JCPenney’s new Brooklyn and Bailey Arizona Jean Co. line – Photo: JCPenney
Having little luck with Millennials, J.C. Penney refocuses on middle-age women
When Marvin Ellison announced he was stepping down as chairman and CEO of J.C. Penney in May to join Lowe’s, he praised the department store chain for its “warrior spirit” and maintained the retailer, despite carrying over $4 billion in debt, had “the talent and expertise to achieve sustainable, long-term growth.” A little over two months have passed and Penney’s board is still looking for a new CEO, while a new Wall Street Journal article raises questions about the retailer’s ability to succeed no matter who it finds to run the business.
The Journal article points to several factors working against Penney in addition to its heavy debt load. Under Mr. Ellison, Penney moved into new businesses such as appliances where the exec had some familiarity going back to his days at Home Depot. While the retailer has had some success in appliance sales, primarily at the expense of Sears, it has struggled in others, including apparel, which makes up more than half the chain’s total revenues.
During Mr. Ellison’s tenure at Penney, the chain also focused heavily on outreach to “Millennial moms” as it sought to increase customer counts and sales.
The strategy to attract younger consumers was nothing new at the chain. One of the criticisms of Penney during former Apple executive Ron Johnson’s disastrous tenure as CEO was that it moved away from its older core customers too quickly before developing a brand identity that attracted younger shoppers. When Myron “Mike” Ellison came back as Penney’s CEO to fix Mr. Johnson’s mess, one of the strategic steps taken by the chain was to refocus on its core older shoppers once again.
Mr. Ellison has also been accused of failing to cater to Penney’s core as the chain launched several new private label clothing brands targeted to younger women while cutting space for brands such as Liz Claiborne, St. John’s Bay and Worthington that appeal to older shoppers.
Mike Robbins, executive vice president of supply chain at Penney, acknowledged in an interview with the Journal that the retailer had taken its eye off “our core customer” to woo younger shoppers. In an apparent past-is-prologue moment, Penney is once again refocusing its attention on winning back the female Baby Boomer shoppers it has lost.
Discussion Questions
DISCUSSION QUESTIONS: Do you agree with the criticism that J.C. Penney’s business has been hurt because previous management lost sight of its core older customer? What will a new CEO, when found, need to do to grow the chain’s business?
Poll
BrainTrust
Nikki Baird
VP of Strategy, Aptos
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
I think the key is in the headline; “Having little luck.” Retail isn’t about luck. It is about consistency and innovation. Johnson killed this brand due to activist investors who pushed him and his broad misunderstanding of the core customer because they felt they could “unlock value” in the space.
The brand has never recovered and the grasping at straws appliance play with half the margin of apparel — what those shoppers who actually shopped at J.C. Penney bought only made it worse. With no CEO to helm this rudderless ship, and no consistency or innovation, I don’t see any generation willing to get in a car and drive to experience whatever it is they are offering. #tragedy
I applaud this move by J.C. Penney. If, despite prolonged efforts, they have failed to find traction with Millennials, then the logical move is to return to their roots and attempt to expand mindshare and market share with their core customer.
I don’t agree. I think the business has been hurt because it tried to attract a new customer, but could not successfully make the transition. There are always two customer segmentation strategies for every retailer: the segmentations they have, and the segmentations they wish they had. You can move from your “core” segments to more aspirational ones if you want. I’m not saying it’s easy, but just because you HAVE a certain set of customers it doesn’t mean you are stuck with them.
I was there for the decline and fall of Montgomery Wards, which made the decision to live with the customers it had — low income, aging women who, as they said “still wanted to shop at a department store but couldn’t afford it.” That’s not exactly a growth demographic right there.
J.C. Penney needs to target growth demographics. If it sticks with the customers it has, it will follow the fate of Wards. The company MUST demonstrate that it can attract new customer segments. Hopefully that’s a proven skill of the next leader for the company.
Agreed, the brand has a core group of shoppers it can’t afford to alienate given it needs the cash flow to support the debt. I think J.C. Penney has to cater to the core with income to purchase now and buy itself time with online and other means to attract non-core shoppers.
Yes, and let’s not forget that the reason Ron Johnson was brought in was because the brand was already beginning to fail with it’s core customer. Now they have simply returned to their roots and are surprised at the result. It is indeed time for new leadership with new skills. For my 2 cents.
We all talk about how the generational cohorts like Gen X and Baby Boomers don’t spend and only Gen Z and Millennials matter. Whatever the name of the generational segment, the fact is, we’ll always have middle-aged and older people and yes, they do have to shop. Not every retailer can target the younger generations and win. I don’t see how J.C. Penney can become “hip” enough to attract a 21-year-old with so many established brands in the space. What J.C. Penney has to do is remain relevant enough so that when the Millennials and Gen Z become middle-aged and older, they are a viable choice.
The idea that J.C. Penney — with its down-at-heel stores, disjointed apparel ranges, and old fashioned brand image — could easily attract Millennials for clothing was always challenging.
The move wasn’t without logic, as J.C. Penney does draw younger shoppers into stores because of Sephora. However, J.C. Penney never made enough effort to change up its apparel proposition to drive cross-purchasing.
There is much in J.C. Penney’s heritage that suggests they could successfully serve the older customer while they build the platform for bringing the younger customer in. I have said many times that it is as simple (haha) as learning lessons from Primark. I watched Primark open in a “B” mall about 50 yards from a J.C. Penney. From the day Primark opened they were busy. And all the crickets found a home in J.C. Penney. Primark didn’t build a fancy store. They just populated a big shell with fresh, fun, INEXPENSIVE product and added new fresh and fun offerings often. Good product that had been smartly merchandised. Great color management and great classification balance. And when I observed the customers I found ALL age groups. To my eye their customer base skewed young because they had an outstanding kids department. Hello Millennial mom. Primark is going to replace J.C. Penney if J.C. Penney doesn’t get its act together.
J.C. Penney clearly lost focus on its customer base and lost customers when Ron Johnson moved too quickly toward younger shoppers, my mother-in-law being one of them. Garfinkle’s in Washington made the same mistake when seeing Nordstrom come to town and went out of business quickly. Marvin Ellison made some of the same mistakes with new categories not interesting to the base. It is much harder to add new customers than retain current ones. Having said that, J.C. Penney needs to figure out how to attract new customers while at the same time holding onto its current customer base. This should be an evolutionary process not revolutionary like Ron Johnson tried.
J.C. Penney has presented its investors (and consumers) with a false choice over the past several years, even predating the Ron Johnson era. Either “cater to our current core market of aging Baby Boomers” or “figure out how to attract Millennials.” Any store expecting to be sustainable in the long run needs to figure out how to do both.
It’s possible to carry robust assortments of both Liz Claiborne and brands targeted to younger shoppers, especially in women’s apparel. Without those younger consumers with increasing spending power to accompany their sheer numbers, the “old” J.C. Penney base will continue to shrink.
It will become clear that Marvin Ellison made a mistake shrinking the footprint of Penney’s “softlines” businesses in order to squeeze in major appliances and more furniture. In hindsight, J.C. Penney could have used this space to offer broader and deeper assortments of apparel and accessories targeted to both Millennials and their moms.
So wait, this suggests that J.C. Penney actually went after Millennial customer? (place uproarious laughter emoji here) Nice try. How about “because we can’t/didn’t change fast enough for the modern retail economy”? That’d be more like it.
J.C. Penney took its focus off its core older customer because they know they need to expand their demographics to grow. J.C. Penney’s aging customer base will continue to decline and if they don’t attract younger shoppers, they will follow the path of Sears and Montgomery Wards. Unfortunately, it is difficult to change a brand’s perception, especially one that has been around for 110 years.
Their repeated efforts to attract younger shoppers have failed. They may want to consider launching a new concept store with a different brand name that has a fresh start and a hipper image. Just a thought.
It’s about time somebody focused on middle-aged women. Her apparel choices lately have been pretty slim. She has deep pockets and has been neglected on so many fronts for far too long.
J.C. Penney’s move away from its core customers to try and attract a younger crowd was about as smart as eliminating its popular coupons.
I do recall reading about the chain targeting Millennial moms, but somehow I failed to notice that J.C. Penney had zeroed in on Millennial consumers. Maybe they missed it too and that’s part of the problem.
I think losing sight of their core consumer was one of many of the factors that hurt its business. The company failed to evolve for decades and when it began to react to changes in the consumer marketplace the slightest error was amplified and it just compounded to the list of errors.
J.C. Penney needs to carefully look at their “emerging consumer.” Is it really emerging or is it a remaining consumer base? Is it enough to sustain the business? There was a reason why it chose to amplify its consumer target. Retreating to the base consumer that wasn’t responding to them anymore is not a smart move.
J.C. Penney is an interesting dichotomy in retail — they have a few arguably successful islands within the store (Sephora, appliances for example) but they’ve failed to leverage those to produce sales in other “softline” departments. Frankly, that they were actively targeting Millennials completely escaped me, and I suspect you’d hear the same answer from Millennials everywhere.
Having visited a J.C. Penney not too long ago, I have to say the experience just walking around the store was not enticing me to shop. There are many core problems they’ve failed to address and it’s just too easy to blame the Ron Johnson era as the root of all their problems. JCP simply hasn’t kept up with their core customer by stocking merchandise that appeals to them, nor have they successfully introduced apparel that appeals to younger demographics. The problem is they really can’t just rely on that existing, aging, base. Yes, they must put some focus on those customers or they will continue to lose their baseline revenue. But, they can’t escape the fact that they have a core customer that is declining in numbers. If they don’t find a way to appeal to other demographics, we won’t see their banner flying high anytime soon.
It must be very difficult to be working inside J.C. Penney over the past decade or so. Imagine being in the trenches with top management COMPLETELY changing direction consistently and randomly, issuing new standards and practices. Reinvention is very difficult to achieve, as history shows very few retailers or brands have been able to execute a reinvention.
The criticism JCP stepped away from middle-aged women as customers to focus on Millennials is just plain old rhetoric, used to sidestep the real issue. The real issue: lack of vision and clarity on behalf of senior leadership hired to lead, leadership without the depth of talent and experience needed to execute in apparel, let alone a reinvention.
Millennials will be middle-aged in the not too distant future, replacing current middle-aged customers. The new CEO must reinvent by offering products reflective of the current retail environment, not chasing old brands and new customer segments JCP is not equipped internally to execute to (design, product, the look and feel of JCP stores, etc.). After all, shoppers can go to Costco to buy the basics of the old Liz and Calvin brands.
I feel like I’m watching a Merry-Go-Round here. There have been so many “focuses” and new “strategies” and re-births of past directions. I believe in the mind of consumers, they really have no idea of who J.C. Penney is. The physical stores are snake bit with the stench of uncertainty of who they are in the customer’s mind from all the efforts to assume new identities, leaving everyone in a mental limbo of what they present. The stores have to be completely reconfigured and refreshed. Got the time and expertise? Find some sharp, clear minds quick, And maybe call the folks at Story!
While the comments about the need for a strong apparel offer for “older” customers, and the need for attracting growth segments are true, it misses the real point. The crushing debt burdens that most/all traditional department stores carry prohibit the level of innovation investment required to shift the retail model for today’s and tomorrow’s consumer. With Macy’s and Kohl’s reasonably positioned in this space (and struggling too!), the real question is the need for other national department store chains to exist. Between Macy’s, Kohl’s and the plethora of online as well as small and interesting offline players, the only answer is … bye bye Sears, K-Mart, and J.C. Penney.