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Don’t Discount JCP Commitment To Its Plan

Monday July 9th, 2012 - 10:34AM

JC Penney is learning there are few fast and easy victories when it comes to changing entrenched retailing culture in a market that has come to depend on coupons and discounts to drive consumer traffic.

Michael Francis is out at Penney in the wake of steeper-than-expected sales declines blamed by most informed observers on the retailer’s Fair & Square pricing rollout. Perhaps someone had to pay the price. And an adjustment of the pricing strategy to wean Penney customers off excessive sale promotion more gradually could be in order.

Willing Sacrifice?

It begs many questions. Is Penney willing to sacrifice many of its traditional customers in the near term to build a robust base of younger customers more important to its long-term prospects? And is there enough patience in the market to wait until Penney’s forthcoming merchandise reset has had a chance to take root before declaring success or failure?

Penney’s recent Father’s Day ad featuring a male couple with their children is further evidence of Penney’s willingness to risk a little controversy in an effort to connect the brand with an emerging younger market. A study by Vision Critical indicates consumers 18-34 were more likely to view the ad positively while consumers 55 and older were more likely to find the ad distasteful or offensive.

Attention Grabber

Other recent research suggests the younger consumers that Penney seems to have its eye on don’t respond to the idea of discounting with the same fervor of more experienced shoppers who have been trained to expect a sale. Young shoppers prefer the sound of a deal better. It might be semantics, but it matters when you’re trying to grab their attention.

The same research suggests such younger consumers are more likely to embrace a total retailing experience— affordable pricing included, but not necessarily the dominant factor— better tuned to their lifestyles. 

Penney sees Martha Stewart as a brand that can bridge traditional and younger consumers. Meanwhile, JC Penney CEO Ron Johnson has dipped into familiar turf with plans to rollout programs by Michael Graves and Bodum, both of which he brought to Target years ago to give the retailer more cred among the trendier set. These brands, and others the retailer is prepping for its reset, seem geared toward building a much more progressive Penney shopper profile.

America's Choice

JC Penney wants to become America’s favorite place to shop as it continues to stage the rollout of its new identity. Penney is beginning to identify more clearly the America the retailer believes will be vital to its future. 

JC Penney might have to compromise a bit in the near term on its no-nonsense pricing plan to prevent an irreversible falloff in core customers trained to expect a discount. But don’t expect many more concessions when it comes to the implementation of a shopping experience meant to mitigate the dependency on coupons and sale promotion to capture a viable, long-term customer base.

Crafting compelling merchandising schemes when discounting is not the intended differentiator is becoming increasingly difficult for retailers. 

JC Penney management isn’t blind to the risks. Commitment can help overcome risk.

The question is whether JC Penney will get enough time for a reasonable chance to declare victory.

—Peter Giannetti