Grandma’s JCP Gets Zippy
Already it is looking like NOT your grandmother’s JC Penney. Modern, crisp and zippy branded boutiques, shops and stores are popping up in 683 of the company’s 1100 stores. CEO Ron Johnson, during his opening salvo last February, said something like “…we like old – we don’t like stale…” Fresh air, indeed, was the aura emanating from that “Woodstock-like,” inspirational presentation of how he intended to transform not only JC Penney, but the entire department store retail model. Ironically, his vision was/is to transform it “back to the future,” to the time when department stores were wonderful all-day shopping experiences, “go-to” destinations with exciting and fun events and activities for the entire family.
So, this part of his vision has begun. And, while he likened part of the past department store experience to today’s apparel specialty chain model, his strategy, once fully implemented, will trump the specialty chain sector by providing consumers an enclosed “mini-mall” full of exclusive branded shops leading to an entertainment-, event- and activity-based, “town square.”
Some of the “naysayers” are commenting that this overhaul, complete with iPads, expert associates, and self-checkout, is so outside of Penney’s core customers’ expectations that it will turn them off. But, hey – aspiration is good! And, how can the naysayers say this when every retail CEO I know is working toward improving the customer experience. I don’t see Macy’s customers leaving in droves as they continue to improve their experience and adopt new and exclusive brands. And, Nordstrom’s launch of Topshop, Brooks Brother’s and Bonobos shops does not seem to be turning customers off. Target’s strategy of rotating specialty shops through their stores every six months has been hailed as a great idea. So, I submit all of these experience elevators have, in fact, attracted new customers.
Furthermore, the new JC Penney experience, exclusive brands and “town square” will add enormous perceived value in their customers’ minds, thus fortifying their “fair and square” pricing strategy and removing them from the “race to the bottom” discounting spiral so prevalent throughout the industry. Some have said that the pricing strategy part of Johnson’s overall plan should have been implemented after the overhaul of the store experience. Maybe, but another side agrees with my point of view that a more clearly communicated consumer education on what the new pricing is, along with the store transformation, will cause the consumer to ultimately “get it.” And, I predict that not only will they regain customers they have lost, but they will also gain share from other segments.
Back to the retail specialty chain comparisons, and a financial perspective on what’s going on in the minds of analysts and investors. What might be the positive scenario at the end of the day? William Ackman, who controls 25 percent of JC Penney’s stock, has been a supporter of transforming the department store into an array of specialty shops from the beginning, based on productivity potential. During a presentation he made last May, he pointed out that Penney’s sales per square foot in 2011 were $132, compared to Aeropostale’s $561 and American Eagle Outfitters’ $436. He then pointed out that a transformed JC Penney, with projected sales of $350 per square foot, would make the stock worth $315 a share, 15 times the current price of $21.
According to published sources, William Ackman’s net worth is around $2 billion. Would you place a bet alongside his? I would.