continues

The struggles of department stores in today's rapidly evolving digital retail environment have been well documented. Macy's is closing stores, Kohl's is reporting declining revenues and Sears is fighting to stay in business. And then there's J.C. Penney. The 100-plus-year-old retailer is bucking the trend and finds itself in the midst of a turnaround. While by no means there yet, J.C. Penney is re-establishing itself as a leading American retail brand.

In a keynote address yesterday at Shop.org, Retail's Digital Summit, Mike Amend, executive vice president, omnichannel, J.C. Penney, discussed how the company is combining the best of online and offline, while maintaining an intense focus on its customers, to reinvent itself.

A Value Play
In order to get back on the right track toward profitability, Amend noted that J.C. Penney is focusing on three primary areas: value, customers and re-imagination The first in that list, value, means more than giving shoppers the lowest price — although that's part of the equation. Amend says J.C. Penney defines value as giving its customers the feeling that they're getting more than what they paid for, and that includes their time and effort.

This commitment to value is what the J.C. Penney brand was built on. The retailer strayed from this approach a few years back, and it cost it dearly. In order to regain its core customers — and attract new ones — J.C. Penney must be willing to change as it customers have, noted Amend.

Reimagining the J.C. Penney Brand
Consumers have changed; it's incumbent upon brands to change with them. Today's consumers have shorter attention spans, connect with brands in different channels and expect a seamless purchase process, including delivery. To keep up with the pace of change amongst its customers, J.C Penney is doing three things: talking to real customers; testing how changes impact the business; and define the success criteria for a new project/initiative before it gets piloted, not after.

“We must be willing to change before turmoil or disruption occurs,” Amend said.

Examples of those changes at J.C. Penney include the rollout of a buy online, pick up in-store program (available at nearly 600 J.C. Penney store locations); the re-entering of the appliance business; and the opening of more Sephora shops inside J.C. Penney locations (58 in the last eight weeks). Specific to appliances, J.C. Penney based its decision to re-enter the product category on customer feedback and the strength of the housing market. And it happened quickly. The process went from idea to development to test to deployment in just about four months.

“Once change has been confirmed, it comes down to the speed of execution,” said Amend.

The move to bring back appliances is proving to be a wise one for J.C. Penney. Appliances in J.C. Penney stores are generating 10 times the sales per square foot compared to the products that were replaced, and an eight time increase in profit margin, Amend noted.

Omnichannel Key to Future Growth
Central to J.C. Penney's turnaround is executing upon its omnichannel strategy. Amend believes the retailer must leverage three differentiators to help it accomplish this goal — unique products, unique experiences, and its nationwide network of stores.

For unique products, J.C. Penney is betting on the growth of its private brands (St. John's Bay, Worthington). Private brands account for 50 percent of J.C. Penney's sales, and the goal is to increase that number to 65 percent to 70 percent, Amend said. And these products aren't available anywhere other than J.C. Penney — including Amazon.com — so it gives the retailer a unique advantage.

“J.C. Penney can no longer be an item-level retailer,” Amend said. “We must be able to solve complex problems and provide unique experiences.” Amend cited the example of a teenage girl getting ready for prom. J.C. Penney can now provide for that whole experience and make it memorable, from finding her dress, to getting her hair done at a Salon by InStyle in one of J.C. Penney's stores, to getting her makeup done at an in-store Sephora shop, before finally getting her pictures taken at an in-store portrait studio.

As for the last piece of the omnichannel equation, Amend believes J.C. Penney has the ability to leverage the capabilities of digital to make its physical stores better, and vice versa. And that process is already well under way. Over 50 percent of J.C. Penney's online orders touch a store in some fashion — shipped from a store, picked up a store, returned to a store. J.C. Penney is leveraging store inventory to help it fulfill online orders with a new ship from store program, as well as its buy online, pick up in-store.

“The use of stores should be standard, not the exception for online orders,” Amend said.