Calm Down, JCPenney’s Troubles Are Not A Sign of Retail’s End Times

Calm Down, JCPenney’s Troubles Are Not A Sign of Retail’s End Times

By Brent Franson | Best Practices | 25 May, 2018

The news that JCPenney’s CEO, Marvin Ellison, is jumping ship to head up Lowe’s produced its share of headlines, including my favorite: JCPenney’s CEO just signaled the end of retail as we know it.

What? No.

Retail is not over. JCPenney is not the bellwether for an entire industry and the usual suspects-slash-scapegoats (e.g. Amazon) are really not solely to blame here. Let’s take a quick look at why JCPenney may have struggled – and why some of its peers (e.g. Kohl’s) are doing just fine.

The extremes are capably navigating through the industry’s struggles… If you’re Gucci, you’re doing great. If you’re Dollar General, you’re doing great. At either end of the spectrum – from lofty luxury purveyors to the bargain basements – retailers are performing well because they’ve been savvy and aggressive about delivering a combination of experience, convenience and/or value to their customers.

Even prior to the retail apocalypse, high-end designers like Hermes were thinking about experience – because you don’t drop twenty grand on a handbag without carefully curating the entire shopping experience from end to end. Similarly, the Dollar Generals of the world aren’t concerned with capturing customers on experience. Their focus is on low margin/high volume, using more than 13,000 US stores to enhance the convenience factor. That’s astutely playing to their respective customer bases. That’s winning.

…but the undifferentiated middle is not. What’s at the heart of JCPenney’s problems? Let’s stipulate, of course, it’s a confluence of factors (some more important than others). But at its core, JCPenney is – like Macy’s – completely middle of the road. It’s not verticalized. It’s not particularly updated nor does the brand feel fresh and current. It’s not the cheapest, so it’s not an obvious target for hardcore bargain-hunters, but neither is it appealing to a more affluent clientele bent on getting quality and experience. And it’s not been particularly innovative in its approach to resolving these issues.

JCPenney hasn’t offered a clear, crisp combination of that convenience/experience/value model and therein lies the problem. There’s simply no reason driving customers to go.

To be clear, it’s not a category-wide issue. JCPenney’s peers – such as Kohl’s and Old Navy – are doing quite well. Kohl’s first quarter numbers beat the Street’s expectations. Yes, the company did shift a friends-and-family event into first quarter, which boosted sales. But it’s also been consistent and clever in its approach. Many noted the innovative steps the retailer took to differentiate itself from others: accepting Amazon returns and selling Amazon’s Alexa, Echo and other products in stores, leasing empty stores to Aldi, and doing a better job managing inventory.

Meanwhile, Old Navy is such a growth engine for Gap (five years and counting of same-store sales growth) that the latter is upping its investment: opening 60 stores and updating 150 others this year alone. And it provides a good, value-oriented experience; one report noted clearly marked discounts, lines for credit/debit card checkout, and even stations where consumers can scan items and check prices for themselves.

But it’s also that JCPenney’s hasn’t adjusted to some fundamental retail shifts. The retailer’s certainly not the only one that continues to flounder. But it has to come to grips with a few trends:

  1. People must be able to instantly answer “Why should I go to JCPenney?” Retailers are competing with an incredibly long list of amazing options for spending time. I’ve written about this before but this is the first time in human history where entertainment opportunities are cheap, even free, highly accessible, and virtually endless. To stand out, you need to claw your way to the top of this Mount Everest of competition with something that’s pretty damn compelling – or you need to be so convenient that people actually get more of their time back by spending just a little on you.
  2. Many consumers no longer need a work and a weekend wardrobe.As workplaces get more casual, consumers are attracted by pieces that pull double duty. Today’s shopper might have one or 1.5 wardrobes as opposed to the suit/tie plus jeans/polo of the past. It’s just not as necessary to have the full complement of work wear when one or two will do for the increasingly rare occasions that demand full formality.
  3. Department stores are less exciting sources for discovery. Instagram ads. A StitchFix bundle. A one-of-a-kind boutique. As marketing becomes increasingly individual and targeted, we have less need for hunting expeditions to the mall to see what’s new. Personalization and curation are removing much of the work for consumers. These other, often digital, sources will surface products consumers are likely to want and enjoy, with minimal effort and fuss.

What do you think?

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Brent Franson

Brent Franson

Brent is the CEO of Euclid Analytics.

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