The only way J.C. Penney makes it through this bankruptcy is through acquisition. They just lost their seat in the latest round of “Department Store Musical Chairs.” That being said, the news that Amazon may be interested in a purchase of J.C. Penney is a little bit of a head-scratcher. I keep asking myself, What am I missing? I just can’t figure out what of value Amazon would be acquiring with the purchase. The J.C. Penney business model is broken. Their assortments are no longer relevant, the merchants are still married to a vendor support model to meet profit targets, the customer base is aging and shrinking and their distribution network is slow. The only value I can see for Amazon is an immediate physical footprint in largely undesirable retail locations that still have some value in the actual real estate. This isn’t like the Whole Foods acquisition where Amazon achieved instant entry into a growing business with valuable customers from which they could mine data. There is no room in the apparel business for another undifferentiated ”me too” mass retailer. Amazon better have a better proposition than a remade J.C. Penney if they want to win in the physical space against Target, Walmart, and the off-price three headed monster of Marmaxx, Ross, and Burlington.
There is no retailer better positioned to take advantage of the disruption to the retail landscape the COVID-19 pandemic has created. They have met the challenge with speed that is, frankly, uncharacteristic of Walmart. I give most of this credit to Doug McMillan. The Walmart army can execute incredibly well but rely heavily on their leader to determine the speed and aggressiveness with which they execute. Walmart needs to execute the transition from a siloed brick-and-mortar and e-commerce organization to a true omni-channel retailer, not just in a customer-facing way, which they have, but through the organization right down to every buying team. Until every Walmart merchant has skin in the e-commerce game Amazon will continue to own that channel. Grocery and COVID-19 have ramped up customer acquisition but they need to achieve excellence online beyond grocery to exploit the advantage.