Monday, February 6, 2012
JC Penney's Dramatic Transformation Begins
If you pay any attention at all to the retail scene, it would have been hard to miss the news of JCP's announced transformation. It has garnered significant buzz with its new management team led by Ron Johnson, Apple store's former retail guru and a star-studded cast recruited from Target and others.
The transformation has three main components:
--A "simplified" everyday low price strategy with a few twists, called fair and square
--A new logo (above)
--Planned dramatic changes to the retail environment, with 80-100 well defined shops within shops and a Town Square component
While it will take a fairly long time to create dramatic change within the stores, the new marketing strategy can be seen now, in circulars as well as TV spots...
From the very basic standpoint of marketing, it is already working. We flipped through the JCP Sunday circular, which is the first time we can say that in quite some time. The ads, highly reminiscent of Target in style, begin to demonstrate the new pricing strategy's three elements:
--Simplified everyday prices, all ending in $ price point ($16, $20, etc)--In Red
--A monthly price, which is presumably a savings from the everyday price--In White
--Mark down prices (Best Prices) which will be in store the 1st and 3rd Friday in February--In Blue
The first time through, this seems extremely confusing. It was difficult to understand what a "February" price really is and the everyday prices are difficult to gauge without clear comparisons (most of the promoted items are private label). And, of course, we don't know how great the mark down deals will be (how many, how deep, etc...). The circular format itself is clean and refreshing and a definite breath of fresh air.
In the extraordinarily annoying TV commercial(don't say you weren't warned): http://www.youtube.com/watch?feature=endscreen&NR=1&v=uI42p6j4yNA, customers rebel against the craziness of multiple pricing strategies, markdowns and clearances. Note: there are much better versions that play off the same theme elsewhere on YouTube.
Simplification of retail pricing in much of the department store channel is desperately needed but has also been historically difficult to achieve for those who have gone down the path before.
Of course, the real test will be the experience once customers get to the store--the transformation in JCP's 1100 stores will be a longer and more expensive process. It will also be an eagerly awaited test to see if simplification can be extended to stores as complex as JC Penney.
We admire the boldness of vision and no doubt JC Penney will be monopolizing retail headlines for some time as their initiatives play out.
As we have always remarked, the great thing about retail is its immediacy: JCP's stock had a very nice run up after the announced new strategy. We'll know fairly quickly if customers beat a similar path to their doors.
Post Script. Had a chance to visit a JCP the other day while on the road. The new pricing policy is in full effect, with every item re-stickered to reflect the new pricing strategy. Some of the everyday pricing seems incredibly sharp--$5 super absorbent bath towels and the like which should certainly grab the customers' attention. They weren't kidding on markdowns either. Blue tagged items took items that were already marked down about 70% and reduced them 20-30% further...
The big miss? Not a scrap of signing explaining the new program to customers, which could have easily been accomplished by replicating the very clear explanations evident in the print ads. And, the intent and purpose of month specials (February specials, in magenta, of course) is not terribly evident in store.
Posted by Neil Stern, Senior Partner, McMillanDoolittle, The Retail Experts at 6:59 AM