Will new JCP mini-stores and a $10 gift make a difference?
Despite a strong September for industry retail sales and somewhat optimistic forecasts, JCPenney's new strategy has failed to bring in consumers. Eschewing the successful promotional and heavy discount approach that works well for competitor's Kohl's and Macy's, early this year JCPenney's new CEO, Ron Johnson, embarked on a simplified everyday low price strategy.
Customers have been underwhelmed. In an effort to get them back in the stores, Penney's has now sent customers a $10 loyalty gift card, refusing to call it a “coupon”. JCPenney stores are also being transformed by the addition of “mini-stores” that are pop-up boutiques for brands such as Levi's, Sephora, and Liz Claiborne.
Johnson's background with Apple has clearly come in to play, as Levi's “denim bar” features iPads that allow customers to browse their 11 cuts and 88 washes of Jeans. In addition, salespeople are being outfitted with iPads to assist cutsomers and check them out without having to queue up at the cash register.
Whether this technology and store-within-a-store innovation will get customers back in the stores remains to be seen. Retail analysts appear split. Commenting on the mini-stores, JPMorgan Chase analyst Matthew Boss said, “Initial shop productivity [is] encouraging.” Morningstar equity analyst Paul Swinand seems to think the overall strategy is sound, but that, “you have to change the brand perception among consumers and brand perceptions are very hard to change.”
On the other hand, in a Fortune magazine article independent analyst Walter Loeb has predicted that by 2013 JCPenney sales will have dropped $5 billion from $17 billion to $12 billion. He said the retailer “is becoming irrelevent to investors and a liability to manufacturers”. ACM Partners, Margaret Bogenrief, has gone so far as to call Johnson's strategy a “reckless experiment”.
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