Why JCPenney’s new business strategy is failing

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JCPenney recently announced a bold new everyday low pricing strategy, greatly reducing the number of sales events and specials in its stores. They heavily promoted their new approach as a more rational business model and a better deal for the consumer.

However, JCPenney sales have fallen dramatically since introducting the new approach. (Sales plunged 18.9% for Q1 and the reported loss was more than twice what was expected.) The consumer isn’t buying. Why?

A better question is, “Why should they?” Unlike Apple Stores or the legendary Nordstroms chain who eschew the heavy discounting in favor of a unique buying experience, JCPenny stores and buying experience are not special at all. In fact, they are somewhat mediocre. So coupons and discounts are about all they have to pull customers into their stores. This strategy sure works for competitors Macys and Kohls.

Seems that for JCPenney’s new strategy to work in the highly competitive apparel and home goods industry, there would need to be a compelling reason for shoppers to go visit their stores. JCPenney left that part out of their business plan.

Your thoughts?

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One Response to Why JCPenney’s new business strategy is failing

  1. AirportsMadeSimple says:

    I don’t know if we discussed this or not, but I had this discussion with someone back in early May, and pointed out exactly what you say here. I predicted management leaving and them eventually declaring backruptcy and/or getting new management in to try “one more time” to re-vamp their image.

    In my opinion, the only way they can is to completely wake up today’s younger consumers. I’m 45, and I remember the “old days” of JCPenney–the catalogs, etc…and today’s consumers, both young AND old, just don’t care about them because there are tooooooo many options out there that are cooler, cheaper, and have better quality. Macy’s has kicked JCP’s butt because their sales are frequent, you get points with their credit card, AND their clothes are higher in quality.

    To wake up today’s younger consumers, and to keep their price-point low, I think they should reduce the 1) size of the stores (who buys lawn furniture at JCP?), 2) number of stores, 3) amp-up (or, for lack of a better term “make it cooler”) their online presence, and 4) throw out the “new store” remodel (I mean, really, what changed? Nothing I could see. I just went into one of their BRAND NEW stores four (4) months ago.), and it was BORING. Not only that, I found it annoying because each department had different music! The Sephora was one channel, young women’s clothes another channel, etc…and yes, you can hear them all at the same time. I had to get outta there. Plus, the clothes were cheapish.

    They HAVE to come up with something hip, trendy, and fun that kicks H&M’s ass. You know how Starwood properties (the high-end hotels) came up with the cool, young “Aloft” hotel brand? Something like that. It doesn’t take wads of cash to design/style a room. It takes planning and creativity.

    Ok. Enough rant! 🙂

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