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Transcript of JCPenny Case
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JCPENNY SUSHANT BHASIN
Term Paper study
Submitted by: Sushant Bhasin
Part- 1
History & background
Modern jcpenney stores are a far cry from the small dry-goods store that James Cash
Penney opened in Kemmerer,
Wyoming in 1902. In those days,
frontier miners and farmers and their
families turned to jcpenney for blue
jeans and other work clothes, shoes,
fabrics and sewing needs. Today, busy
working families turn to jcpenney in
cities, towns and suburbs and The original Golden Rule store in Kemmerer, 1902
to jcp.com for affordable fashions and home accessories.
Originally, Mr. Penney called his stores the Golden Rule because it was his personal and
business philosophy to treat others the way he himself would want to be treated. In 1913,
his growing chain of stores incorporated in Utah as the J. C. Penney Company, Inc. and the
Golden Rule name was phased out. In 1914, the Company moved its headquarters from Salt
Lake City to New York City to be closer to its major sources of merchandise. Since 1992, the
Company has been headquartered in Plano, Texas.
As jcpenney grew, it became A Nationwide Institution, as one of its early logos
proclaimed. At one time, more than 2,000 jcpenney stores dotted Main Streets and
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downtown shopping districts across America. After World War II, the Company followed its
customers into the new suburbs, and later into regional shopping malls. The jcpenney
catalogue debuted in 1963, and in 1994, the forerunner of todays jcp.com began offering
merchandise via the Internet.
JcPennys commitment to serving its customers with style, quality and smart prices has led
the Company through many transformations over the years as society and shopping habits
change. Furthermore, through more than 100 years of history, the Company has stayed true
to its Golden Rule beginnings, with a continued commitment to care for the communities
where it does business in and operate in an ethical and responsible manner. Today these
commitments live on in the Companys dedication to make Every Day Matters for all its
stakeholders.
JcPennys Business level strategy before the implementation of new positioning strategy
and competitive assessment of marketplace
Target Market
For decades, JC Pennys core customer has been a woman aged between 35 to 55 years,
who has between $35,000 to $100,000 household Incomes.
Product
Huge volume of In house brands was available. Four hundred Multiple Branded and
unbranded products was available under one roof. Brands like Arizona jeans shop and
Mango are the partners for more than 2 decades which are known all across the world.
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Price
The store keeps those products which are meant for the middle and Affluent class in USA. It
proved to be too costly for the customers. E.g. the designer Michael Graves Tea pots were
available for average $200 inside the JC penny store. From 1990s up till now the cost of the
product remains the same and the Selling price goes up by 43% but she the customer of JC
Penny knows how to take the discount and gets a product which cost $10 to company at
Average $15. But JC was not following the same trend and were charging high.
Distribution/Place
Have 1107 Department stores in all 50 US states and Puerto Rico. Design of the outlet has
traditional look which attracts more and more customers who are above the age of 30s.
More than 50% stores are located in the shopping malls and the rest of them are owned by
JC Penny.
Promotion
There are many promotional offers like weekend, weekly, hourly bonus buy, Free shipping,
Loyalty Programs, JCP cash etc. All these promotional methods were adopted by JCP. Spent
more than 2 billion dollars in a year on promotion. 590 unique promotions have been
organised in a year.
The major problems behind JcPennys failure are:
Team Management was one of the major problems because the staffs till 2010 were not
equipped with proper technology neither in the head office nor in the Stores. Employees
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were not satisfied with the kind of working environment which includes Medical benefits
and calling them by Mr. and Ms. XYZ.
Brand Management one more major problem because the then CEO Mike Ullman
Refocused on the In-house Brands and pushed the workforce not to think out of the box by
which the company hasnt differentiated itself from its rivals and didnt came up with any
new Brand.
Investors Management leads to all the stores owned by jcps. There are almost 400 out of
1100 stores which are owned by jcps and they were giving $150 per square feet Revenue as
compared to the stores which are situated in malls and gives $250 to $300 per square feet
revenue.
SWOT assessment 2012
Location of Factor Type of FactorFavourable Unfavourable
Internal Strengths
1. Balanced Brand Image
2. Customer first Approach
3. Through multiple retail options
there is a wide range of product
offerings available
Weaknesses
1. Decline in the sales of stores
2. There is a continuous recall in the
product offerings
External Opportunities
1. Good amount of focus in- shopSephora stores.
2. Investment in online retail
format and mobile Applications.
3. Launching of New exclusive
Private Label Brands.
Threats
1. History in the financial report isweak. E.g. FY2010
2. Cost implemented in order to
open new modern stores
3. Rising labour cost in the US
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Key Findings
There could be a reason that there was a decrease in traffic in malls as customers looses
interested in fashion because of old tired outlook.
Customers were bombarded with promotional offers like coupons, discounts, thus confusing
the when is the right time to buy
The 590 promotional programs but no takers as 99 percent of the time customers ignored
them.
The frequency of price discounts made customers feel that the brands have become cheap
which ultimately led to lack of trust among customers regarding JC Penny as brand.
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Part 2
The New strategy adopted by JcPenny
Target market
JC Pennys new target market is people who falls in the age of 10 to 55 years, still would
focus on woman.
Product
All the productive brands are available which are meaningful to consumers. Repositioning of
private brands like Stafford, Worthington, J.Ferrar etc in order to make thrashing store
experience for the new customers. Shop concepts have been totally changed for great
American brands like Liz Claiborne and introduction of brands like Lamour.
Price
Fair and Square pricing strategy which includes 3 elements are Everyday, Month-Long
Values and best price have been Introduced which means great prices would be provided
from the start. Lowest ever prices would be provided on 1st
and 3rd
Fridays. 1 happy return
policy would also be provided to the customer which means return the product anytime and
anywhere. Every day and Monthly pricing strategy which means according to the occasions
on daily basis discounts would be provided.
Distribution/Place
Almost more than 100 shops would be available under the one roof which gives a feeling of
speciality store inside a department store. Concept of each brand would be created and
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these concepts would change every month inside the store since the customer likes to shop
in edited environment. The store would be into parts
I. Red Zone will consist of new different productsII. Family room which is meant for service
Promotion
Broadcast in order to provide some knowledge to customers. Monthly distribution of
Magazine which states the monthly theme adopted by Penny and would also talk about the
partnership with other brands would in the Inbox of the customer. Launching of I pad
Applications in order to shop in the store. Based on the theme which has already been
conveyed in the Magazine accordingly monthly change in the colour of exterior lighting to
the store would be done. Almost $80 million is spent by JC Penny monthly on promotion
which will attract customer at least to visit a store once in a month.
According to the Video, JC Penny treats the national brands, designer, celebrities as
Partners. They signed celebrity Ellen DeGeneres to advertise their brand, changing the
brand symbol.
Brand logo is a FRAME with a starting point. The FRAME captures a moment of that
celebrates life that is remembered by an individual over his/her entire lifetime. New Brand
symbol is trying to make an emotional connect to the customer.
Brand symbol must reflect Distinctly American and echoes new brand attributes like
honesty, simplicity, relevance and inspire
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Allen had an emotional connect with JC Penny. As described in the video it is assumed that
Allen worked for JCP to earn her pocket money. Allen could easily pass on JCPs message in a
lighter mood without making customer think too much through her talk show.
According to me, JcPenny have made lot of changes as compared to the previous approach
towards the customer which are as follows:
Introduces designer and national brands in order to be viewed as Trendy bycustomers.
Introduction of solid colours in order to have colourful , and have a visual appeal(as per the presentation).
Focus on Television ad, Word of Mouth, Text Message campaigns featuring AllenDeGeneres.
Change in communication mix that echoes Pricing throughdigital/website/mobile platform.
Customers profiling in order to understand purchasing behaviour and accordinglyoffer products and services.
Change in design of fixtures with good backdrops replacing walls that would usegraphics to tell the story of the brand instead of mannequins, lightening up stores
and if required place glass to create an environment that customer would like to
face.
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Part 3
Financials (USD Million)
JC Penny
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
COGS 11,571.00 10,646.00 10,799.00 11,042.00 9,747
Gross Margin 6,915.00 6,910.00 6,960.00 6,218.00 4,779.00
Gross Profit Margin 37.41 39.36 39.19 36.03 32.90
Operating Expenses 5,336.00 5,747.00 5,617.00 5,251.00 5,417
Net Sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
Expense ratio 28.87 32.74 31.63 30.42 37.29
Net Income 572 251 389 -152 -520
Net sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
Profit Ratio 3.09 1.43 2.19 -0.88 -3.58
Net sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
Total Assets 12,011.00 12,581.00 13,042.00 11,424.00 11,424.00Asset Turnover ratio 0.65 0.72 0.73 0.66 0.79
Total Assets 12,011.00 12,581.00 13,042.00 11,424.00 11,424.00
Equity 4,155.00 4,778.00 5,460.00 4,010.00 4,010.00
Financila Leverage 0.35 0.38 0.42 0.35 0.35
Net Profits 572 251 389 -152 -520
Equity 4,155.00 4,778.00 5,460.00 4,010.00 4,010.00
Return on Net Worth 0.14 0.05 0.07 -0.04 -0.13
Note: The current financial data is till January 1st
2013.
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JC Penny Profit Model
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Net sales 18,486.00 17,556.00 17,759.00 17,260.00 14,526
COGS 11,571.00 10,646.00 10,799.00 11,042.00 9,747
Gross Margin 6,915.00 6,910.00 6,960.00 6,218.00 4,779.00
Operating Expenses 5,336.00 5,747.00 5,617.00 5,251.00 5,417
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Gross Profit Margin 37.41 39.36 39.19 36.03 32.90
Expense ratio 28.87 32.74 31.63 30.42 37.29
Profit Ratio 3.09 1.43 2.19 -0.88 -3.58
Asset Turnover ratio 0.65 0.72 0.73 0.66 0.79
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Total Assets 12,011.00 12,581.00 13,042.00 11,424.00 11,424.00
Equity 4,155.00 4,778.00 5,460.00 4,010.00 4,010.00
Jan-09 Jan-10 Jan-11 Jan-12 13-Jan
Asset Turnover ratio 0.65 0.72 0.73 0.66 0.79
Return on Assets 0.05 0.02 0.03 -0.01 -0.05
Financila Leverage 0.35 0.38 0.42 0.35 0.35
Return on Net Worth 0.14 0.05 0.07 -0.04 -0.13
Evaluation of Financial Performance:
I. Sales getting decreased constantly this is a sign of worry for the company.II. Cost of goods sold also got decreased but its of no use until the sales get
increased.
III. The expense ratio got increased and the gross profit margin for the companydecreased which could be the reason for JC Penny suffering from loss.
IV. Every dollar invested in the business Penny has to pay 4 more cents backwhich results in loss.
V. Every dollar invested in Assets Penny again losing each cent on each dollar.
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VI. Overall, nothing is in favour of JC Penny and Assets as well as Equity gotdecreased and the condition for the JC Penny here is unfavourable.
VII. For 2013, specifically the profit was 3.5 times less as compared to last year.The overall loss this year is expected to be more than 600 Million USD.
VIII. This year 2013 there is highest increase in the expenses because of theopening of new format stores.
During my visit to JCPenney, South Laburnum Avenue, Sandston, VA, I met Paul a furniture
sales representative. He shared one of the incidences took place while he was dealing with a
customer.
Situation: JC Penney had a small, but nice, furniture selection. I noticed upon a slipcovered
sofa, on displaysort of; it wasnt in any sort of living-room arrangementin a neutral stone
color. The companion oversize chair was nearby, but not exactly grouped with the couch. No
matter: The couch was the right size and style. The best thing, for sure, was the price: a flat
$900. It was the lowest price of any other store. True to promise, neither there was .99
after the price on this couch, Nor on any of the other price tags. So one of the customers
were browsing the furniture area, by practice-sitting on the Sofa, imagining what the piece
would look like in family roomfor a good five minutes alone. Then, finally, along comes
ambling a gentleman, guessing in his 60s, a little stout, neatly dressed in a gray suit and tie,
nametag with new JCP logo affixed to lapel. How are you today? he said in a too-loud
voice, after a beat, after an almost obvious, concerted effort to muster enthusiasm, as he
walked toward us. Thats a nice couch.
Yeah, the customer said we like it. Do the covers come off for washing?
http://www.forbes.com/companies/jc-penney/?lc=int_mb_1001http://www.forbes.com/companies/jc-penney/?lc=int_mb_1001 -
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They do, the salesman said, slowly, nodding. Fully machine washable. Or you can have
them dry-cleaned. Its good construction; fully made in the United States. Most probably
he said West Virginia and not North Carolina.
The moral of the above real time story means there is a lot to make the sales associate
understand about JCPenny strategy and Do everything possible to enlist the employees in
the new marketing efforts. All the sales associate knew is the price is lowest of all the stores
in Virginia. There is as much at stake and as many questions along those lines as applied to
sales associates like Paul.
According to me Department stores are still important whether it is America or any other
country in this world. But the problem here is, these stores could become those empty
showrooms where people come and have a look at the products and buy the same product
from somewhere else may be for better price, Quality or any other reason. JC Penny has one
of the greatest Infrastructures with almost 1200 outlets in America.
Two dimension which according to me If followed then JC Penny can achieve the target
which are:
Technology
A customer should be allowed to shop through multi channels, in this scenario according to
Peter Fader, a Wharton marketing Professor and co-director says the biggest app for a
customer today is mobile, so let the customer shop through whichever channel she wants to
and make the choices open for them. I think Ron Johnson the new CEO is known to
implement technology and JC Penny will come up with flying colours.
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Brand Identity
The decision taken by Michael and Johnson for displaying the brands concept wise is the
best since the identity of brand is very important factor. JC Penny itself has a strong brand
identity and now they have decided to keep only those brands which are loved by
customers.
I think the strategy would definitely be successful but it will cost 2 to 3 years in order to
show the results and millions of dollars or crore of rupees.
JC PENNY is the brand which deals in low, particularly middle as well as high class products
after they came with their strategy of 5 Ps implemented by CEO Ron Johnson and President
Michael. Unlike IKEA, BURBERRY and other high profile brands JC Penny is the one company
which takes care of the Middle Income people the most and also deals in Low as well as
High Income people.
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References:
http://www.jcpenney.net/Our-Old-Company/About-jcpenney/Our-History.aspx http://yousigma.com/comparativeanalysis/jcpenneycorporationinc.html http://www.zacks.com/stock/news/67216/J.+C.+Penney%3A+A+SWOT+Study http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyI
d=105457000000000
http://library.morningstar.com/stock/balance-sheet?country=USA&t=JCP http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-
a-tough-sell-on-the-sales-floor/2/
http://www.jcpmediaroom.com/ http://en.wikipedia.org/wiki/J._C._Penney http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-
2012-6?op=1
http://www.jcpenney.net/Our-Old-Company/About-jcpenney/Our-History.aspxhttp://www.jcpenney.net/Our-Old-Company/About-jcpenney/Our-History.aspxhttp://yousigma.com/comparativeanalysis/jcpenneycorporationinc.htmlhttp://yousigma.com/comparativeanalysis/jcpenneycorporationinc.htmlhttp://www.zacks.com/stock/news/67216/J.+C.+Penney%3A+A+SWOT+Studyhttp://www.zacks.com/stock/news/67216/J.+C.+Penney%3A+A+SWOT+Studyhttp://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://library.morningstar.com/stock/balance-sheet?country=USA&t=JCPhttp://library.morningstar.com/stock/balance-sheet?country=USA&t=JCPhttp://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://www.jcpmediaroom.com/http://www.jcpmediaroom.com/http://en.wikipedia.org/wiki/J._C._Penneyhttp://en.wikipedia.org/wiki/J._C._Penneyhttp://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://www.businessinsider.com/jcpenney-employees-talk-about-ceo-ron-johnson-2012-6?op=1http://en.wikipedia.org/wiki/J._C._Penneyhttp://www.jcpmediaroom.com/http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://www.forbes.com/sites/jenniferrooney/2012/03/14/jc-penneys-new-strategy-a-tough-sell-on-the-sales-floor/2/http://library.morningstar.com/stock/balance-sheet?country=USA&t=JCPhttp://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://subscriber.hoovers.com/H/company360/financialMarketData.html?companyId=105457000000000http://www.zacks.com/stock/news/67216/J.+C.+Penney%3A+A+SWOT+Studyhttp://yousigma.com/comparativeanalysis/jcpenneycorporationinc.htmlhttp://www.jcpenney.net/Our-Old-Company/About-jcpenney/Our-History.aspx