Homeless in Plano

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\"\"The vultures – perhaps more accurately the buzzards – are circling around Legacy Drive in Plano, Texas again, once more picking up the distinct scent of death hanging over the JC Penney Co. With the departure last month of Marvin Ellison — its latest presumed savior – to Lowe’s, the retail world is working up a lather that this is one more step in the ever-quickening demise of one of the grand dames of modern American retailing. (Hopefully the irony of the street name on which Penney corporate headquarters are located is not lost on anybody.)

After a decade of disaster-upon-catastrophe-upon-downturn, Penney finds itself with no leader, no clear merchandising strategy and no time left to figure it out. Its debt load increasing while store traffic decreases due to its mall-centric real estate, Penney is treading dangerously close to retail irrelevancy. But it’s not there yet. It has a loyal core customer base, a staple of strong house brands and a market niche made a bit roomier with the demise of Bon Ton and the ongoing meltdown at Sears.

All is not lost and a new CEO who knows how to kick merchandising ass while keeping costs in check still has a fighting chance to resurrect James Cash Penney’s baby. And while the store’s fashion positioning is crucial for any potential resurgence, it is perhaps no more important than fixing another foundation department at the store: home.

Home furnishings products, primarily soft goods like bedding, bath, window fashions and furniture, have always represented a disproportionate amount of sales revenue at Penney, more so than at perhaps any other full-line general merchant. At one time – and it wasn’t that long ago – one of every three curtain and drapery products bought in America was purchased at Penney’s. Has there ever been another major merchandising classification where a single retailer had a 33 percent market share? Doubtful.

It’s why any turnaround plan drawn up by the new CEO must have a major focus on home furnishings. Specifically, Penney must address five very important elements of its home strategy. If it does its chances for survival will improve immeasurably. If not… well, you know what happens then.

1. Get That Window Business Back

Do the math: There are about 125 million households in the United States. Each has a minimum of four to six windows, and most have a lot more. That’s a potential market segment of 62 million units a year, assuming a purchasing pattern of replacing a curtain or drapery every ten years. That’s fair given that, honestly, these products never really wear out…they are replaced more out of sheer boredom than anything else. (And by the way, nobody really knows the difference between a curtain and a drapery, so don’t even bother asking.)
Penney needs to put trained salespeople back on the floor in its window departments. It needs to expand the space devoted to the category. And it needs to get much more aggressive online. These are not difficult fixes. Window fashions are the key to fixing the Penney home business.

2. Expand the Housewares Department – Especially Small Electrics

Penney has always been underrepresented in its housewares assortment, both in cookware and small electrics. The former is a nicely profitable business that helps build a loyal customer base. The latter is an absolutely rotten business that loses money but is a traffic-building loss-leader like nobody’s business.
Penney began to build this business back in the early 2000s when the last merchant ever to run the store – Allen Questrom – brought in legendary home guru Charlie Chinni. And it worked…until subsequent management pulled the plug on the whole thing. No mid-placed department store can ever be successful without a fully functioning housewares department. Sadly, Penney proves that every day.

3. Don’t Put All Your Merchandising Eggs in Major Appliances

One of Marvin Ellison’s big moves was to put major appliance departments into some 600 Penney stores. His history with Home Depot taught him it was a good category and with the ever-deteriorating condition of Sears, he reckoned it would be a good addition to the Penney merchandising mix. And he wasn’t wrong. It’s a core category for households and the margins are decent. But it can be a giant pain in the merchandising butt too. It takes up a lot of space on the selling floor. It has to be delivered, never a Penney specialty. And the turns on the category are among the worst in modern retailing. Plus, both Depot and Lowe’s (Ellison’s new home) have come to the same conclusion and each has the real estate and the consumer purchasing mindset that are ideal for majors. Counting on the category to drive new sales and make the merchandising difference is not a long-term solution for Penney.

4. Figure Out Your Soft Home Brands

Under a series of managers, Penney has watched its branding strategy in soft home – bed, bath and window – go from one extreme to the other. Sometimes it was all private label. Other times it was national brands. Right now, it’s a mash-up of house brands like JCPenney Home and Home Expressions, captured brands like Royal Velvet and Liz Claiborne, national brands such as Laura Ashley and Waverly and other assorted quasi-celebrity labels such as Lionel Richey, Cindy Crawford and even Martha Stewart. Lots of stores mix it up with their branding and there’s nothing wrong with that. But Penney is all over the place with its names and needs to be better focused. It has some real powerhouse labels in that mix and those should be getting more attention than they do now.

5. Find a Sephora for Home

There’s no question that on the main floor, Sephora has been a huge success for Penney in beauty. A counter-intuitive quirk started when Mike Ullman was president of the store (the first time) after coming from the same position with Sephora’s parent company, the match-up has proven to be enormously serendipitous for Penney without seemingly harming Sephora’s independent store business. Penney needs to find a brand in the home space it can do the same thing with. For this it needs to forget about conventional licensing arrangements and figure out a way to bring in somebody totally unexpected – but eminently delicious. Could that be IKEA with satellite stores? Maybe, though those demographics might be a disconnect for the store’s current customer base. How about Crate & Barrel or its struggling CB2 off-spring? Wouldn’t that be a way for Crate to get the physical store scale it can’t seem to achieve on its own without the expense of building tons of new stores. Or could Pier 1 see this as a way to fix its aging, out-of-the-way store base? Maybe none of these is right. But maybe somebody else is. Sephora has proven that the model works. Now Penney needs to replicate the concept in home.

Whoever gets the president’s job at Penney will have a very long to-do list…and not a lot of time to get it done. Wall Street and the store’s customers are getting inpatient. But it’s not impossible. It just starts, as most things do, at home.

Warren Shoulberg grew up in New York City where a J.C. Penney store was pretty much a foreign concept…even though the company’s corporate offices were in Manhattan.



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