J.C. Penney's Retail Challenge
Buying new fall apparel, the annual rite better known back-to-school shopping, is J.C. Penney’s second-biggest sales season (Christmas is no.1).
But the recent season of this year became a big test for the world-renowned department store chain.
According to Maxim Group retail analyst Rick Snyder, “Investors are looking at sales gains, increased store traffic, less cash burned and improved margins.”
Last year, sales declined 22% in the second quarter and 27% in the third quarter, retail time spans that include the crucial back-to-school (shopping) months of July, August and September.
Penny struggled with inventory last year, stores didn’t receive the right mix of back-to-school children’s merchandise and there were problems keeping items in stock. School uniform sales (usually a huge fall success) faltered last year, as did toddlers’ and preschoolers’ merchandise.
Since then, merchandise mistakes have been corrected, said Betsy Schumacher, Penney’s senior vice president over children’s: “Now we’ve clarified, narrowed our assortment and we’re in stock.”
After talking with customers, Schumacher incorporated many of their suggestions and ideas; the plus-size girls’ department is now extended and in the same department with regular sizes. And there’s now a separate department for toddlers and preschoolers, sizes 1 to 6.
Other incentives and brand additions included: Personalization kits with shoe and backpack purchases, $25 prescription eyeglasses for kids age 16 and under, plus coupons and regular discounts with the printed ads twice a week.
The Canadian brand, Joe Fresh, now has a children’s line; Nike has been added to the girls’ department, Penney’s own workout apparel brand, Xersion, has been extended to boys and girls. National brands like Disney and Penney’s Arizona have a line of age-appropriate dresses, skirts and matching sweaters, leggings and jeans.
“We’re positioned to be able to learn and react. If we need to make adjustments in the fourth quarter, we will,” declared Schumacher.
Best Buy’s “Store-within-a-store”
Best Buy’s CEO Hubert Joly has aggressively pursued a “store-within-a-store” concept (more common among department stores and Asian retailers). This means that while you’ll still see the familiar blue shirts and Best Buy products, you will also see (and be able to also buy from) Samsung, Microsoft and other retail company employees occupying their own spaces and places within the Best Buy store.
The benefits of this is higher sales of popular brands, plus the rent that Samsung and others would pay to Best Buy results in higher revenue for the consumer electronics retailer.
But will providing space to another, similar company increase sales and additional traffic throughout the entire store? Or just that particular company? There’s a risk that Best Buy may eclipse the brand that matters most: Best Buy. “Going overboard with ‘store-within-a-store’ could diminish the power of the Best Buy brand,” said Brian Kelly, a Chicago-based retail consultant.
One of Joly’s top projects is to boost sales by redesigning store space; he wants stores to stock higher-growth products that could boost sales per square foot. This is the ultimate measure of a retailer’s health.
And that’s also where the store-within-a-store concept becomes useful; the other companies are essentially leasing their spaces and each manufacturer controls their own pricing and merchandise decisions. This enables Best Buy to focus on just a few areas, while also benefiting from the investments of the other companies’ sales and rent revenue.
According to Jeff Green, a Phoenix-based retail consultant, it’s a win-win (a strange one): “Microsoft, Samsung and others can promote their brands without having to operate a full-scale store. And for Best Buy, it’s a way for them to get away from all of that square footage.”
Target’s Tech Innovations
Two years after reviving its website, Target has gone on a “digital rampage”, transforming a store-based culture into an integrated innovation machine; the company that normally needs a year to plan clothes and accessories collections is now producing mobile apps and social media tools in just a few weeks.
In the past several months, the company has revamped Target Mobile, started a digital a coupon program through Facebook and live streamed residential hall college students in Target-product-outfitted dorm rooms; consumers can purchase these products and items by just scrolling over them.
It’s a pivotal time for Target; the retail powerhouse has struggled to increase sales at its 1,784 U.S. stores as many consumers flock to the Internet for deals and convenience. As a result, many retailers are searching for new growth sources through online, mobile and social media.
Target’s executive teams regularly evaluate new technologies, whether they have originated from the store’s new innovation center near Silicon Valley or from corporate employees; a combined group of tech experts and business strategists now try to quickly test inventions in individual stores.
With digital technology rapidly remolding the retail business, Target officials decided they needed talent and speed; the former to create and evaluate technology, and the latter to out that innovation to good use in a quick manner.
Sources: “J.C. Penney has a lot to prove this season”-Dallas Morning News-The (Sunday) Vindicator and “Best Buy bets big on new concept”-Star Tribune (Minneapolis)-The (Sunday) Vindicator, July 28, 2013, and “Target setting its sights on technology, innovation”-Star Tribune-The (Sunday) Vindicator, August 18, 2013