Introduction

J. C. Penney Company, Inc. is an American department store chain with 865

locations in 49 U.S. states and Puerto Rico. In addition to selling conventional

merchandise, J. C. Penney stores often house several leased departments such

as Sephora, Seattle's Best Coffee, salons, auto centers, optical centers, portrait

studios, and jewelry repair. James Cash Penney in the U.S founded it on April 14,

1902; 117 years ago. Most J. C. Penney stores are located in suburban shopping

malls. Their major merchandise includes: clothing, cosmetics, electronics,

footwear, furniture, housewares, jewelry, toys and appliances

Logo transition:

In June 2008, a promotion called "Speed Dressing" developed consummation with

the J. C. Penney logo and trademark "Each Day Matters". The advertisement won

a prize at the Cannes Lions International Advertising Festival. The advertisement

was scrutinized for appearing to promote teen intimacy. J. C. Penney denied that

the promotion was theirs and their publicizing office Saatchi and Saatchi

announced that it hosted been made by a third gathering merchant. Epoch Films,

who declined to comment, entered it in the challenge. Marketing master John

Tantillo prompted that the organization separation itself from the business and

furthermore shed the attention it engendered.

Problem Identification

J.C Penney suffered a 5.5% decrease in first quarter sales for 2019. Financial experts

question how much longer the 114-year-old brand will stay in business.
  Poor customer service

Customers faced difficulty in receiving timely and appropriate orders. Many

people received wrong orders with some complaining about how they received

an order weeks later.

 Pricing Strategy

J.C. Penney made a bold move this year to rid their stores of all discounts,

sales, and coupons for “fair and square” pricing. However, the old pricing strategy

worked better for the company because it created hype and buzz in the shopper

community leading to greater sales for J.C. Penney.

So, where did J.C. Penney go wrong? While some people admire their attempt to

change, they attempted to destroy over a century’s worth of price conditioning

consumers have been through with department stores and pricing in general. They

were not completely off base, as consumers with more and more access to

information are beginning to realize that the value of products is determined

much differently than a sticker would suggest. Yet, assuming that most

consumers would not fall prey to the colorful print ads tucked within the comics

section in the Sunday paper, overlooks how much the majority of consumers

value “winning” the retail game. Simply, deflating the perceived value causes

customers to value the actual product less.

With a 20% sales drop, J.C Penny’s flight in the face of traditional retail

pricing, has failed, at least in the short-term. CEO Ron Johnson insists that the

company will continue with this method, even though experts expect the retail

chain to gradually return to offering frequent sales and promotions.

 Other than this, they were seen putting on higher price stickers on original

prices. To most loyal customers this was a shocking move and deemed extremely

unethical. It also had a drastic effect on the sales, which further reduced.

 Improper store layout and merchandise placement

Their stores met with empty shelves, messy displays, and abandoned cash registers

around March. The stores, which both anchored enclosed shopping malls, felt

outdated and far too large. The following images illustrate the unfitting conditions of

their stores:
  Abundance of retail outlets

J.C Penney suffered a 5.5% decrease in first quarter sales for 2019. Struggling

retailer JC Penney has announced a round of store closings leading up to 27 stores.

More closings are almost certainly on the horizon. Analysts originally predicted the

chain would cut more than 100 locations this year, and the company's management

team has predicted they will continue to slim down in the near future.

The stores identified for closure either require significant capital or are

minimally cash flow positive. Other than this, many people in the U.S now prefer

shopping from online retailers such as Amazon, making physical presence in such

abundance less favorable.

 Impact of Amazon on department stores

With the seemingly inevitable rise of e-commerce, it's no mystery that the retail

industry is quickly changing. And some of the world's best-known traditional retailers

are being left behind in the process. Of course, Amazon isn’t solely responsible for

killing struggling stores. Bad leadership and strategic mistakes have crippled

companies like J.C Penney just as much, according to some. However, Amazon gets a

category in its crosshairs, companies in the space need to brace for impact. As of

2017, Amazon alone had the highest market share in contrast to all the other

departmental stores combined. Amazon's overall revenue skyrocketed 25% year over

year to $38 billion last quarter alone. The image below illustrates market value

comparisons:
 With J.C. Penney shares trading in low single digits and Amazon’s shares

trading at four digits, J.C. Penney’s market value is at a fraction of that of Amazon’s,

roughly $970 million, compared to $528 billion of Amazon.

With the caveat that J.C. Penney could rebound hard on signs of any sustained

improvement for the remainder of this year, people feel more comfortable betting on

Amazon.com as the more likely business to survive and thrive over the long term.

That's not to say there won't be more volatility along the way, but Amazon has

repeatedly proven to be a winner that keeps on winning.

 Competitors

 Walmart

Walmart is an American multinational retail corporation that operates a chain

of hypermarkets; discount department stores, and grocery stores, headquartered

in Bentonville, Arkansas. The company was founded by Sam Walton in 1962 and

incorporated on October 31, 1969. It has 11,389 stores and clubs in 27 countries,

operating under 55 different names.

Price leadership is core to who they are. Everyday low cost is their

commitment to control expenses so those cost savings can be passed along to the

customers. Their omni-channel presence provides customers access to broad

assortment anytime and anywhere.

What does ‘being the largest retailer in the world’ mean to Walmart?

 Economies of scale: The company can share its fixed costs over many

products, which makes Walmart one of the cheapest places to shop.

I. Efficient and effective use of resources: Walmart can use its resources, such

as distribution facilities, information systems, knowledge and other

 capabilities and skills, more efficiently and effectively over a large number of

locations.

II. Huge gains from implementing best practices: The company can identify

better ways of performing tasks, managing stores and hiring new employees

and can achieve huge gains by implementing these best practices in its vast

network of stores.

III. Experimenting with less risk: The company can engage in many

experiments within its stores or in new store formats without the risk of losing

a substantial amount of profits or revenue.

IV. Market power over suppliers and competitors: Due to its size, Walmart can

exercise its market power over suppliers by requiring lower prices from them.

The company can also affect the competition by selling selected items at a

loss, thus driving competition out of the market.

While most departmental stores have faced a drop in sales, Walmart has found

pockets of growth in sales via grocery and electronics. It has been able to compete

with Amazon by giving customers the option to buy items online and then pick them

up at stores that same day.

 Kohl’s

Kohl's is an American department store retail chain, operated by Kohl's

Corporation. With 1,158 locations, it is the largest department store chain in the

United States as of February 2013. Polish immigrant Maxwell Kohl, who opened a

corner grocery store in Milwaukee, Wisconsin in 1927, founded the company. Nine
out of 10 Kohl's stores are in suburban strip malls rather than enclosed shopping

malls, so declining foot traffic in malls hasn't affected the chain as strongly.

Kohl’s featuring Amazon smart-home shop within their stores. These mini

shops are staffed with Amazon employees that help customers figure out figure out

what products work best for them along with the option of scheduling an Amazon

expert to visit their home for a consultation.

Other than this, Kohl's says it will accept eligible Amazon items, without a box or

label, and return them for customers for free. The move highlights a major headache

of shopping online: Customers often cannot try something before they buy it, and if

the item does not work out, it can be a hassle to return it. This Kohl's-Amazon

partnership offers one solution, at least for people with Kohl’s nearby. The reason

why Kohl’s would want to partner with Amazon is an increase in foot traffic and new

customers. If Amazon shoppers go to Kohl's to make a return, perhaps they will pick

up a few items while they're at it.

 Macy’s

Macy's and J.C Penney are two of the most well known department stores in

the United States, and each has been around for over 100 years. But department stores

are no longer in their heyday. The rise of e-commerce, declining foot traffic to malls,

and a higher demand for off-price products are just some of the factors that

have caused department stores to suffer in recent years. Several department-store

chains, including both Macy's and J.C Penney, have recently closed locations across

the country as they struggle to adapt to shoppers' changing habits. Macy's, however,

has appeared to be on the upswing.

Macy’s has come up with its own image recognition mobile application

designed to simplify searching for items on its ecommerce site by submitting a photo
of an item from daily life. By enabling app users to simply snap a photo of an item of

interest with their smartphones and easily search for and purchase a similar item on

Macys.com, the retailer is taking impulse buying to new heights. This fall, the retailer

is introducing or expanding a host of capabilities, including several that underscore

mobile’s crucial role in helping the retailer attain its goals, such as same-day delivery,

a broad expansion of messaging and smart fitting rooms.

 SWOT Analysis

Strengths

 A strong legacy: J.C. Penney has a strong legacy of about 100 years in the

retail sector and has strong brand equity.

 Business operations: J.C. Penney has a diversified supplier base, good

marketing campaigns, convincing private and national brands, and good point-

of-sale technology initiatives along with cost and inventory management. It

focuses to close any store that is underperforming and that is exiting its

catalog business.

 Customer retention: J.C. Penney focuses to enhance the customer’s

experience in shopping by renovating, remodeling, and refurbishing stores

along with refreshing its website functionality for keeping a tap on the steady

migration to online shoppers. It also launched convincing new merchandise

and the J.C. Penney Rewards program to attract more customers.

 Huge product line: J.C Penney has a diverse product and service line. It also

has an efficient supply chain. It has a varied mix of private and in-house

brands.

Weaknesses
  Blurry target market and identity crisis: J.C Penney aimed to have a

deeper, more emotional and enduring relationship with current and new

customers. However, with their new pricing strategies, they have confused the

consumers and made it all the more difficult to appropriately place themselves

in the minds of the consumers.

 Lack of coupons: The problem is the J.C Penney’s management team did not

realize just how much their customer is addicted to the coupon drug. The old

policy has been working well for retailers, because it hypes consumer

emotions, making them feel smart and encouraging them to talk with other

consumers about it. That’s how hype and buzz begins.

 Improper store layout and merchandise: Their stores met with empty

shelves, messy displays, and abandoned cash registers. The stores, which both

anchored enclosed shopping malls, felt outdated and far too large.

 Decrease in sales and popularity: J.C. Penney has been facing a dip in sales

over the past few months. This will, in fact, reflect on its financial condition.

 Less global presence: J.C. Penney has a less global presence, especially in

emerging economies. This will be a hindrance to their business operations.

Opportunities

 Expansion of product line: J.C. Penney can expand its business operations

into the appliance segment. This will provide an opportunity for J.C. Penney

to increase its business operations.

 Enhanced advertising campaigns: J.C. Penney can increase their visibility

by means of increasing their advertising and also providing more focused

services to their customers. Moreover, increasing their advertising strategy can

reach to a wide range of people.

  Have an increased online presence and use social media affectively: With

the advent of technology, it has become increasingly important for companies

to invest on online retailing as well as promotions to stay relevant to

consumers.

 Return to old pricing strategy: Since their previous pricing strategy

resonates well with the consumers, it is advisable for them to shift back to it.

This could help bring back a few loyal customers and could enable in some

market share growth.

Threats

 Presence of an online market: J.C. Penney faces a lot of competition from

prominent e-retailers. It lacks a presence in the online market that is a serious

threat to business growth. It also reduces the margin of the business.

 Competitor’s expansion: Expansion from the competitors business can affect

the business margins of the company. Especially established competitors such

as, Walmart possess a high threat to J.C Penney. Their cost leadership strategy

resonates well the consumers and has led to a greater market share for them.

 Weak consumer spending: The overall purchasing power of consumers is

diminishing overtime, which could pose as a serious long-term threat.

 Solutions

Allowing customers to use coupons again will be successful as it hypes

consumer emotions, making them feel smart and encouraging them to talk with other

consumers about it. Also, it has worked well for them in the past and they should stick

to strategies, which result in greater revenues. However, it is increasingly important to

plan these strategies appropriately to gain long-term benefits.

 The brand’s image can be fixed with competent business storytelling strategies

that let people inside your history and activity, thus increasing your chances to regain

your popularity. J.C Penney can take up bloggers to get the company out of this

unfortunate situation. As content marketing goes, this is perhaps the wisest strategy:

Bloggers can offer advertorials, guest posts, social buzz, interviews, product reviews,

endorsements and so on.

Store layout and merchandising directly affects store traffic, dwell time, and

sales, among other things. That’s why it’s critical to invest the time and resources in

making sure that the look and feel of a store is on point. Store layout can be improved

by using the right floor plan, being aware of how customers move around in the store,

ensuring appropriate quantities and categories, appropriate placement of merchandise

as well usage of store space, freshen up displays on a regular basis, incorporating an

engaging sales staff and availability of fitting rooms.

They can work on better customer and delivery service to ensure customer

retention. This can be done by simplifying the delivery process, speeding up

communications with the warehouse, getting rid of paperwork makes the process

much quicker so it’s advisable to incorporate EDI, preparing customer clearances in

advance, keeping the customers informed and be as responsive as possible.

Just like Walmart, J.C Penney should think about aggressively increasing

online sales. With physical retail outlets slowly losing significance, it’s imperative for

all retailers to consider the importance of technology ad the ease it provides to people

in general.

Lastly, J.C Penney should consider coming up with creative partnerships that

can enhance customer footfall as well as sales in general. It could partner with major

online retailers such as, Amazon.

Kinza Baig

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