When James Cash Penney opened a little retail dry goods store in Kemmerer, Wyoming, in 1902, he named it The Golden Rule.
And while doing unto others as you would want them to do unto you is always sage advice, 116 years later, the golden rule in retailing is something very much different: Be relevant onto others, or they will stop doing onto you completely.
That’s the situation Penney’s namesake company – the name change came a decade after its founding – finds itself in, living dangerously close to the edge of retailing irrelevancy.
Partly because of decisions made decades ago, partly because of its unfortunate positioning in the modern retailing spectrum and partly because of bad – sometimes very bad – management decisions over the past decade, JC Penney is faced with a very limited number of possible scenarios.
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Loaded down with debt, bad real estate, a decimated management team and an empty corner office where the CEO would normally sit, it is rapidly running out of time to find a solution to its current dilemma.
From this viewpoint, at least, there remain only three realistic hands for the Penney Company – and that is still how most current and former employees refer to it – to play to make it through the next few years. The odds are not in its favor.
1. Sticking With Its Hold Cards
Right now Penney has enough on its balance sheet to persevere for the immediate future. While the debt load is heavy, other retailers have survived with far worse financial positions.
But the time for incremental changes to its merchandise mix, executive team, business plan, ad campaigns and overall market positioning has long since passed. It is not getting the customer’s attention anymore, and these relatively small adjustments are just not going to do the job.
Playing this hand, Penney probably has 18 to 24 months under its current guise and then a faster demise under bankruptcy laws. If the Toys “R” Us situation has shown us anything in retailing, it’s that creditors don’t have any patience for restructuring big retail operations and that they just want their money out of them as fast as possible.
This is not a time to go into the fight with a pair of deuces.
2. Fold Its Cards
Is Penney worth more dead than alive? Maybe some creditors believe that, but in an era when there is more retail real estate around than anybody knows what to do with and liquidation sales are near-everyday occurrences, it is not exactly an inviting hand to play.
Penney needs a good Christmas and to hit the ground running in 2019. That’s tough without a CEO and a decimated merchandising staff — not to mention morale that’s just this side of a POW camp.
Nobody is wishing that it be dealt this hand. But nobody can rule it out either.
3. Getting A Brand New Deck
At the risk of inviting painful memories of a previous attempt to reinvent itself, Penney’s best hope could be to radically remake its retailing presence. It has the basic tools to build on – Sephora , a still-robust home business and a loyal (if aging) customer base. By focusing on these areas and layering on its strengths in private-label moderate apparel, it could regain share.
It would have to toss out all the things that aren’t working while retaining the pieces that its current target customers want. That’s pretty much the opposite of what it tried under Ron Johnson, so the comparisons are not valid.
It is stuck with mall real estate, so it should capitalize on that, leasing out space to retailers who appeal to the demographics of who is shopping there. Is Primark a good choice? Maybe. Does that open up the door to an entire rebranding into low-cost fashion, à la off-pricers and outlets? It’s an interesting idea.
How about Ikea boutiques to bring a real refresh to its home assortment? Can the Sephora brand be expanded into other classifications, like fashion or home? Not easy, but intriguing. Both of these options bring in new customers but don’t run the risk of alienating existing shoppers the way some earlier purges were attempted.
Strapped for cash and short of time, Penney would need to do this on the cheap — and on the fast. But it can be done.
It doesn’t need to run the table; it only needs to win a few hands to gain some momentum.
The largely unacknowledged strength of J.C. Penney is its existing customer base. They want to keep shopping at its stores, and they are near evangelical in their loyalty to the brand. That’s an intangible hand to quantify — but even harder to duplicate.
Penney needs to put all its cards on the table and hope for a good deal. An ace in the hole wouldn’t hurt either.
Date: September 6, 2018
Source: Forbes