Photo: JCPenney
J.C. Penney dumps appliances
It’s not unusual for a new chief executive to step in at a company and go about downgrading or eliminating projects altogether that were near and dear to their predecessor’s heart. So, it probably doesn’t come as a big shocker that relatively new J.C. Penney CEO Jill Soltau has decided that the department store chain will no longer sell appliances after the end of this month.
Former CEO Marvin Ellison, who came from Home Depot, brought the category back to Penney in 2016 some 30 years after the chain had gotten out of the business citing the opportunity presented by a weakened Sears, which was bleeding share at the time. After an initial pilot at 22 stores in San Antonio, San Diego and Tampa, Penney declared the test a success and began rolling appliance departments out to more of its stores.
When Mr. Ellison abruptly left Penney to join Lowe’s last May, it sent a clear message that he had given up on a company that he once boasted was undergoing “one of the greatest financial turnarounds in retail history” under his leadership.
When Penney hired Ms. Soltau, former president and CEO of Joann Stores, last October, management was clear that it was looking to go into a different direction than it had with Mr. Ellison. Apparel category performance, which lagged under the former CEO, was a key factor in the decision to hire Ms. Soltau.
“We wanted someone with rich apparel and merchandising experience and found Jill to be an ideal fit,” said Paul Brown, the board director who chaired Penney’s CEO search committee, at the time of the hiring. “Not only is she an established CEO and former chief merchant, her depth of experience in product development, marketing, e-commerce and store operations have been an important basis for the turnaround work she spearheaded at prior companies.”
In a statement issued this week by Penney, the company said it would continue to sell appliances and offer free basic delivery and installation on purchases from $299 through Feb. 28.
The chain, which is also cutting back on furniture, said it is in the process of finalizing new store layout options with an eye to maximizing efficiencies, reducing inventory and create an enhanced shopping experience that inspires repeat shopping trips. With the space it has, Penney intends to focus more on higher margin “legacy strengths in apparel and soft home furnishings.”
- JCPenney Confirms a Reposition of its Home Department – J.C. Penney
- Can a new CEO revitalize J.C. Penney’s business? – RetailWire
- Will Penney’s appliance test put a fork in Sears? – RetailWire
- Ellison leaves Penney, fueling further doubts – RetailWire
- Has J.C. Penney pulled off ‘one of the greatest financial turnarounds in retail history’? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you approve of J.C. Penney’s decision to dump appliances? Will focusing on its legacy strengths — apparel and soft home goods — be enough to revive the chain?
Poll
BrainTrust
Ben Ball
Senior Vice President, Dechert-Hampe (retired)
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
Home delivery is its own little universe, requiring sophisticated technology, processes and financial commitment to be profitable, I see no evidence that JCP is in a position to make those commitments, so I think this is the right move.
It still raises the question, “How is Penney going to differentiate?” but it likely wasn’t going to be in white goods.
Without knowing the numbers regarding appliances, it is difficult to be categorical. But if J.C. Penney wants to call itself a department store of the populous, it should carry appliances. Given her background in soft goods, Jill Soltau is probably more fond of apparel than of refrigerators. That happens sometimes, right or wrong.
This move demonstrates two important points. First, as leaders — be it retail or any other organization — we have a strong bias to return to what we know best and what has been successful for us before. Mr. Ellison knows hard goods. Ms. Soltau knows soft goods.
With regard to the future of J.C. Penney under Ms. Soltau, a similar bias among shoppers may play in her favor. I never thought of buying appliances at J.C. Penney — and I never thought of buying clothes at Sears.
On a related note, I walked into a Lowe’s store yesterday and had a somewhat unnerving experience. They had zero-turn mowers parked on the apron at the entrance (yes, it’s almost time to start mowing lawns here in Knoxville) and the front row was filled with bright red models bearing the Craftsman logo. Even though I’m well aware of Lowe’s distribution deal for Craftsman as a student of retailing, it was still a shock as the man who trailed after his mom into Sears several times a week as a boy, and who grew up driving a Craftsman garden tractor because his dad would “only buy Craftsman son, Sears has the best tools.”
Very good point. That’s why so much of business is running in circles as new players push their approach, rather than looking at the overall piece. I agree with the point made by someone else about “department stores” having departments. Probably in the portfolio there are a bunch of stores where having a hardware/appliance offering makes a lot of sense, even if this isn’t true for every store. Rather than making a one size fits all decision, I’d make differentiated decisions based on a categorization of the store portfolio for various elements.
For some reason I was looking at an H-E-B store locator, and you could get a return based on various choice criteria. Who knew that some stores have eye care centers, certain stores have cooking schools, some have in-house roasted meats, and some pharmacies have compounding capabilities, etc.? Why J.C. Penney and Sears didn’t do a similar reset long ago is beyond me.
Adding major appliances was a “comfort zone” move on Marvin Ellison’s part that clearly didn’t pay off. A low-margin and high-expense move that didn’t recapture market share from Sears as intended. So kudos to Jill Soltau for acting decisively. JCP is a softlines store (apparel and “soft home,” especially domestics) and ought to focus on its core strengths while addressing its overassortment and excess inventory issues.
Not that they had it in them, but what if J.C. Penney had introduced appliances along the lines of PIRCH? It could have been a redefining move. Plus for those of us who remember the J.C. Penney catalog, our memories of what the store was/is/can be go beyond softlines. Plus the stores were completely different in locations outside of the suburban setting.
Well, Ben I would say there was a something else unnerving — albeit unnoticed — yesterday: you DIDN’T walk into a Sears.
J. C. Penney needs to figure out who they are and whom they wish to be. That’s been the problem with the chain for a very long time. Most department stores dumped their secondary departments and focused primarily on apparel, jewelry, and housewares because it was profitable. However, competition from specialty apparel chains made selling mostly apparel challenging, and many department stores struggled with that model to the extent that several went out of business. I don’t see J. C. Penney as a leader in fashion apparel so if that’s the direction they intend to pursue they need to truly identify what will make them different and focus on that. Selling appliances were okay and would have been successful if the long term plan was to rebuild J. C. Penney as a traditional department store along with furniture, toys, and so on. Unfortunately, J. C. Penney has changed course so often during these few years that they have confused the public and the consumer has little reason to shop them. The big issue isn’t whether or not to sell appliances, but what is J. C. Penney going to be, how are they going to get there and when doing so, will they be a brand the public will embrace? Jill Soltau has her work cut out for her.
This doesn’t feel like new news. It feels like it was just a matter of time. Marvin tried to get into a business where he had expertise. And with Sears’s demise, it might have sounded logical. But the logistics of the appliance business are a universe unto themselves. I never saw any synergies with the apparel business. Now Jill is going where she has strength and expertise. But I’m not sure what “legacy strengths” means anymore, if anything. We are in a “that was then, this is now” environment. Lots of now bankrupt companies had legacy strengths, and their reliance on those so-called strengths blinded them to the necessary changes the market was demanding of them.
I thought the approach of appliances and furniture was a sound strategy when it was introduced. J.C. Penney had a window of opportunity to be able to merchandise the entire home.
Certainly delivery and installation is a challenge, but it is a solvable one. No retailer today can really provide a complete home and fashion makeover. Now, what are they left with? Clothing, shoes and other items that are readily available everywhere.
So what is the point of differentiation at J.C. Penney? The answer is more deals, more discounts and some store within a store concept.
I don’t see much hope for the future.
Dropping home goods, appliances and lifestyle products may not be the elixir that J.C. Penney needs to get back on track. Adding or dropping product categories will not solve what is fundamentally wrong with the J.C. Penney shopping experience. Being objective, without looking at the P&L financials, it’s hard to see how the company will benefit or have any missed opportunities by dropping the appliance categories.
However, for the modern customer, it’s challenging to even know what J.C. Penney even stands for today. Way back when, they were known for their affordable apparel, and were an alternative to shopping at Macy’s or Sears. Their legacy strengths are only but a memory today, as there are so many other players to contend with. Perhaps it’s high time for the company to completely take some risks and reinvent themselves.
Of course J.C. Penney needed to dump appliances. Anyone who disagrees should consider if Home Depot has the brand permission to sell clothes! The age of the generalist has ended. J.C. Penney can start counting its days.
It’s a lot of space — in some expensive real estate — to house appliances. And even under Ellison, I didn’t see a whole lot of effort being put into driving sales in that space. Other than the initial “we’ve got appliances!” there wasn’t a lot of media devoted to driving awareness, and definitely execution — at least in the stores I visited — left a lot to be desired. It was so devoid of assistance that I felt like I could’ve wheeled an entire refrigerator out the mall entrance and no one would’ve stopped me. That’s not a good sign in a category that is big ticket, and big commitment on the part of the customer. They want hand-holding and reassurances that they’re making the right decision.
So I understand the math. Ellison was placing a bet that Sears would be completely dead by now, and there was an opportunity to step in and capture that spend. I think the reality didn’t match the plan. Whether that is because it was the wrong strategy, or just the poor execution, I could not say.
Will focusing on its legacy strengths — apparel and soft home goods — be enough to revive the chain? C’mon. What strengths? It is time to start winding this operator down. It surely will be worth less tomorrow than it is today and it isn’t worth much today. The world has past it by and it has no reason for being.
Get out while there is something to salvage.
This move represents the latest effort by J. C. Penney to understand “what is under its umbrella” that will give consumers a reason to shop at its stores or online. Appliances did not seem to fit or reinforce any competitive advantage. Going forward, the question is what is next? Perhaps this decision will allow J. C. Penney to return to what once made them a great retailer. However, I would recommend that any resources freed up from this move be allocated to improving its online experience.
The decision to sell appliances and furniture was based on sound reasoning, and it also played to Marvin Ellison’s background. However, the execution in stores was pretty lackluster. The choice was poor and customer service (even in terms of staff availability) was also weak. As such, this initiative has not taken off and it has not transformed J.C. Penney’s fortunes. Ditching the ranges seems sensible, especially if they are not driving profit. However, it is not a solution: J.C. Penney still needs to create a compelling point of differentiation to drive consumers to its stores and websites.
Sorry Jill, you’ve had enough time to formulate a vision for who J.C. Penney is and who their customer is and how you’re going to get there. This is another tactic devoid of a shared vision for where J.C. Penney can and should go.
Bad idea in the first place. Just because your competition sells dog food doesn’t mean that you should. Same principle here — appliances were brand-wrong from the get go and I would have to say with total lack of “permission” from their customer. J.C. Penney is grasping at straws right now. Even this idea of focusing on apparel, their core offering, sounds like a road fraught with potholes and killer competition. Do we have the next Sears here? Sure seems like it.
It makes sense for J.C. Penney to drop appliances, especially if their new CEO is not appliance savvy. Additionally, there are many costs associated with maintaining an appliance inventory including delivery and service.
Given all its twists and turns I believe that J.C. Penney has to quickly decide what it wants to be, how it wants to be perceived and convey that to a broad audience. Whatever brand equity remains in the J.C. Penney name has to be connected to a particular direction and for a particular target audience.
Even if we are thinking department store, many of us do not think appliances. That said, J.C. Penney’s move toward appliances didn’t seem to make a blip in the night. Dumping appliances sounds like a good move to me however, J.C. Penney still has a ways to go to define who they are. So much turnover in the past few years has done them no favors. The consumer has no idea who they are. Ms. Soltau has her hands full and I wish her all the luck and my 2 cents.
J.C. Penney, like Sears before them, has been stuck in the boring middle for more than a decade. The way out is to be more remarkable, starting with their core customers and their core categories and build out from there. Having spent many years in the appliance business, it is a complicated supply chain and trying to get consumers to shop for them at the mall is fighting against long-term shifts in consumer behavior.
There may be no way out for J.C. Penney (see my Forbes article tomorrow) but if they can survive it will be by creating a more memorable and well-harmonized shopping experience in the current core categories. And they had better hurry!
I think a better IP question might have been “did you approve of JCP getting INTO appliances?” IIRC the discussion when they began this experiment the responses clustered around “no” and “why not?” We now know the answer to the latter: if (some argued “when”) it ends up being abandoned, it tends to reinforce the view of not having any clear plan, even desperation.
But back to appliances: whatever. I think everyone saw this as a long shot. Furniture, OTOH, gives me more pause; it’s not so much that they’re known for it, it just seems like a category that’s so underserved. I know everyone has (still) been buying couches and dining room sets over the years … but where? Levitz closed years ago, as have many local quality chains, (other) department stores have cut back, it seems if not “online-proof” then at least “online-resistant.” I refuse to accept that all anyone wants is IKEA, or a back strain from trying to heft a 200 lb box at Target….
This really just feels like a new CEO moving in and deciding to “undo” the biggest thing her predecessor created. Were sales too low to justify this category at JCP? Maybe. Without seeing actual numbers, it’s obviously hard to say. Did appliances help define the JCPenney shopping experience? No, it didn’t. As Neil Saunders says in his comments, the in-store execution left a lot to be desired.
While this may be a good move financially, it really doesn’t help define who JCPenney is as a brand anymore. Apparel and soft home goods? Great — so are many, many, other retailers. What will help them differentiate themselves now? When we last heard about apparel at JCP, they were flip-flopping between targeting millennials or other age groups. They are a department store, so what are the surviving departments? And how will consumers see them as unique and interesting as compared to other stores?
There is much work to be done at JCP.
J.C. Penney never distinguished itself as to what the point was of having appliances in the first place. It saw Sears going down and identified it as an opportunity to pick up customers, but why? Why should customers go to Penney instead of Lowe’s or Home Depot? There was never a value proposition for the customer that JCP would be the price leader, the service leader, etc. It was just, yeah, we have appliances too.
It was the same thing with toys. As Toys “R” Us careened into bankruptcy, JCP added toys (as did a lot of other retailers) on the proposition that customers have to go someplace. But a reason was never articulated for why customers should shop J.C. Penney.
The mindset seems to have been, build it and they will come. I think Jill Soltau is doing the same thing with clothes, or at least re-emphasizing it with clothes. What is the reason consumers have to shop Penney’s over the competition? Right now, there is none.
Soltau needs to come up with an overarching theme for the chain and run some kind of bold marketing campaign to embed in the consumer’s mind that J.C. Penney is a store to shop at for this reason. Simply saying yeah, we have clothes, we have toys, we have appliances is not enough.
J.C. Penney’s challenge is that it is no longer relevant to enough people. Its legacy is no longer relevant Like Sears, its legacy is what is killing it. The shopper for the legacy no longer exists. J.C. Penney can not clone onto a promise that’s out of date and out of touch.
J.C. Penney must start with a deep understanding of with whom it wants to do business. How do they live? How do they outfit their life? Then create a selling model that will surprise and delight them.
We know it is not 200,000 square feet in a regional mall. We know its not a sea of racks with goods assorted based upon history.
Folks in the early stages of home and family formation live a very different life and their solutions to life problems are different from what J.C. Penney knows. Ms. Soltau must understand that and set a new course.
A mess! I never understood what they were doing going into appliances and I do not think they did either. The original “We have appliances since Sears is gone” was okay, and then — nothing — no advancement of that narrative! Likely simply a comfort spot for Mr. Ellison. Good riddance to appliances. However….
(And I really like JCP. I shop them for much of my business clothing.)
None of this matters. Their unsustainable debt load is going to kill them! I am very afraid that the debt will disallow any real change through the starving of operative cash! We are already watching this — Painful!