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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 Internal Type of Factor Favourable Unfavourable Strengths Weaknesses 1. Balanced Brand Image 1. Decline in the sales of stores 2. Customer first Approach 2. There is a continuous recall in the 3. Through multiple retail options product offerings there is a wide range of product offerings available

External

Opportunities 1. Good amount of focus in- shop Sephora 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 is weak. 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. II. 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 mome nt 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 Red Zone will consist of new different products Family room which is meant for service

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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 by customers. 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 Allen DeGeneres. Change in communication mix that echoes Pricing through digital/website/mobile platform. Customers profiling in order to understand purchasing behaviour and accordingly offer products and services. Change in design of fixtures with good backdrops replacing walls that would use graphics 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 Sales COGS Gross Margin Gross Profit Margin Operating Expenses Net Sales Expense ratio Net Income Net sales Profit Ratio Net sales Total Assets Asset Turnover ratio Total Assets Equity Financila Leverage Net Profits Equity Return on Net Worth
18,486.00 11,571.00

Jan-10
17,556.00 10,646.00

Jan-11
17,759.00 10,799.00

Jan-12
17,260.00 11,042.00

13-Jan 14,526 9,747 4,779.00 32.90 5,417 14,526 37.29


-520

6,915.00 37.41
5,336.00 18,486.00

6,910.00 39.36
5,747.00 17,556.00

6,960.00 39.19
5,617.00 17,759.00

6,218.00 36.03
5,251.00 17,260.00

28.87
572 18,486.00

32.74
251 17,556.00

31.63
389 17,759.00

30.42
-152 17,260.00

14,526 -3.58 14,526


11,424.00

3.09
18,486.00 12,011.00

1.43
17,556.00 12,581.00

2.19
17,759.00 13,042.00

-0.88
17,260.00 11,424.00

0.65
12,011.00 4,155.00

0.72
12,581.00 4,778.00

0.73
13,042.00 5,460.00

0.66
11,424.00 4,010.00

0.79
11,424.00 4,010.00

0.35
572 4,155.00

0.38
251 4,778.00

0.42
389 5,460.00

0.35
-152 4,010.00

0.35
-520 4,010.00

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 Net sales COGS Gross Margin Operating Expenses
18,486.00 11,571.00

Jan-10
17,556.00 10,646.00

Jan-11
17,759.00 10,799.00

Jan-12
17,260.00 11,042.00

13-Jan 14,526 9,747 4,779.00 5,417 13-Jan 32.90 37.29 -3.58 0.79 13-Jan
11,424.00 4,010.00

6,915.00
5,336.00

6,910.00
5,747.00

6,960.00
5,617.00

6,218.00
5,251.00

Jan-09 Gross Profit Margin Expense ratio Profit Ratio Asset Turnover ratio 37.41 28.87 3.09 0.65 Jan-09 Total Assets Equity
12,011.00 4,155.00

Jan-10 39.36 32.74 1.43 0.72 Jan-10


12,581.00 4,778.00

Jan-11 39.19 31.63 2.19 0.73 Jan-11


13,042.00 5,460.00

Jan-12 36.03 30.42 -0.88 0.66 Jan-12


11,424.00 4,010.00

Jan-09 Asset Turnover ratio Return on Assets Financila Leverage Return on Net Worth 0.65 0.05 0.35 0.14

Jan-10 0.72 0.02 0.38 0.05

Jan-11 0.73 0.03 0.42 0.07

Jan-12 0.66 -0.01 0.35 -0.04

13-Jan 0.79 -0.05 0.35 -0.13

Evaluation of Financial Performance: I. II. Sales getting decreased constantly this is a sign of worry for the company. 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 company decreased 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 back which 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 got decreased 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 the opening 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?

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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 Pr esident 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-strategya-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-johnson2012-6?op=1

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