Term Paper study

Submitted by: Sushant Bhasin

Part- 1

History & background

Modern jcpenney stores are a far cry from the small dry-goods store that James Cash

Penney opened in Kemmerer,

Wyoming in 1902. In those days,

frontier miners and farmers and their

families turned to jcpenney for blue

jeans and other work clothes, shoes,

fabrics and sewing needs. Today, busy

working families turn to jcpenney in

cities, towns and suburbs and The original Golden Rule store in Kemmerer, 1902

to jcp.com for affordable fashions and home accessories.

Originally, Mr. Penney called his stores the Golden Rule because it was his personal and

business philosophy to treat others the way he himself would want to be treated. In 1913,

his growing chain of stores incorporated in Utah as the J. C. Penney Company, Inc. and the

Golden Rule name was phased out. In 1914, the Company moved its headquarters from Salt

Lake City to New York City to be closer to its major sources of merchandise. Since 1992, the

Company has been headquartered in Plano, Texas.

As jcpenney grew, it became “A Nationwide Institution,” as one of its early logos

proclaimed. At one time, more than 2,000 jcpenney stores dotted Main Streets and

JCPENNY – SUSHANT BHASIN

downtown shopping districts across America. After World War II, the Company followed its

customers into the new suburbs, and later into regional shopping malls. The jcpenney

catalogue debuted in 1963, and in 1994, the forerunner of today’s jcp.com began offering

merchandise via the Internet.

JcPenny’s commitment to serving its customers with style, quality and smart prices has led

the Company through many transformations over the years as society and shopping habits

change. Furthermore, through more than 100 years of history, the Company has stayed true

to its Golden Rule beginnings, with a continued commitment to care for the communities

where it does business in and operate in an ethical and responsible manner. Today these

commitments live on in the Company’s dedication to make “Every Day Matters” for all its

stakeholders.

JcPenny’s Business level strategy before the implementation of new positioning strategy

and competitive assessment of marketplace

Target Market

For decades, JC Penny’s core customer has been a woman aged between 35 to 55 years,

who has between $35,000 to $100,000 household Incomes.

Product

Huge volume of In house brands was available. Four hundred Multiple Branded and

unbranded products was available under one roof. Brands like Arizona jeans shop and

Mango are the partners for more than 2 decades which are known all across the world.

JCPENNY – SUSHANT BHASIN

Price

The store keeps those products which are meant for the middle and Affluent class in USA. It

proved to be too costly for the customers. E.g. the designer Michael Graves Tea pots were

available for average $200 inside the JC penny store. From 1990s up till now the cost of the

product remains the same and the Selling price goes up by 43% but she the customer of JC

Penny knows how to take the discount and gets a product which cost $10 to company at

Average $15. But JC was not following the same trend and were charging high.

Distribution/Place

Have 1107 Department stores in all 50 US states and Puerto Rico. Design of the outlet has

traditional look which attracts more and more customers who are above the age of 30s.

More than 50% stores are located in the shopping malls and the rest of them are owned by

JC Penny.

Promotion

There are many promotional offers like weekend, weekly, hourly bonus buy, Free shipping,

Loyalty Programs, JCP cash etc. All these promotional methods were adopted by JCP. Spent

more than 2 billion dollars in a year on promotion. 590 unique promotions have been

organised in a year.

The major problems behind JcPenny’s failure are:

Team Management was one of the major problems because the staffs till 2010 were not

equipped with proper technology neither in the head office nor in the Stores. Employees

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were not satisfied with the kind of working environment which includes Medical benefits

and calling them by Mr. and Ms. XYZ.

Brand Management one more major problem because the then CEO Mike Ullman

Refocused on the In-house Brands and pushed the workforce not to think out of the box by

which the company hasn’t differentiated itself from its rivals and didn’t came up with any

new Brand.

Investor’s Management leads to all the stores owned by jcp’s. There are almost 400 out of

1100 stores which are owned by jcp’s and they were giving $150 per square feet Revenue as

compared to the stores which are situated in malls and gives $250 to $300 per square feet

revenue.

SWOT assessment 2012

Location of Factor Type of Factor

Favourable Unfavourable
Internal Strengths Weaknesses
1. Balanced Brand Image 1. Decline in the sales of stores
2. Customer first Approach 2. There is a continuous recall in the
3. Through multiple retail options product offerings
there is a wide range of product
offerings available

External Opportunities Threats

1. Good amount of focus in- shop
Sephora stores.
2. Investment in online retail
format and mobile Applications.
3. Launching of New exclusive
Private Label Brands.
1. History in the financial report is
weak. E.g. FY2010
2. Cost implemented in order to
open new modern stores
3. Rising labour cost in the US

JCPENNY – SUSHANT BHASIN

Key Findings

There could be a reason that there was a decrease in traffic in malls as customers looses

interested in fashion because of old tired outlook.

Customers were bombarded with promotional offers like coupons, discounts, thus confusing

the when is the right time to buy

The 590 promotional programs but no takers as 99 percent of the time customers ignored

them.

The frequency of price discounts made customers feel that the brands have become cheap

which ultimately led to lack of trust among customers regarding JC Penny as brand.

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Part 2

The New strategy adopted by JcPenny

Target market

JC Penny’s new target market is people who falls in the age of 10 to 55 years, still would

focus on woman.

Product

All the productive brands are available which are meaningful to consumers. Repositioning of

private brands like Stafford, Worthington, J.Ferrar etc in order to make thrashing store

experience for the new customers. Shop concepts have been totally changed for great

American brands like Liz Claiborne and introduction of brands like L’amour.

Price

Fair and Square pricing strategy which includes 3 elements are Everyday, Month-Long

Values and best price have been Introduced which means great prices would be provided

from the start. Lowest ever prices would be provided on 1st and 3rd Fridays. 1 happy return

policy would also be provided to the customer which means return the product anytime and

anywhere. Every day and Monthly pricing strategy which means according to the occasions

on daily basis discounts would be provided.

Distribution/Place

Almost more than 100 shops would be available under the one roof which gives a feeling of

speciality store inside a department store. Concept of each brand would be created and

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these concepts would change every month inside the store since the customer likes to shop

in edited environment. The store would be into parts

I. Red Zone will consist of new different products

II. Family room which is meant for service

Promotion

Broadcast in order to provide some knowledge to customers. Monthly distribution of

Magazine which states the monthly theme adopted by Penny and would also talk about the

partnership with other brands would in the Inbox of the customer. Launching of I pad

Applications in order to shop in the store. Based on the theme which has already been

conveyed in the Magazine accordingly monthly change in the colour of exterior lighting to

the store would be done. Almost $80 million is spent by JC Penny monthly on promotion

which will attract customer at least to visit a store once in a month.

According to the Video, JC Penny treats the national brands, designer, celebrities as

“Partners”. They signed celebrity Ellen DeGeneres to advertise their brand, changing the

brand symbol.

Brand logo is a “FRAME” with a starting point. The “FRAME” captures a moment of that

celebrates life that is remembered by an individual over his/her entire lifetime. New Brand

symbol is trying to make an emotional connect to the customer.

Brand symbol must reflect “Distinctly American” and echoes new brand attributes like

honesty, simplicity, relevance and inspire

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Allen had an emotional connect with JC Penny. As described in the video it is assumed that

Allen worked for JCP to earn her pocket money. Allen could easily pass on JCP’s message in a

lighter mood without making customer think too much through her talk show.

According to me, JcPenny have made lot of changes as compared to the previous approach

towards the customer which are as follows:

 Introduces designer and national brands in order to be viewed as “Trendy” by

customers.

 Introduction of solid colours in order to have colourful , and have a visual appeal

(as per the presentation).

 Focus on Television ad, Word of Mouth, Text Message campaigns featuring Allen

DeGeneres.

 Change in communication mix that echoes “Pricing” through

digital/website/mobile platform.

 Customers profiling in order to understand purchasing behaviour and accordingly

offer products and services.

 Change in design of fixtures with good backdrops replacing walls that would use

graphics to tell the story of the brand instead of mannequins, lightening up stores

and if required place glass to create an environment that customer would like to

face.

JCPENNY – SUSHANT BHASIN

Part 3

Financials (USD Million)

JC Penny
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
COGS 11,571.00 10,646.00 10,799.00 11,042.00 9,747
Gross Margin 6,915.00 6,910.00 6,960.00 6,218.00 4,779.00
Gross Profit Margin 37.41 39.36 39.19 36.03 32.90

Operating Expenses 5,336.00 5,747.00 5,617.00 5,251.00 5,417

Net Sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
Expense ratio 28.87 32.74 31.63 30.42 37.29

Net Income 572 251 389 -152 -520

Net sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
Profit Ratio 3.09 1.43 2.19 -0.88 -3.58

Net sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526

Total Assets 12,011.00 12,581.00 13,042.00 11,424.00 11,424.00
Asset Turnover ratio 0.65 0.72 0.73 0.66 0.79

Total Assets 12,011.00 12,581.00 13,042.00 11,424.00 11,424.00

Equity 4,155.00 4,778.00 5,460.00 4,010.00 4,010.00
Financila Leverage 0.35 0.38 0.42 0.35 0.35

Net Profits 572 251 389 -152 -520

Equity 4,155.00 4,778.00 5,460.00 4,010.00 4,010.00
Return on Net Worth 0.14 0.05 0.07 -0.04 -0.13

Note: The current financial data is till January 1st 2013.

JCPENNY – SUSHANT BHASIN

 JC Penny Profit Model
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Net sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
COGS 11,571.00 10,646.00 10,799.00 11,042.00 9,747
Gross Margin 6,915.00 6,910.00 6,960.00 6,218.00 4,779.00
Operating Expenses 5,336.00 5,747.00 5,617.00 5,251.00 5,417

Jan-09 Jan-10 Jan-11 Jan-12 13-Jan

Gross Profit Margin 37.41 39.36 39.19 36.03 32.90
Expense ratio 28.87 32.74 31.63 30.42 37.29
Profit Ratio 3.09 1.43 2.19 -0.88 -3.58
Asset Turnover ratio 0.65 0.72 0.73 0.66 0.79

Jan-09 Jan-10 Jan-11 Jan-12 13-Jan

Total Assets 12,011.00 12,581.00 13,042.00 11,424.00 11,424.00
Equity 4,155.00 4,778.00 5,460.00 4,010.00 4,010.00

Jan-09 Jan-10 Jan-11 Jan-12 13-Jan

Asset Turnover ratio 0.65 0.72 0.73 0.66 0.79
Return on Assets 0.05 0.02 0.03 -0.01 -0.05
Financila Leverage 0.35 0.38 0.42 0.35 0.35
Return on Net Worth 0.14 0.05 0.07 -0.04 -0.13

Evaluation of Financial Performance:

I. Sales getting decreased constantly this is a sign of worry for the company.

II. Cost of goods sold also got decreased but it’s of no use until the sales get

increased.

III. The expense ratio got increased and the gross profit margin for the company

decreased which could be the reason for JC Penny suffering from loss.

IV. Every dollar invested in the business Penny has to pay 4 more cents back

which results in loss.

V. Every dollar invested in Assets Penny again losing each cent on each dollar.

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 VI. Overall, nothing is in favour of JC Penny and Assets as well as Equity got

decreased and the condition for the JC Penny here is unfavourable.

VII. For 2013, specifically the profit was 3.5 times less as compared to last year.

The overall loss this year is expected to be more than 600 Million USD.

VIII. This year 2013 there is highest increase in the expenses because of the

opening of new format stores.

During my visit to JCPenney, South Laburnum Avenue, Sandston, VA, I met Paul a furniture

sales representative. He shared one of the incidences took place while he was dealing with a

customer.

Situation: JC Penney had a small, but nice, furniture selection. I noticed upon a slipcovered

sofa, on display–sort of; it wasn’t in any sort of living-room arrangement–in a neutral stone

color. The companion oversize chair was nearby, but not exactly grouped with the couch. No

matter: The couch was the right size and style. The best thing, for sure, was the price: a flat

$900. It was the lowest price of any other store. True to promise, neither there was “.99″

after the price on this couch, Nor on any of the other price tags. So one of the customers

were browsing the furniture area, by practice-sitting on the Sofa, imagining what the piece

would look like in family room–for a good five minutes alone. Then, finally, along comes

ambling a gentleman, guessing in his 60s, a little stout, neatly dressed in a gray suit and tie,

nametag with new JCP logo affixed to lapel. “How are you today?” he said in a too-loud

voice, after a beat, after an almost obvious, concerted effort to muster enthusiasm, as he

walked toward us. “That’s a nice couch.”

“Yeah, the customer said we like it”. “Do the covers come off for washing?”

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“They do,” the salesman said, slowly, nodding. “Fully machine washable. Or you can have

them dry-cleaned. It’s good construction; fully made in the United States.” Most probably

he said West Virginia and not North Carolina.

The moral of the above real time story means there is a lot to make the sales associate

understand about JCPenny strategy and Do everything possible to enlist the employees in

the new marketing efforts. All the sales associate knew is the price is lowest of all the stores

in Virginia. There is as much at stake and as many questions along those lines as applied to

sales associates like Paul.

According to me Department stores are still important whether it is America or any other

country in this world. But the problem here is, these stores could become those empty

showrooms where people come and have a look at the products and buy the same product

from somewhere else may be for better price, Quality or any other reason. JC Penny has one

of the greatest Infrastructures with almost 1200 outlets in America.

Two dimension which according to me If followed then JC Penny can achieve the target

which are:

Technology

A customer should be allowed to shop through multi channels, in this scenario according to

Peter Fader, a Wharton marketing Professor and co-director says the biggest app for a

customer today is mobile, so let the customer shop through whichever channel she wants to

and make the choices open for them. I think Ron Johnson the new CEO is known to

implement technology and JC Penny will come up with flying colours.

JCPENNY – SUSHANT BHASIN

Brand Identity

The decision taken by Michael and Johnson for displaying the brands concept wise is the

best since the identity of brand is very important factor. JC Penny itself has a strong brand

identity and now they have decided to keep only those brands which are loved by

customers.

I think the strategy would definitely be successful but it will cost 2 to 3 years in order to

show the results and millions of dollars or crore of rupees.

JC PENNY is the brand which deals in low, particularly middle as well as high class products

after they came with their strategy of 5 P’s implemented by CEO Ron Johnson and President

Michael. Unlike IKEA, BURBERRY and other high profile brands JC Penny is the one company

which takes care of the Middle Income people the most and also deals in Low as well as

High Income people.

JCPENNY – SUSHANT BHASIN

References:

 http://www.jcpenney.net/Our-Old-Company/About-jcpenney/Our-History.aspx

 http://yousigma.com/comparativeanalysis/jcpenneycorporationinc.html

 http://www.zacks.com/stock/news/67216/J.+C.+Penney%3A+A+SWOT+Study

 http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyI

d=105457000000000

 http://library.morningstar.com/stock/balance-sheet?country=USA&t=JCP

 http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-

a-tough-sell-on-the-sales-floor/2/

 http://www.jcpmediaroom.com/

 http://en.wikipedia.org/wiki/J._C._Penney

 http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-

2012-6?op=1

JCPENNY – SUSHANT BHASIN