Martha Stewart is Apple of Penney CEO’s Eye
Ron Johnson, CEO of J.C. Penney, has said publicly that he is out to do no less than transform the department store experience. Now, it appears, Mr. Johnson has taken a step in that direction with the announcement that J.C. Penney will acquire a 16.6 percent stake in Martha Stewart Living and begin opening Martha-branded home good spaces within its stores that sound very similar to Apple’s Genius Bars. The companies also plan to jointly develop a website.
"A store has to be much more than the products that it sells," Mr. Johnson told The Associated Press. "That’s what I learned from Apple. You can really move product and change and enrich people’s lives."
A positive to the move, as The Wall Street Journal pointed out, is that it addresses one of the weaker areas of Penney’s business — home goods.
Under the deal, Martha Stewart Living will establish stores-within-the-store beginning in February 2013. It will be stocked with items selected by Martha Stewart’s group and purchased by Penney’s buyers.
Consumers will be able to go the space to not only buy products but to get advice on a wide range of homemaking subjects.
"For J.C. Penney to be successful, they really need to target a broad audience," Liz Dunn, an analyst at Macquarie Research, told Reuters. "If you’ve got stores that big you really can’t target your audience so narrowly. You need to have offerings for everyone."
"I have been an admirer of Martha Stewart for two decades," Mr. Johnson told the AP. "We’re going to unlock the potential of this partnership."
One potential negative for Martha Stewart in the arrangement is that other companies currently doing business with the company, most notably Macy’s, may look elsewhere now that Penney is involved.
Lisa Gersh, president and chief operating officer at Martha Stewart, told the AP, that working with Penney should not affect current relationships.
"This is a different presentation and a different view," Ms. Gersh said. "We think this is great for the brand and for all our (store) partners."
According to the Journal, Macy’s issued a statement that said it was reviewing its line in light of "the proliferation of Martha Stewart-branded product in the marketplace."
Discussion Questions
Discussion Questions: What is your reaction to the J.C. Penney/Martha Stewart Living deal? What will it mean for Penney? What will it mean for the Martha Stewart brand?
If Ron Johnson’s intention is also to invent a time machine that can transport J.C. Penney customers back to the time when Martha Stewart was cool, then I think it might work. Failing that, I’m a little confused.
I’m not sure this is a “transformational” move for JCP but it’s a good one. I happened to walk a local Penney store yesterday (one of its small prototypes) and was struck by the lack of presence in cookware and small electrics compared to Kohl’s. Meanwhile JCP continues to devote significant space to window treatments and lamps among other businesses. Without having personal knowledge of the numbers, I wonder whether all that real estate is as productive as possible.
The alliance with Martha Stewart does raise a few questions:
1. Does the brand really help JCP reposition itself toward the younger demographic not being reached today?
2. Does an expanded selection of home goods really lend itself to the “genius bar” concept?
3. Will JCP take the steps needed to expand its “kitchenware” business or simply re-brand existing product categories with the Martha Stewart insignia?
The underlying question for Martha Stewart is whether the JCP alliance is a long-run win. If she loses Macy’s business as a result, she also loses some of Macy’s aspirational aura and younger demographic.
Some years ago the Department Store format was listed a dead, yet it is still with us. Two factors have contributed to its endurance. A shopping experience, that consumers like, which includes real service. Superior merchandising and presentation not found in competing formats.
Martha Stewart has created a quality brand which withstood Kmart. The concern is that a Macy’s customer is different than a J.C. Penney customer. If Martha Stewart is going to cheapen the brand for J.C. Penney customers, this could have longer-term implications. Owning part of a supplier seems outside the scope for retailers.
Confusing. As a brand with recognition and trust (in spite of prior bad press and jail time) its a win with the JCP older female segment. Martha the brand has multiple key relationships and was at one time featured in Kmart stores, so what remains to be seen is how or if the JCP store brand will leverage this to their shopper’s advantage or provide assistance to help grow the brand globally.
Martha is a brilliant marketer in her own right. Allowing JCP to take on a substantial stake in her company gives Martha Stewart Living a competitive advantage, in spite of any attrition due to perceived (real or otherwise) conflict.
The Apple Genius Bar is about people helping people. If Mr. Johnson brings well trained, knowledgeable sales associates into the launch of the Martha Stewart line, it will differentiate them from all other home goods department store offerings where finding anyone able to do anything but ring up a sale is non-existent.
The only problem I see is that with the Martha Stewart line available at other retailers, the Penney customer may do their research at Penney’s and buy at a discount somewhere else.
Hmmm. So J.C. Penney is going to turn things around by shoehorning yet another mega-brand into its stores, and this time, one that is hardly proprietary (maybe it will become so if/when Macy’s and potentially others dump Martha in protest)?
Brands that came before that didn’t save the day include Ralph Lauren’s American Living, Liz Claiborne, Mango shop-in-shops, Sephora shop-in-shops, and a smattering of tween brands (Southpole, Fabulosity, Bisou Bisou, Ronson)…each one arguably diluting the value of the ones that came before and after.
Unless Penney’s pulls a Sears and turns itself into a brand licensor (sells its brands to other retailers), I don’t see how this will move the needle.
Who hasn’t Martha Stewart danced with? Or do consumers care?
Martha is an aggressive, well known figure of dubious loyalty but with upscale, good taste merchandise. Martha Stewart stores within JCP will add more luster to Penney stores even with remaining Stewart loyalists still hovering inside Blue-lighted Kmart stores. And for Martha Living, its business will continue to grow. The deal appears to be a B+ for both companies.
I can already foresee where this MSL shop within a store will be located inside Penney’s. It should be located between lamps, bed linens and housewares, probably in the space devoted now to seasonal merchandise. They sell a lot of luggage, so that shouldn’t be displaced.
I want to see how they recruit, train and retain Martha Stewart experts (mini-Marthas). It’s not a terrible idea, but transformational? Not so much.
Apart from the “genius bar,” it continues the trend of JCP buying brands and declaring them its own. Nothing transformational there either.
Adding Martha Stewart’s line is a step in the right direction for Penney’s. It is certainly not the big hit that will bring Penney’s back to relevance; but it certainly gets them started. The popularity of her brand became widespread after she went to, and was released from prison for doing something many of us probably would have done. Unfortunately she was made an example.
I liken this to the Red Sox signing a Yankees player. Only the player is Hideki Irabu. And it’s not the Yankees and Red Sox. It’s more like the Giants and the A’s….
I don’t know the current brand health for MS. However, due to mobile and apps, retailers need exclusivity in their assortments now more than ever. Therefore, any brand across multiple outlets is not good for the outlet. Same for Eddie Bauer, Craftsman and Kenmore.
The tyranny of ubiquity. Or as we like to say, “retail ain’t for sissies.”
I think everyone understands that brick and mortar operations are not able to compete with online retailers solely on price. The challenge Penney’s (or anyone) is going to have when trying to increase their service offerings is ensuring that they have sufficient staff (both numbers and quality) to deliver on the promise. In communications technology they refer to QOS (Quality of Service), and this is even more critical in a retail operation that wants to make service its differentiator.
There will not be a quick answer here. It is going to take a while to find out if this kind of service can be delivered economically. It also requires a break-in period while processes are refined and replicated. I think it remains to be seen if customers really perceive it as a differentiator. A Martha Stewart outlet will always help the desperate male wanting to find something for their significant other. Maybe a seasonal presence will make sense.
The department store business model is dead. If Penney’s (and the others) are going to be successful or even exist in the next 5 to 10 years, they have to change dramatically. How dramatically? As dramatic as the change from being a catalog retailer in the first half of the 20th century to being a brick and mortar retailer in the second half.
At this point it is not terribly important what action is taken, but that some mindful, business changing action is taken. In no case is the future a projection of the present. Unfortunately, in retail, most project the future as going back to the past.
Bravo for Penney’s taking action.
I like the part about transforming the department store experience. It IS about experience. However, I wonder if taking a bit of what worked for him in prior lives and piecing it together is a bit of “mailing it in.” What transformed Target was different than what made Apple stores such a success. each situation needs core principles but original thinking too.
Martha Stewart is the winner in this deal. Ron Johnson has a real challenge on his hands. The thought that you can dramatically narrow a department store’s focus to the extent he seems to be moving will be fraught with numerous pitfalls.
What could it hurt for a retailer that is otherwise ho-hum and fails to exploit its current offerings?
Having visited Macy’s, Nieman-Marcus, Saks Fifth Avenue, Nordstrom, Lord & Taylor, Sears, and J.C. Penney at two different locations this past weekend, J.C. Penney fell to the bottom of that list just below Nordstrom.
They couldn’t do any worse. It actually might help. I haven’t seen any results of their store-within-a-store utilizing Sephora. That one made sense.
I hardly see this as a move that will attract new and most importantly, younger customers. It may just expand their offering to the 60 and up crowd. The problem with that is obvious.
Macy’s is definitely the leader in excitement, merchandising and overall appeal.
Would seem like a great move for a couple of obvious reasons: 1 – Martha Stewart Products, 2 – Store-within-a-store. Maybe even more important will be the association of the Martha Stewart panache with J.C. Penney. I can remember when Martha was with Kmart. My wife wouldn’t go into Kmart for anything EXCEPT the Martha Stewart products. Now her products will be in a decidedly more upscale venue and Penny should be able to showcase some of their other lines to Stewart shoppers. Penney’s has never been a junk merchant, just outdated and PL focused, which kept the high spending trendies away. Maybe this will convert Penney’s from “Your mom’s store” to “my store.” I wish them all the luck in the world. A great first step!
Stores within Stores has been a staple for department stores for a decade. What’s transformative about that? Penney’s has Liz Claiborne, dropped from the department stores and a separate Ralph Lauren label already. Martha Stewart is already in Macy’s, at least for now.
Again, what’s transformative?
I wouldn’t bet against anything Ron is going to try. He took a brand (Apple) and premium products (iPhone, iPad, Mac, iPod) and sculpted those concepts into a retail destination of choice. Ever look into an Apple store? They are constantly busy. Why? Because the customer loves the experience, the products, and the feeling inside using the products. He is going to transform JCP with that same logic. Having a ‘Genius’ type bar in the Martha Stewart side I think would be very well received by the under 35 crowd as they already “get it.” Imagine walking into a JCP and a MS store-in-store and having an experience similar to their experience within Apple? He can blow this out across the chain. He was the first to bring in an upscale brand at Target (Michael Graves) and now he is taking the MS brand and marching it into JCP only now he has the Apple customer experience under his belt. Ron will win with this and attract a new clientele to his customer base. Just think of the iPhone app he can develop along with this to drive customers onto his website or into his store. He’s not just thinking outside the box, he’s transforming it.
Martha Stewart at Kmart was successful because the groupings of products made it easy for consumers to get a coordinated look quickly to transfer their rooms. There were pictures and products were grouped together. This was successful and needed no extra employees.
So with the store-within-a-store concept will JCP be eliminating their traditional home goods products or adding this store to it? Will the Martha Stewart store have people there to answer questions? Will they answer questions only about Martha Stewart products or about the JCP home goods products? What do consumers want? Does the advice work equally well for a senior downsizing to smaller apartment, a growing family with changing needs, or Gen Xers decorating for the first time? With this big announcement will JCP become known at the home goods store? What happens to the rest of their merchandise?
The announcement is a bold move but there are many unanswered questions.
“One potential negative for Martha Stewart in the arrangement is that other companies currently doing business with the company, most notably Macy’s, may look elsewhere now that Penney is involved.”
But why? Won’t the exciting and exclusive merchandise she offers at JCP be different than the exciting and exclusive merchandise she offers at Macy’s? Or Kmart?
I’m not going to write off Mr. Johnson yet, but based on what I’ve seen so far, I’m quite underwhelmed…I think he might have been a better fit with Sears, where over-hyped, question-raising ideas have become something of a staple; (but not to worry Ron, I’m sure there will be an opening there soon.)
I’m a little disappointed actually — feels like more of the same (house of brands) vs. anything transformational. But I think we have to give them the benefit of the strategic doubt, given the track record … so, we’ll see. Hopefully, it’s not just a bigger Martha area in the same old JCP = yawn.
It’s a good start. It will bring Penney new consumers while increasing Stewart’s brand accessibility and franchise footprint. Beyond that, it’s hard to predict what the end results will be. But if Johnson delivers on his promise, it will be interesting to see the retailer’s transformation.
I really wish Ron the best of luck! I like JCP and I believe that there is a place for JCP in today’s retail landscape. The prices at JCP are as good or better in some cases to its competitors, who in my mind are Target, Walmart, Sears, Macy’s, and most important — Kohl’s. None of these stores offer merchandise substantially better or differently than JCP and JCP’s service seems to be pretty good as a standard, and yet JCP seems to be the poor stepchild of the retail industry when you read certain analysts reviews. I hope that this is a home run for JCP.
Having said that, I really have little faith in the MSLO brand or merchandise, at this point it risks only seeming like leftover rehash of previous work of Kmart and Macy’s. MSLO are going to have to come up with some terrific and visionary merchandise and “takes” on merchandise in order to be desirable. Design will need to be classic and tasteful, in line with Ms. Stewart’s reputation, however, it will need to be fresh as well.
I wish JCP the best.