Inside J.C. Penney’s $1 billion plan to boost business
Inside J.C. Penney’s $1 billion plan to boost business
J.C. Penney has announced it will be spending more than $1 billion in the next few years to try to revive the more than 120-year-old department store chain. The company emerged from Chapter 11 bankruptcy reorganization back in the winter of 2020, and retail is a still a complicated place given ongoing economic issues, including inflation.
Marc Rosen took over as chief executive officer of J.C. Penney in late 2021, and he spoke with “Marketplace Morning Report” host David Brancaccio for more about this investment. The following is an edited transcript of their conversation.
David Brancaccio: So what can a J.C. Penney do for its customers that a big box store or an online giant cannot do for them?
Marc Rosen: Yeah, it’s interesting that you asked that question, because that’s exactly how we started this project. What is it that our customers need? And who are our customers? And our customers are the core of America; they’re hardworking families, they’re school teachers, construction workers and medical workers. And what they’re looking for is a place to shop where they don’t have to make the trade-offs that they have to make in their everyday life, where they can find great fashion and great brands and still get a great value, where they can have a great shopping experience and they don’t have to sacrifice quality.
Brancaccio: Now, I know you have a lot of your attention on online shopping as well, but you’re still betting on shopping malls and stores that have bricks and cinder blocks that hold them up. I know that some of your owners, J.C. Penney’s owners, run malls, so that’s going to be the way it is. But is that still the place you want to be these days?
Rosen: It’s both an online and an in-store shopping experience. I think that many of our customers want to come into the store because they want to see and feel and touch product. They want that try-on experience, and they want to be able to do that in the store. They want the help and the advice of associates in putting an outfit together.
I’ll tell you, a couple of weeks ago, I was in stores and a customer came up to me and he was going to a wedding. And he was looking for a bow tie, he had never worn a bow tie before. And he needed help finding the bow tie, knowing how to tie it and knowing what to wear it with. And you can only do that in a physical store. Stores play a big role in fulfillment, so we both ship from store and we have customers who buy online and pick up in store. And so that’s really, really important. I think the online experience is also important, because our customer wants to be able to do research, they want to be able to find product and inspiration there. And they want to check and see if it’s in stock in store before they come in and buy it.
Brancaccio: I’m just trying to visualize that scene you painted a moment ago a little bit more clearly. So you’re in a J.C. Penney store, and a guy comes in looking for a tie. Did you say well, “I’m the CEO.” Or did you just like make sure he got what he needed?
Rosen: Well, it was actually really interesting, as you say that. I was visiting stores, and I was I think it was in the Cleveland area, and the customer came up to me and he said, “Do you work here?” And I was walking alone toward the back of the store. And I said, “Actually I do. How can I help you?” And, luckily, before I got too far into that bow tie experience, the manager who had been touring the store with me saw that I was with a customer and came running up to help.
Brancaccio: I know that some government data find that inflation isn’t spiking like it did coming out of pandemic, but we still have inflation. And doesn’t inflation drive your customers to ruthlessly look for the absolute cheapest?
Rosen: So for our customer, inflation is absolutely a stress in their life. What we see from the data is that, a $75,000 median household income, that household is spending over $700 a month more than they spent two years ago on the basics, on either rent or mortgage, on gas, on groceries. And that’s a real stress on families. And because of that, it goes back to then our customers having to make trade-offs. What we are providing them with is that shopping experience where they can find the great product — so they can find great brands like we have in store: Liz Claiborne, Worthington, Stafford. But also national brands like Levi’s, Adidas and Dickies. And they can find those great products, have a great shopping environment and not have to make that trade-off because it’s going to be at a great price and they know it’s great quality.
Brancaccio: It sounds like you still have optimism about this brand.
Rosen: We absolutely do. We started, about a year ago, making some of these investments. And we’ve seen positive proof points that the investment is working. We have over 50 million customers who have visited us in the last three years. Our focus is on getting them to visit more frequently. And what we’ve seen since we’ve started improving the product, improving the store environment and the online experience and giving them faster fulfillment, is we’ve seen an increase in frequency from our customers. So we’ve seen an over 5% increase in customer frequency overall. And some of our key customer segments are visiting us with an increase over 20% versus the prior year. We’re also seeing that in key areas within the store, like men’s and women’s apparel and home, we’re gaining share.
Brancaccio: You gonna use some of that billion to be sure you have the inventory when someone comes in looking for a size 34 x 30 pants?
Rosen: Right, I think that’s critically important. So we’ve really focused on getting the right product for our customer, but we’ve also focused on in stock and making sure that it’s there when the customer comes. If you look at the investment we’re making, it’s really focused on three areas: It’s focused on remodels of the store and store technology, it’s focused on a better online shopping experience and then it’s also focused on merchandising and supply chain technology to help us say, “Where should we place that item? How do we make sure that we have the right size assortment there for the consumer who’s shopping that store? And if we don’t have it in store, how do we ship it from fastest place to get it to the customer?”
Brancaccio: You’re rethinking where the cashiers are if you go into a J.C. Penney?
Rosen: That’s right, so we are moving to more of a centralized checkout experience, which we think will give our customer a better checkout experience. But we’re also going to have mobile checkout through the store. So every associate will have a mobile device, which will help them access inventory. It will help them to fulfill orders if they’re shipped from store. It will help, if a customer can’t find their size, to order it online and ship it to the customer’s home. And then, most importantly, it will also help them use that mobile device to check out any customer at any point throughout the store.
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