THE JOURNEY YO REMARKABLE RETAIL

Steve helps organizations understand and respond to retail disruption by creating customer-centric, memorable and profitable growth strategies.

The Key To JCPenney’s Survival Isn’t Closing Stores. It’s Becoming Relevant.

The Relevancy Imperative is not a Jason Bourne novel turned into a cinematic action thriller—though with this report that Jeff Bezos might ride in on his white horse to save the day, perhaps truth will turn out to be stranger than fiction. Instead, while Wall Street may clamor for store closings and cost reductions, JC Penney has one core issue central to its survival: a woeful lack of customer relevancy.

JC Penney’s bankruptcy filing did not surprise many people. The more than century old retailer has been on a long, slow slide into oblivion for nearly two decades. The harsh reckoning engendered by the pandemic only accelerated what many—including yours truly—have been predicting for just about any brand that has been swimming in a sea of sameness for years and that has failed to articulate a strategy to become more intensely customer relevant and remarkable.

Last week Penney’s unveiled its business plan as it hopes to emerge from Chapter 11 with a sustainable path forward. Beyond demonstrating a stunning capacity for understatement by calling its financial performance “challenged”—the stock has lost more than 95% of its value in under 5 years—the biggest news was the company’s intention to close about 240 stores, or roughly 30% of its locations.

Let’s get a few things straight. Penney’s problems are not rooted in having too many stores. Plenty of “big box” retailers make a bigger store fleet work just fine. Penney’s cost structure is not the primary issue either. If the company had been able to grow revenues meaningfully during the past 1o years we would scarcely be talking about SG&A expense. In many cases the company has probably cut well beyond fat into the muscle. And we can’t blame lackluster e-commerce performance fundamentally either. Great digital and online capabilities mean relatively little if you don’t have stuff enough people want to buy, particularly without discounting it like crazy.

At this point, for a bunch of reasons, JC Penney has no choice but to close stores to focus its scarce resources, while also pushing hard for greater efficiencies—if only to cool the jets of the financial types who never met cost reductions they didn’t like. Unquestionably there is solid upside by deploying improvements in all things digital and executing better harmonized retail capabilities. But none of this will make any real difference if the company does not urgently improve its ability to win, grow and keep dramatically more customers with solid lifetime value. It’s all about becoming far more remarkable and far more intensely customer relevant.

At the risk of understatement, this is a huge challenge. The company’s renewal plan is presented in a fact-based, logical manner, probably owing to the big name consulting firm that put it together. It details some of the early traction Penney’s has seen from newish CEO Jill Soltau’s eminently sensible initiatives. Most intended initiatives track well against what many have been imploring Penney’s to do before, during and after Ron Johnson’s disastrous tenure. They may well move the dial. But here’s the thing. A slightly better version of mediocre will not cut it. If the past decade or so of digital disruption has taught us anything it’s that even very good is no longer good enough. You have to be remarkable.

To be fair, Soltau’s been dealt a terrible hand. Mall-based department stores have been in significant decline for two decades and there is nothing on the horizon that suggests that will change. The efforts of two prior regimes failed to win back the customers Johnson fired back in 2012. Moreover, regardless of location, retailers that try to sell a little bit of everything to large masses of the population are collapsing in an increasingly bifurcated retail world. The lingering effects of the COVID-19 crisis will, by the company’s own admission, make it difficult to regain meaningful revenue growth in the near-future.

Alas all roads lead to three inconvenient truths. Bailing doesn’t fix the hole. In the trade areas where Penney’s remains they must win back significant share—online and in-store—from better positioned competitors in a contracted spending environment. And, to paraphrase Carlos Castaneda,  “the problem is, they think they have time.”

A version of this story first appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here

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"The Store Operations Council enjoyed every minute of Steve Dennis's presentation on retail's future. He always keeps it real and speaks the language of retail experts."

Cathy Hotka

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Cathy Hotka & Associates

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