A Look at J.C. Penney's Proposed Store Concept: Will it Succeed?



One of the most interesting retail news is J.C. Penney's announcement of a new retail strategy.  Various articles have already discussed all the nuances of the new pricing strategy that J.C. Penney implemented starting on February 1st, this one from Brian Ahearn being the most interesting: Will J.C. Penney's New Business Strategy Positively Influence Sales?.  The retailer is dramatically reducing the number of sales that it holds per year and instead it is shifting to a low prices all the time approach. 

I am not going to get into the merit of the pricing strategy, noting though that in its annual report filed last week with the SEC the company warned that: “There is no assurance that we will be able to successfully implement these strategic initiatives, which may result in an adverse impact on our business and financial results. In addition, the changes to our pricing strategies announced in January 2012 could result in a prolonged decline in sales."

Instead I will focus on J.C. Penney's new store concept, which the company will start introducing this summer in a process that will take about 4 years.  In fact, it is this part of the retailers plan that is going to determine the success of even the pricing strategy.  It is not surprising that the new pricing strategy is currently having an adverse impact, as it was implemented within its old store concept.  Shoppers would only understand, accept and eventually subscribe to a radical shift in a retailer's pricing policy only when it is coupled with an equally noticeable change in store concept and customer experience.

So let's see what are J.C. Penney's plans for their new store concept, keeping in mind that they might be modified and improved in the months and years to come.  My analysis will follow the framework that I presented on my earlier post, How to Create a Unique and Engaging Customer Experience.
  • Store Concept and Design - J.C. Penney is planning a shops-within-a-store concept.  Each retail store will eventually house between 80 and 100 specific brand shops.  Currently J.C. Penney already features a few shops in shop from brands like Sephora, MNG Mango and Liz Claiborne.  Other designs features, some of which have already been introduced, include specific color schemes in lighting, signage and fixtures which change monthly.
  • Customer Service - J.C. Penney is going to introduce a customer service area, which they dubbed "Town Square".  It is ideally going to be a service and advice center modelled after Apple's "Genius Bar".

As you can see, there are not too many details on how exactly this plan will come together.  Therefore, there are a lot of questions that will only be answered once the new stores are in place.  Here are my main concerns:
  • How is J.C. Penney going to deliver a consistent and unique brand message?  How are their patrons going to readily understand and notice that specific message in their stores, as they are surrounded by a collection of completely distinct shops inside each store?  The shops-in-shop strategy has been successful for other retailers, as it allowed them to attract customers that are invested and sold on the lifestyle and message of those brand shops.  However, the risk is that J.C Penney's message could get lost among all the conflicting and competing messages that the various brand shops will try to convey.  Retailers should always keep in mind that the key to success is to develop a unique store concept and message that can be delivered consistently and continuously to their customers.  Alternatively, they will not stand out, their message will prove unremarkable and will fade.
  • How is J.C. Penney going to deliver a great customer experience?  Is the "Town Square" staff going to act as some sort of tour guiding service?  Is J.C. Penney going to develop engaging and compelling propositions which will add value outside of the brand shops?  CEO Ron Johnson in a recent interview hinted that they are studying all types of innovative ideas, including the introduction of new technologies.  However, he did not provide any specifics, mentioning that these things take time.  Retailers should remember that innovative approaches and installations, high tech or not, are important to deliver a differentiating and more stimulating experience.  It is particularly significant in J.C. Penney's case, as until now their entire value proposition has only been centered around price reductions and has overlooked the customer experience.

As I mentioned above, we will have to wait and see.  However, I have to commend J.C. Penney for their realization that their store concept needed updating and that only delivering a remarkable customer experience can bring long term success.

2 comments:

  1. I can't find anything good about the new pricing strategy or store design. Yes, the prices are now lower but the quality of merchandise is also lower grade. A new upscale look paired with cheap clothes make for very unhappy customers--or should I say previous customer.....

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  2. Dear Reader,

    I have to agree with you that J.C. Penney's new direction is questionable in some of its details. As I mentioned in my post, I was sceptical in the success of its pricing strategy, as it was introduced without any real change in its store concept or in the customer experience it provides. To be fair to J.C. Penney's management, turnarounds are tricky and take time. We will need to wait and see. Certainly, it does not bode well to hear that their actions are making customers unhappy.

    Best Regards,

    Eli

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