JCPenney is self-funding its latest turnaround plan, which includes a reinvestment in its core customer and a more focused value proposition.
CEO Marc Rosen shared in a briefing that given the retailer’s “strong balance sheet,” it is taking cash flow generated by the business and reinvesting it in core initiatives that will help “make every trip to JCPenney count.” Top priorities include updating store interiors; integrating new technology to support associates; enhancing digital capabilities; and optimizing supply chain and merchandising operations.
“Right now, we have less than $500 million in debt, and we will not be taking on any additional debt to fund or to pay for this investment,” Rosen explained. “We’re generating strong cash flow for the business right now because of the work we’ve done to re-energize our product portfolio. That is driving the customer to come and shop, and now, we’re investing to make sure that when the customer comes to shop with us, either online or in store, that they don’t have to make the tradeoffs.”
Now, the company is using the $1 billion to invest in improving:
- Digital capabilities. The company reported that it will continue to upgrade its website and mobile app with, among other features, improved search functionality and product details, customer product reviews and more customized product and styling recommendations.
- In-store physical and technology upgrades. To make the in-store experience more inviting and productive, JCPenney will update its 650+ stores in various ways. “You’re going to see a fresh coat of paint, you’re going to see new and improved lighting that really shows that product,” Rosen explained, and “you’re also going to see centralized checkout.”
A new POS system will create a centralized view of inventory for customers and associates, and improved WiFi — coupled with associate mobile POS devices — will help enrich customer service in stores. More than 100 stores have gone through this refresh thus far.
- Merchandising and supply chain optimization. JCPenney is upgrading merchandising tools and supply chain operations to improve product availability as well as the overall fulfillment experience. New inventory management systems, among other tools, will support more accurate decision-making and efficiency, so the retailer can cater to customers’ unique needs. Enhanced tools will also scale JCPenney’s ability to provide customized and localized product assortments in tune with local community preferences and trends.
“It’s all about getting the right product to the right customers at the right time,” Rosen said. “We’ve invested in a lot of new technology that’s utilizing things like AI that are helping our merchants really decide where to place products so the customer can get them in the most efficient way.”
Rosen noted that the retailers’ turnaround plan has “full support” and buy in from its owners, Simon and Brookfield, which took the retailer out of bankruptcy in 2020. Although JCPenney has historically struggled to stand out and truly resonate with consumers, Rosen doubled down on the company’s improvements in customer frequency, which were driven by the positive response to JCPenney Beauty, new product collaborations and refreshed in-store and digital shopping experiences. The retailer has seen a more than 5% increase in shopping frequency among customers, with a 20% increase among its key segments.
Can JCPenney Truly Differentiate Through Experience?
JCPenney’s “Make it Count” customer strategy and brand proposition is the centerpiece of the turnaround plan. The retailer went through rigorous data gathering to level set with its core customer base — diverse, middle-class families — to gauge the true drivers of customer frequency and loyalty.
“We talk about frequency because we want to make sure we’re earning the right to our customers’ next trip and transaction,” said Chief Customer Officer Katie Mullen during the briefing. “Our experience has to be designed so that the customer comes back, but our marketing and engagement with our communities are designed to tell that story. We’re trying to attract more customers who look like our current customers. We’re not trying to move away from our core customer who is middle class working families of all stripes.”
Through surveys with 15,000 consumers across the U.S. and interviews with in-store customers, the retailer confirmed that “the customer is looking for us to make an unwavering commitment to them about how we will continue to help them ‘make it count’ in their lives,” Mullen said. “Because at the end of the day, our customers, just like us, fundamentally care about what they do with their time and this one beautiful life that we each have. Our commitment is to help our customers get the most out of their lives and we feel we can do that in a unique and differentiated way.”
There are four key differentiators JCPenney plans to focus on in its latest transformation journey:
- Accessible fashion: JCPenney has invested substantially in its brand partnerships, its private label brands and new collaborations that aim to increase relevance in key categories — especially fashion. Most recently, JCPenney announced its partnership with celebrity stylist Jason Bolden to reimagine collections for two private labels – J.Ferrar and Worthington – for all sizes.
“The collabs we have done are hyper-inclusive and really drawing our customers in,” Mullen said. “We have brands that are representative and speak specifically to our customers and their wants and needs. And one of those wants and needs is finding products created by founders who look like them and share their lifestyle.” Mullen pointed to the retailer’s “strong commitment” to plus size and extended sizes across the business as one existing differentiator that will only be expanded upon in the future.
- New and improved rewards: To truly create value for its middle-class consumers, JCPenney is focusing on rewarding them for their loyalty. Beyond feeling the “reward” of great service, customers will see improved financial benefits through the retailer’s credit card and loyalty programs.
“We want to make sure they have access to credit and to loyalty programs that help them stretch their dollars and make the purchases that they want to make more affordable,” Mullen said. “At the end of the day, we focus on the idea that every trip a customer makes should be worth that trip. And that’s a really deep commitment that we make across all of our, all of our sales channels and all of our stores”
- Community-driven efforts: With a store network that spans across the U.S., JCPenney is finding ways to support local communities through philanthropic giving, product development and in the brand experience. “We’re also a part of many different cultural communities that are important to us,” Mullen explained. This involvement is “part of our associates and how they choose to show up for our customers. With 50,000 associates across the county, that comes to life in really rich ways.”
- Living by the Golden Rule: Mullen noted that the company was “founded on and still lives by the Golden Rule” – to treat others as you’d want to be treated. “That Golden Rule is pervasive across the organization,” she said. “We know that our heritage matters to our customers. We have to both be modern and relevant to what our customer wants today. But part of the reason we can do that is because of the longevity of commitment that we’ve made to our customers, and the consistency of the values and what we’re bringing to the table.”
Mullen expanded: “It’s that commitment to stay true to our core, and at the same time continuing to innovate and modernize our experience to be able to serve the customer better. Because at the end of the day, we are here to help our customers making out in their lives to make every day every dollar and every date night matter.”