The Me-Too Path to Success
By George Anderson
There hasn’t been anything revolutionary in what J.C. Penney has done in recent years to get its business turned around. In fact, if anything, the retailer has been successful
borrowing what works at other retailers and making sure it executed against its me-too strategy.
Consider some of the changes initiated at Penney when Allen Questrom was the company’s CEO that are being continued under Myron “Mike” Ullman’s leadership.
Penney borrowed a page from Kohl’s (which, of course, also borrowed the concept from others) of placing its checkouts at the front of the door instead of locating them within
product departments.
The company also brought stores outside of the mall to stand-alone locations. As others discovered, the cost of operating outside the mall is generally less costly and stand-alone
stores generate more sales per square foot.
Terry Prindiville Jr., district manager for Penneys in the Twin Cities area, told the Minneapolis Star Tribune, “As we’ve moved into off-mall locations, our productivity
has improved. You simply have less square feet to manage.”
Penney also switched to a central buying system back in 2001 to improve its purchasing efficiency and give it more clout negotiating deals with suppliers. Other department stores
and competitors in other channels began central buying long before Penney.
Finally, the department store chain, like others, has focused on exclusive brands such as Arizona Jean Co., Nicole by Nicole Miller, nick(it) and Chris Madden to present itself
as the place to shop for fashion in clothing and for the home.
While, the company has found success with its exclusive brands, it is not without significant competitive challenges.
As Linda Barck, a consumer from Northfield, Minn., told the Star Tribune, “Penneys is usually my first stop. But Target’s gotten a lot better. If I want something quick,
I’ll go [to Target]. I know their prices are reasonable.”
Moderator’s Comment: What does Penney’s success say about the need to differentiate? What are the challenges/opportunities you see before the chain?
We would suggest that Penney does, in fact, differentiate from the competition and the answer as to how was provided by Howard Davidowitz, chairman of Davidowitz
& Associates: “They chose their strategy and they executed on that strategy flawlessly.” –
George Anderson – Moderator
They may not be on the cutting edge, but it simply means that to survive you don’t have to be first, you just have to be consistent in the message you send out. To that degree, they’ve done well and the market they compete in is big enough for multiple players to exist. The downside to not differentiating themselves more is the premium they place on location and price points. Location they might be able to defend but price point, as we all know, is a niche nobody can own long-term.
Many businesses have found success by being ‘on trend’ or a close second to the early adopters. Instituting innovation across a wide range of locations, effectively and consistently, can ultimately win out over the prototype one-off installation. Along with reinterpreting innovation, Penneys has found ways to improve on the original design, while also making efficient investments in its stores. Nothing wrong with that.
Isn’t execution always the key? JCP’s dedication to the idea of selling their way to growth — instead of controlling their way to growth, which never works — is producing dividends. They’re wedded to the idea of doing the basics and doing them well, instead of launching several hifalutin’ programs that confuse customers and employees alike.
Is this differentiation? Unfortunately, yes. The enviable challenge for JCP will be to manage success. They haven’t had a lot of experience with that in recent years, instead focusing on managing adversity.
It’s important not to confuse innovativeness with differentiation.
JCP may not be on the cutting edge of retailing, but its dedication to moderate pricing, moderate fashion, and moderate presentation is, actually, differentiation from traditional department stores like Macy’s, May, Dillard’s, and others that have been competing for the high-end customer.
I would agree with the moderator. Penney has differentiated from its competition by developing a cohesive organization-wide strategy, and executing it. The execution came despite difficult initial results, and in the face of 9/11 and other external factors.
The niche Penney occupies does not require significant differentiation. The market was poorly served, populated by either aging moderate department store chains (moribund is the word that comes to mind) or regional chains with potential but no national presence (Kohl’s). Penney executed to its demographic need profile: moderately priced merchandise with just enough quality and fashion, presented in an attractive way and marketed around both price and lifestyle.
They have differentiated in the most difficult medium to attempt: operational excellence. Penney has many hurdles left to leap, and is faced with the continuing challenge of maintaining the existing direction and momentum. But for now, they are executing. And the customer is voting. No fancy niche strategy. Hard core retailing fundamentals, integrated functional mission statements, and leadership with vision and integrity.
Wow. Sounds easy, doesn’t it? Differentiated? You bet.
Alan’s reason for success was simple… Alan is (or was) a MERCHANT. Penneys, for far too long, was driven by the accountants. They almost killed the company. Unfortunately, as was the case with Penneys, when the accountants take over, they look profitable at first because they start milking the brand. However, this never lasts. There should always be a MERCHANT on top of any retail organization who wants to grow. This wasn’t a ME-TOO PATH TO SUCCESS story… it was about a merchant making the decisions instead of the accountants.
Penney’s is, in one word, dependable. The quality of their goods and merchandising is something you can rely on. Pricing and promotion are as good or better than most retailers, too. If they are copying other retailers, they seem to be doing a better job of executing, which makes it seem unique. I believe they have a rosy future if they continue on their present course.