Sephora scales down for scaled-down Penney’s

Discussion
Photo: Sephora
Oct 26, 2016
Matthew Stern

As analysts and news outlets debate whether or not J.C. Penney is currently experiencing a recovery, one undeniable success has been the chain’s relationship with Sephora. But this relationship has reached a roadblock that both the retailer and the brand are working to get around.

The popular, profitable store-within-a-store currently appears in all or most of Penney’s 600 full-sized department stores, Fortune reports. So in order to expand beyond this saturation point, the companies have been working to create a smaller version of the Sephora store-within-a-store. While it is only being piloted in one location at the moment, the chain has hinted at the idea of expanding the miniature store-within-a-store into more of the 400 small-format J.C. Penney stores around the country.

J.C. Penney has been taking other steps to try to build on recent momentum with certain Millennials. The chain has been getting 45 percent of its sales from what it calls “the modern American mom,” according to CNBC, and Sephora’s popularity is part of that. But Penney is also taking steps to cater to Millennial men in the same age range with its current fall fashion line.

Industry experts have noted that it’s crucial for J.C. Penney to improve its apparel offerings if it wants to truly rebound.

At the same time, J.C. Penney is no longer maintaining a strict focus on apparel. Earlier this year the retailer began selling home appliances, Forbes.com reported. The move came after a successful pilot in 22 stores.

J.C. Penney’s 40,000 square-foot small-format stores tend to appear in smaller markets like Caribou, Maine, according to Fortune. But figuring out how to tease further success out of the existing smaller stores could provide some lessons for the company’s future. With numerous chain retailers mulling or moving on small, urban formats to better serve Millennials, J.C. Penney could have a testing ground for its own urban endeavors.

DISCUSSION QUESTIONS: Is J.C. Penney wise to expand its Sephora relationship to include smaller stores? How do you feel about Penney’s rebound strategy to date? What other moves would you recommend for the chain?

Braintrust
"I think it's essential that J.C. Penney and Sephora develop a more "curated" version of their collaboration for the many smaller J.C. Penney stores."
"J.C. Penney is basing their jack-of-all-trades aspirations on dated department store models. Successful stores specialize."
"I may be alone in this point of view, but I find it hard to believe that Sephora/LVMH is selling out to one of the most tired brands in the U.S."

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10 Comments on "Sephora scales down for scaled-down Penney’s"


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Ori Marom
Guest

Sephora is owned by LVMH, the maker of prestigious perfume and cosmetics brands. Thus it enjoys unusual stability as a retailer. It basically does not have to turn profits to remain viable because it serves as a customer front-line and also drives online sales for LVMH.

Unfortunately, such brand ownership seems to be the only viable lifeline to retailers in the “affordable-luxury” product category where in-store markups often exceed 300 percent but most products are still available online.

J.C. Penney should nurture this profitable partnership and look for more of its sort. Well done!

Jasmine Glasheen
Staff
Jasmine Glasheen
Contributing Editor
1 year 2 months ago

The Sephora presence brings customers to J.C. Penney and improves the general perception of the company. Still, I wonder how housewares fit into their revamp. I’m not saying that people who buy luxury cosmetics don’t cook, but the mindset of shopping for cosmetics and housewares is quite different.

J.C. Penney is basing their jack-of-all-trades aspirations on dated department store models. Successful stores specialize. If they want to do housewares, I suggest they create a subsidiary that specializes in appliances alone.

Dick Seesel
BrainTrust

I regularly shop a midsized J.C. Penney store in Menomonee Falls, Wisconsin. (The home of Kohl’s headquarters — not coincidentally.) Penney built this and other roughly 90,000 square foot locations before the Ron Johnson era, to see if it could operate Kohl’s-sized off-mall stores successfully. This location does contain a Sephora shop, although not as big as the one just installed at a local anchor store in a Simon mall.

I think it’s essential that J.C. Penney and Sephora develop a more “curated” version of their collaboration for the many even smaller J.C. Penney stores around the country. It’s arguably the most successful part of J.C. Penney’s business for the past several years — in many of the smaller communities where these stores are located, Sephora will be the only game in town for shoppers who want more than their local discounter can offer.

Ryan Mathews
BrainTrust

Expanding the relationship with Sephora makes sense for J.C. Penny provided certain caveats are in place. Clearly, when it comes to store-within-a-store concepts one size doesn’t fit all, especially in J.C. Penney’s case where store sizes can fluctuate significantly. There’s also the question of which emerges the dominant brand, i.e., do shoppers see Sephora as a department inside J.C. Penney or do they see J.C. Penney as a wraparound Sephora? Evolving the entire retail context is also critical if J.C. Penney is going to continue growing — with or without Sephora. The chain has to continue to find ways of expanding its shopping base and modernizing its customer offerings.

Lyle Bunn (Ph.D. Hon)
BrainTrust

The vitality that a Sephora brings to a J.C. Penney location is a step in the right direction of customer engagement goals. Infusing a bold brand identity serves Sephora’s ongoing branding and adds some flavor to the vanilla marketing of the department store experience. Every retailer must offer discovery and fulfillment and the way that Sephora does these offers on-site lessons to J.C. Penney associates.

Peter Charness
BrainTrust

Clearly fine tuning assortments so that they are appealing to the local customer, and having a selection that makes it easy for that customer to say yes (to multiple purchases) is critical for every retailer. No one is going to beat Amazon’s breadth of assortment and “fair pricing.” Curation and locally tuned content is essential.

Lee Kent
BrainTrust

The Sephora move has proved to be a good one and expansion is the right next step. What I don’t get is the appliance angle. The shopper who comes in to buy makeup is probably not there to also buy an appliance. But once they get dolled up with make-up, buying a nice outfit goes hand-in-hand.

I would suggest J.C. Penney refresh their thinking about what their “modern American mom” is looking for and give her that kind of curated assortment. Just sayin’.

For my 2 cents.

Lee Peterson
BrainTrust
I may be alone in this point of view, but I find it hard to believe that Sephora/LVMH is selling out to one of the most tired brands in the U.S. That revenue vs. brand cachet decline has got to be off. It’s a win-lose IMO, with Sephora in the loss column, especially long-term. Short-term thinking and instant revenue sure looks good right now, I get that, but let’s check back in a few years after a few hundred store closings and see. Macy’s would’ve been a better partner, but perhaps a few years ago when Macy’s was a little healthier, they passed or were not interested. In any case, J.C. Penney will win every time they can bring a brand in-house that draws a younger customer on a mass scale. I’m sure it’s an injection of foot traffic they would not normally get, ever. In terms of other ideas, J.C. Penney missed on Apple (Apple gets it), but what about other CE brands? After all, a buck is a buck, right? Why not have… Read more »
Craig Sundstrom
Guest

My impression is that smaller markets are less likely to offer competing sellers of upscale products — no Macy’s, let alone a NM or Nordstrom — so they should offer something of a monopoly advantage. Of course it’s also possible that these markets have less sophisticated consumers — no offense, Caribou — and regardless, they aren’t going to aggregate to the numbers you see in metro areas. Is it “wise” to (try to) expand there? It would seem foolish not to try.

As for JCP’s efforts in general: I think they’re doing the best that can be expected, given the difficult market niche they occupy.

Ken Morris
BrainTrust
The Sephora brand appeals to the demographic (18- to 45-year-olds) that J.C. Penney needs to attract — younger shoppers that wouldn’t normally shop there. With sales per square foot three-times higher than the average area in Penney’s, the Sephora shops in the 600 full-sized Penney’s stores are a huge success, which explains why Penney’s plans to incorporate Sephora in its smaller format stores. I think this is a brilliant strategy for Penney’s to extend its customer base by giving younger consumers a reason to visit their store. With a strategy to attract Millennial shoppers, this is a great opportunity to get this segment to change their perceptions of Penney’s and potentially become loyal customers. While this is a great strategy to attract young shoppers, Penney’s needs to continue to shift its merchandise assortment to younger styles and brands so they can more effectively compete with fast fashion specialty chains such as Forever 21 and H&M. Another focus area should be to accelerate its marketing and customer engagement on social media and mobile platforms where their… Read more »
wpDiscuz
Braintrust
"I think it's essential that J.C. Penney and Sephora develop a more "curated" version of their collaboration for the many smaller J.C. Penney stores."
"J.C. Penney is basing their jack-of-all-trades aspirations on dated department store models. Successful stores specialize."
"I may be alone in this point of view, but I find it hard to believe that Sephora/LVMH is selling out to one of the most tired brands in the U.S."

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