Mkt 634 - J.C. Penney Case Study

J.C. Penney

Central Problem

After the Great Recession in 2007, one of America’s first department store J.C. Penney’s stores closing, sales malaise, declining market share, slumping earnings, and weak stock market performance. The major problem is J.C. Penney repositioning in the market. Whole department stores industry, especially middle market retailers experienced declining in consumers’ demand. Economic recession hit them badly and increased the consumer frugality. The CEO of J.C. Penney Ron Johnson was trying to reposition its business model and its brand in February 2012.

        Ron Johnson took a sledgehammer to the J.C. Penney way of doing business. Which included new logo- “jcp”; new brand spokesperson- Ellen DeGeneres, one of the most fun and vibrant people in entertainment; new store design- “Town Square”; new sales structure- a new pricing scheme; new pricing strategy- combined elements of two traditional pricing strategies. However, J.C. Penney was still disappointment its loyal customers because these changes confused customers and resulted in further decline in their demands and further deterioration in their financial health.

Analysis of Situation

The best way to analyze a company’s situation to help them do the right decision is by conducting a S.W.O.T analysis.

The strengths that J.C. Penney has, the lowest cost of real estate. J. C. Penney has an average of less than $5 per square foot, but some specialty stores like Gap should pay around $40 per square foot. They have exceptional access to merchandise, like Levi’s innovative Curve ID program that helps women find the right jeans for their body type. They can scale to create enormous marketing power, like offering free gift wrapping, free hot dogs and ice cream, even free haircut for school children. Colocation with specialty stores is also one of J.C. Penney’s strengths, they are ongoing opening of about 300 Sephora locations inside J.C. Penney stores. This department store provided with huge number of private labels, such as Worthington, St. John’s Bay, The Original Arizona jeans Co, and Stafford.  In additional, J.C. Penney has over 1100 locations and great revenue performance. As a department store, it not only provided soft goods but also hard goods, such as appliances, hardware, electronics, and sporting goods. Most importantly, it has its core value, which to treat customers as they would like to be threated- fair and square.

Although J.C. Penney has lots of strengths I listed above, but unfortunately, it also has lots of weaknesses that will impact J.C. Penney’s growth. Compare its direct competitors Kohl’s, Macy’s, and Sears, J.C. Penney has the lowest revenue in the fiscal year of 2011. Actually, J. C. Penney’s performance had been lackluster from 2007. A number showed the average J.C. Penney customer visited a store only four times per year, and the sales per square foot was only $156, which was much lower than its primary competitors- Kohl’s and Macy’s, even it was just half of Target in the FY 2011. The case also pointed out that its primary competitors was increasing from online retailing. However, according to Johnson’s statement, he still believes that physical stores are still the primary people acquire merchandise. But its competitor Macy’s has investing heavily in their e-commerce operations. Besides, J.C. Penney just has a limited market share, because its competitors have almost same offerings. The merchandises of J.C. Penney do not meet the best standards. J.C. Penney is less of global presence, especially in the developing countries.