J.C. Penney needs a fashion turnaround, and soon
J.C. Penney is certainly in fashion when it comes to Wall Street. The department store chain, which managed to post gains during a tough holiday season when its rivals did not, has investors jumping on its bandwagon as it continues a turnaround from one of the great management debacles in retailing history (see Ron Johnson). While there are certainly positives to point at, Forbes contributor Walter Loeb has written that it will all amount to very little if Penney doesn’t find a way to improve its performance in the apparel category.
In his column, Mr. Loeb writes that Penney, like other department stores, is dependent on fashion categories to achieve sustained growth. But the chain is challenged to come up with lines that consumers, particularly Millennials, want to buy. He notes that these younger consumers are in no hurry to refashion their wardrobes. Right now, Penney is losing in this area to fast fashion specialty chains such as Forever 21 and H&M.
Back in 2009, Penney had turned to Mango, the Spanish fast fashion retailer, to help attract Millennials to its stores. This December, the relationship between the two came to an end when Mango announced it was closing all 450 MNG by Mango shops inside of Penney stores.
Mr. Loeb does not think that Penney private labels, such as St. John’s Bay and Stafford, are likely to connect with Millennials. Penney needs something fresh and that’s where its new chief merchant John Tighe comes in. Unfortunately, the changes made by Mr. Tighe will not be clear for more than a year. What happens in the meantime will say a lot about Penney’s future prospects.
Discussion Questions
DISCUSSION QUESTIONS:
How important is apparel to J.C. Penney’s growth prospects? What would you do to reenergize the category if you were in charge at Penney?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
Apparel is the life blood for J.C. Penney. In order to re-energize the category I would go out and find a fashion guru, pay whatever it takes (within reason) and do a complete remake of the women’s fashion in the stores. I would concentrate on the 20 to 40 range and everything else will fall into a positive bottom line. Secondly, I would find an upscale ad agency to get things moving on both TV and in print.
Mr. Loeb is right. Millennials wouldn’t be caught dead wearing Stafford or St. John’s Bay.
H&M and Forever 21 and Zara are not only attracting Millennials with constantly-changing and inexpensive fashion, but there are plenty of “Forever 45” shoppers in their stores as well. Competition is good for retail — may the best store win.
It’s important for sure, but the problem may prove to be intractable.
I was reading in Walter’s most recent piece that H&M now does $30 billion in annual sales in the U.S. Those dollars had to come from someone else, and J.C. Penney is one of those “someones.” And we haven’t even started talking about Forever 21 and Zara.
The past five years have been stunningly disruptive to U.S. apparel retailing. There’s a reason J.C. Penney’s board tried to reinvent it in 2011. That was an obvious failure. But the problem still remains.
I honestly don’t know what I would do if I were in charge. We know that celebrity brands don’t do the trick (Sears has tried that with no success). Perhaps partnerships with designers would help.
The other thing to do is focus on soft home and try to reduce dependency on apparel. I’m not hopeful it will make up the shortfall, but it might be a better bet.
Mr. Tighe’s promotion to lead merchant reflects the new CEO’s recognition of (and dissatisfaction with) the J.C. Penney apparel problem. Penney has had an historically underdeveloped women’s apparel business (and strength in men’s), long predating the Ron Johnson era. But it’s a tricky equation — the attempts to appeal to a Millennial consumer by walking away from key brands like St. John’s Bay were catastrophic and wisely corrected by Mike Ullman.
J.C. Penney is heavily dependent on private and exclusive brands in its women’s area, so the first thing I would focus on is the “clarity of offer” between brands. Does ANA have a brand identity clearly different from Stylus, or St. John’s Bay, or Worthington, or Liz Claiborne? (The list goes on … ) And within each brand, is there a focused assortment of items?
J.C. Penney isn’t the only department store guilty of an overwhelming assortment of brands, colors, prints and styles. But it needs to address this issue (and to continue expanding categories like athleisure) in order to offer clearer choices to its core customer. Then comes the harder work of product development meant to appeal to the same customers buying Sephora at J.C. Penney today.
Nobody knows who create the fashion at J.C. Penney.
We know the fashion designers sold in Walmart and Target and Macy’s but no one, not even me, knows who create these fashion brands at J.C. Penney.
Link up with Project Runway. (Heidi Klum has hooked up with Macy’s.)
Create an awesome brand/concept/marketing and be a way for new designers to come to market. Or, maybe get Joe Zee, once of Elle, who did a reality show on Sundance for awhile, providing technical assistance to small clothing lines/designers needing help to reposition for success.
Figure out how to do fast fashion and production in the US as part of this brand. That’s American Apparel’s USP, although it got mixed up with oversexualized marketing and other problems.
Unlike what Ron Johnson did, don’t roll it out to every store. Designate “lead” stores by market to begin to develop and roll out this approach. (Johnson had the right idea in some respects, but I don’t think he understood that a JCP in Walla Walla, WA or Pendleton, OR doesn’t have the same opportunity as a store in Kansas City or Dallas.)
But yes, apparel is the key element for department stores. Not only JCP is in the position of needing to be able to position for the future, as well as deal with the fast fashion retailers — mostly non-US firms, which will increase their penetration in the US because it is such a big market.
Maybe fast fashion is to US retail as Japanese auto production/German auto design was to US automobile manufacturers. US companies developed a particular design approach, way of building cars, marketing, branding based on a set of time-bounded circumstances. The foreign companies developed under different circumstances and over time, US consumer preferences shifted to a set of characteristics congruent with the kinds of cars the Germans and Japanese were already building.
Whether or not the US department store chains can survive that kind of reshaping of the market is an important question.
I would hope that retailers with a strategic mind would also focus on quality. Fast fashion is affordable, but not built to last. As anyone of any age can attest to, if you pay anything over $20 on this stuff, you’re crazy because you’ll throw it out by the end of the year.
I’m hoping department stores continue to cater to the brands that consist of quality. It is a mix of fast fashion with a brand appeal, but you also need the consistency of quality that will keep customers coming back to the store time and time again. Millennials will figure this out eventually too, as they look to save money and realize that they should spend more on quality clothes (staples in their wardrobes) that will last for years, not months.
Brand JCP is in yet another repositioning, therein lies the rub. And being fashion (apparel and home) right is fundamental to the success of JCP. It is elusive and a bit of catching lightning in a bottle. This is especially true at this time of flagging fashion interest where fashion is in the eye of the beholder, aka personalization.
JCP has to clearly identify with whom it wants to do business and then give the lady what she wants. Such a difficult challenge at this time of mall and department store loss of relevance and the rise of online apparel shopping/buying.
I’d start at defining the customer. I’d do it by life stage, HHI and by store location. I would identify all the points of entry for her to engage brand JCP. I would create a brand promise that “surprises and delights” that is both emotional and rational. JCP must be a store for her first, and then the members of her family. I would emphasize family formation and then create sub targets beneath.
It must be a shared responsibility across all key brand shareholders: merchants, operators and marketing. There may be no dissonance across the brand experience regardless of channel of engagement. The tactics will naturally flow from the strategy. It should aggressively leverage its massive media spend to ensure a well rounded and robust brand presence. It won’t be easy.
And as all the other mall anchors say, “retail ain’t for sissies!”