J.C. Penney Launches Growth Brands Division

Discussion
Nov 15, 2010
Tom Ryan

By Tom Ryan

J.C. Penney plans to launch three new businesses. The first two
are online-only businesses: Clad, which will sell designer apparel to males,
25 to 54; and Gifting Grace, focusing on women, 30 to 54. The third, The Foundry
Big & Tall Supply Co., will sell
big and tall clothing for men online and via as many as 300 brick and mortar
stores to be built within five years, if all goes as the company plans.

The new businesses will be
part of a new “Growth Brands Division,” which
will also explore other ventures. These initiatives will be separate from the
core JCPenney brand but will leverage the company’s merchandising, marketing,
product development, sourcing, IT, planning and allocation, and consumer research
capabilities.

Both new apparel websites are in a marketing alliance with Hearst Magazines,
publisher of Esquire, Cosmopolitan, Good
Housekeeping
and Marie Claire. Anne Sutherland Fuchs, a former publishing
and digital executive, will become group president, digital ventures of the Growth
Brands Division.

Clad “will provide a full assortment of well-curated designer
brands in a savvy digital environment,” according to a statement from
Penney. It is headed by Will Swillie, previously director of brand management
at Retail Convergence, a portfolio of e-commerce companies including Rue La
La, where he launched the men’s business, after spending more than 15
years at top retailers.

Gifting
Grace will offer “a comprehensive online gifting resource offering
an extensive assortment of unique and memorable gift items, compelling content
and convenient tools for the year-round gift-giver.” Mary Drolet, founder
of Club Libby Lu, will lead Gifting Grace.

The third property, The Foundry Big & Tall Supply Co., will supplement a
selection of national men’s brands with The Foundry Supply Co. private
brand merchandise. According to a company news release, a website will debut
in April 2011, followed by a 10-store initial launch in May. Expanding agressively,
the chain should hit 150 locations by 2013 and 300 within five years.

“Our objective through this new division is to capitalize on our
extraordinary retail expertise to strategically pursue untapped opportunities
to serve key customer segments. Our aim is to generate new revenue streams
consistent with our long range plan mission of being the growth leader in the
retail industry,” said
Penney chairman & CEO Mike Ullman, in a statement.

Pressure to jumpstart
growth has increased in recent months as activist investor William Ackman’s
Pershing Square Capital Management and Vornado Realty Trust recently jointly
amassed a stake of more than 26 percent in Penney.

Discussion Questions: Is J.C. Penney in a good position to launch separate
growth ventures? Of the three businesses being launched, which do you think
holds the most potential for growth?

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12 Comments on "J.C. Penney Launches Growth Brands Division"


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Dick Seesel
Guest
10 years 5 months ago
It’s worthwhile for JCPenney to think “outside the box” of its core business for new growth opportunities that it can manage, but it’s also an acknowledgment that its sales have stalled. JCP seems to have a new strategy every six months for revitalizing its comp sales and market share, mostly centered around a new brand initiative — from American Living to Sephora, from Liz Claiborne to MNG by Mango. At the same time, its assortments and private brands are badly in need of editing. Two of the three new initiatives are web-only, which suggests that JCP doesn’t have confidence in their placement inside existing brick & mortar stores — or as freestanding concepts — but e-commerce may also turn out to be a viable testing ground. The big & tall business feels like a niche opportunity to me (even though I would be a target consumer) that has not been fully exploited in JCP’s physical stores. Bottom line: Other national retailers (Macy’s, Target, Kohl’s) seem to be in a better position than JCPenney today to… Read more »
David Biernbaum
Guest
10 years 5 months ago

It’s a very smart idea for J.C. Penney to branch into “big and tall” for men. America is massively oversized and yet many department stores lack having the assortment of sizes to fit. I think this is a terrific strategy that will work.

Paul R. Schottmiller
Guest
Paul R. Schottmiller
10 years 5 months ago

Given the projections for online growth occurring at a much higher rate than offline in the coming decade, I expect to see a virtual avalanche of new online retail concepts from the traditional “bricks” as they chase the growth while leveraging the core competencies on the back end.

fred faulkner
Guest
fred faulkner
10 years 5 months ago

JCPenney has lost the men’s business for several reasons.
– location in the stores
– service to the customer in the clothing departments
– alteration services
– too much merchandise that does not sell

Ed Rosenbaum
Guest
10 years 5 months ago

It is great to see J.C. Penney’s marketers and execs starting to think out of the box with creativity. Who knows if it will work but they should be commended for taking the first steps. The current in store model simply is not going to take them where they need to be.

Christopher P. Ramey
Guest
10 years 5 months ago

No surprises here. Every company has a responsibility to continuously revisit their long-term plans. By leveraging their core competencies J.C. Penney can continue to grow and future-proof their business. Ditto for every other retailer reading this thread.

Paula Rosenblum
Guest
10 years 5 months ago

The big-and-tall specialty has the best chance for long term success.

– I’m still not convinced that single channel retailing, especially on-line only, creates a profitable business model for most.
– the big-and-tall segment is under-served.
– specialty retail is more shoppable than department stores.

I think experimenting, tweaking, and bringing in new formats is a great idea, rather than just trying to fill up existing real estate.

Don Delzell
Guest
Don Delzell
10 years 5 months ago
First, the investment JCP has made in the infrastructure to support its online business is significant, and apparently, scalable. One hopes that this extends beyond software leverage to physical plant, logistics, fulfillment and marketing as well. If so, then these new ventures will start off on the right foot. These two online businesses do not appear to come with ready made audiences, although the Hearst tie-in implies some degree of co-marketing. Success, at least initially, may very well come from the ability of the JCP marketing team to drive site traffic. Based on past evidence, this appears to be a well developed skill set internally and in conjunction with marketing partners. Business history is littered with samples and examples of different approaches to growth through diversity. In JCP’s favor is the continued focus around demonstrated core competencies and organizational legitimacy. JCP as an organization has provided evidence that it knows how to market apparel and soft goods, how to launch and support brands, and how to manage online businesses effectively. Pending a real-world application of… Read more »
Gene Detroyer
Guest
10 years 5 months ago
The department store model is broken. It has no sustainable competitive advantage. Unfortunately, some retailers look at their business as department store operators. Fortunately, JCP is more forward looking. Mike Ullman says, “Our objective … is to capitalize on our extraordinary retail expertise … Our aim is to generate new revenue streams consistent with our long range plan mission of being the growth leader in the retail industry. Note, Mr. Ullman said nothing about operating department stores. He sees JCP as a retailer and obviously does not define the “retail industry” as something that necessarily has a roof, walls and doors, at least not literally. Consider the store within a store concept that JCP is pursuing. It is a better use of real estate, closer to the shopper, more focused on specialty attraction. It likely provides a better ROI and it is unique. The online effort parallels where the retail business is going and JCP isn’t just saying let’s put Penney’s on the internet. They are saying let’s exploit the online opportunities in the same… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
10 years 5 months ago
JCP has chosen to expand in a relatively easy and very forgiving way in today’s economy. Smart. Taking advantage of Penney’s in-place merchandising/buying system is an excellent way to maximize use of existing resources. All three new businesses will start slowly, obviating the need for massive inventories to fill up b&m stores. Three websites, along with future “supersizes” departments in as many as 300 stores within five years. Great way to stick a toe in the water. And then there’s the “juice.” Moves like this send a positive jolt of electricity through entire organizations. Never underestimate the power of a positive flow of energy, hope, and expectations. Thus, as many JCP employees as possible should be asked to contribute to these new retailing efforts in ways both large and small. Let all of them touch it. Of the three, I like Clad’s chances best. Female-oriented gifts need to be sold in lavender-scented boutiques where shoppers can touch, feel, and squeal. They need to be tactile. Online, Gifting Grace will appeal to “femails” rather than females,… Read more »
Lee Peterson
Guest
10 years 5 months ago

Not sure why they never rolled out their Arizona Jeans brand. It’s over a billion dollars worth of goods sold a year within the fuddy-duddy JCP environment and would be a nice compete for the likes of the other “too expensive” jean brands and their knock-off companions. Seems to me it would behoove them to try that first.

Kai Clarke
Guest
10 years 5 months ago

J.C. Penney and other department store retailers need to change their model or perish. This is a great move by JCP, especially considering the growth of online businesses, and the shift in our population for specialty clothes (i.e. Big and Tall). This type of thinking points the way to better revenues, as well as a shift in JCP’s model that will only help their future prospects.

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