Can J.C. Penney Emerge and Regain Lost Brand Loyalty?

Venerable retailer J.C. Penney has endured for 114 years and has generated considerable brand loyalty during that time, but, so much of its national appeal almost came completely undone during a 17-month period from November 2011 through April 2013 when Ron Johnson was its CEO.

Johnson announced plans for a brand transformation in early 2012 and company stock rose 24%. While his rebranding initiatives were bold, they never caught on (see “Fair and Square Every Day Pricing”) and wound up alienating untold numbers of customers. In the fourth quarter of 2012, same-store sales sank a staggering 32%. Johnson was fired in April 2013.

Fast forward more than three years and current CEO Marvin R. Ellison, who assumed his post one year ago, has made great strides in bringing back those lost customers, while acquiring new ones. During the company’s recent 2016 Analyst Meeting, he presented an ambitious three-year plan for accelerated growth and outlined its financial expectations for improved performance beyond 2017. 

Will J.C. Penney ever be able to dig itself out from the Ron Johnson and spark a new generation of brand loyalists?

Loyalty360 sought the opinions of some of its Association members.

“JCP has done an amazing job putting in place a multi-faceted consumer engagement methodology, covering email, mobile coupons, and in-store enhancements to name a few,” Doug Sutherland, Loyalty Specialist, Dynamics, explained. “They’ve realized that the demographics and psychographics of the consumer is broad, and making a variety of offers provides an array of data about the types of offers and engagement approach that is attractive to their consumers. This form of mass personalization appears to be effective, given the improvement in results. It will be interesting to see how close they come to incremental personalization in both messages and offers in the next 12-18 months, especially given the continuous improvements happening at their competitors, including Macy’s and Kohl’s.” 

During the past year, Ellison said he and his team have made considerable progress “balancing the art and science of retail by improving our execution in omnichannel, marketing, store operations, supply chain, and merchandising. There is still much work to do, but I am confident that our focus on sales growth, new technology, and expense management will continue to accelerate our turnaround and create shareholder value.”

Not everyone is convinced of an imminent JCP positive turnaround.

“I don't think I’ve ever seen JCP attempt a customer loyalty/engagement strategy, but I’m also not naturally drawn to go to Penney’s as well,” Ravi Bajnath, Director of Customer Relations and Marketplace Integrity at Fiverr, told Loyalty360. “In South Florida, location and branding are two huge factors for shopping behaviors. Penney’s (and their stores in my region) are always situated next to competitors. The last time I went in to a Penney’s, it felt like the store I knew growing up 20-plus years ago (and that’s not a good thing for department stores).” 

Ellison plans to build value through value and differentiation through private brands, home, and beauty. What’s more, the company plans to advance its omnichannel execution to connect with customers how, when, and where they prefer to shop. A major component of this strategy is mobile, which is the company’s single greatest touch point with digitally-savvy shoppers. Key to this approach is a newly redesigned JCPenney app that enables customers to locate items, apply coupons, and access their JCPenney Rewards more easily.

Ellison provided financial performance estimates for the 2017-2019 period, as follows:

Compounded annual comparable sales growth anticipated to be 3.0 %; 
Gross margin is expected to improve 75-100 basis points;
Additional SG&A expense leverage of 215-240 basis points;
Net income is expected to be between $450-500M by 2019;
Earnings per share of $1.40-1.55 by 2019.

Karine Del Moro, VP Marketing, Confirmit, told Loyalty360 that J.C. Penney is definitely headed in the right direction.

“It’s great to see J.C. Penney focusing on ensuring it delivers an omnichannel customer experience, particularly with the new focus on mobile,” she explained. “Today’s shoppers have high expectations of a personalized experience and no successful retailer can ignore that if they expect to succeed in the long term. The critical element for it continued improvement will be in listening to customers carefully, understanding what they expect, and looking for ways to ensure they meet those expectations. I’d expect to see the company focus on capturing feedback from customers at key touch points, such as in store, on the website, and through the new app to obtain a clear view of how shoppers feel at each interaction.”

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