JC Penney CEO - we need to re-establish "the foundations of retail" despite years of digital transformation

Profile picture for user slauchlan By Stuart Lauchlan March 3, 2019
Summary:
JC Penney's digital transformation program has been running for years, but it's time to rebuild the foundations apparently.

JC Penney bag

The good news - JC Penney saw the biggest rise in its share price in five years last week; the bad news - the rally came on the back of another set of negative announcements, including more store closures and bailing on a digital subscription joint venture.

The former is something that we’ve become used to and there will be more to come. The latter involves a partnership signed in late 2017 with bombfell.com, a subscription service that sent customers five items of clothing chosen by a stylist which they then had seven days to decide whether to buy or send back.

It was an offering similar to Nordstrom's Trunk Club, and Amazon’s Prime Wardrobe service and its closure is just another sign of the ongoing trouble that JC Penney continues to experience in trying to reclaim its status as Middle America’s go-to store.

Five months into her role, the firm’s latest 'rescue the business' CEO Jill Soltau knows there’s a problem and is in the fortunate position afforded all incoming turnaround executives of being able to offer up brutal self-truths without having to take responsibility for them:

You have my assurance that we are not accepting the status quo. This is not business-as-usual. Our current reality is clear - JC Penney has been and continues to be in transition. While it doesn't matter how or why we got here, we are taking deliberate actions to improve our operations so we can build the kind of momentum that drives change.

This is a critical time in our company's evolution and our approach needs to be different, balancing the need to act with immediacy while taking the appropriate amount of time to get our strategy right.

The issue here is that JC Penney’s “appropriate amount of time” has taken years to get to the current uninspiring state of the nation. So when Soltau talks in terms of “providing strategic clarity” and “applying discipline to ensure we’re focused on work that adds the most long-term value”, there’s a depressing air of familiarity about it.

What does emerge is a set of words that Soltau keeps repeating - “the fundamentals of retail”. What does that mean? It’s not entirely clear, but she states:

We need to re-establish the fundamentals of retail at JC Penney and build capabilities focused on satisfying the wants and expectations of our customers. This work will put us on a path to ensure that our digital and store operations operate seamlessly to provide an experience that exceeds our customers' expectations.

OK, so as a mile-high mission statement, that’s aspirational enough to work, but sufficiently lacking in detail to be essentially meaningless. That said, there is some additional meat on the bones to be offered up as she says:

We will continue to clear unproductive inventory swiftly and thoughtfully and implement new processes and training across our organization to ensure we prevent future buildup of excess inventory. Second, we are strengthening our integrated omni-channel strategy to ensure we return to growth in our digital channels, but in a sustainable and profitable way. Third, we are redesigning and improving core store processes while implementing enhanced technology tools to better equip our store associates to deliver on our customers' expectations.

Narrowing down on priority number two, the firm’s omni-channel thinking is still a work-in-progress, despite the much-vaunted efforts of earlier CEO Marvin Ellison to rebuild the retailer around this idea. Soltau says:

We're taking actions in the near-term here as with many of our problems that we need to solve to improve our positioning. And we're spending a lot of time on our site from an assortment standpoint and experience standpoint and assuring that the technology platform that supports it is top-notch.

A lot of effort is being done around that as we look to becoming a stronger omni-channel retailer so that we can be where and when our customers want us to be. So we're taking a lot of action. I am in search for a leader for e-commerce in order that we can make more progress faster. In my experience, what we're doing right now is mission-critical to get the foundation re-established so that when that new leader comes in, he or she can hit the ground running. I’ve seen it done before. The good thing about digital capabilities is it is real-time and we can move quickly.

But for a retailer which has been engaged in a high-profile digital transformation program for several years to be talking at this stage of the need to “get the foundation re-established” isn’t a good look. The idea of being where the customer wants to be is sound of course, but it’s omni-channel retail 101 and it’s where JC Penney ought to have been a long time before this.

Once upon a time JC Penney was Middle America’s retail sweetheart and Soltau makes a pitch that those customers who once loved the brand are still out there:

What I've heard from our customers is that they are in our corner. JC Penney is a storied brand that has been part of the American consumer consideration set for a very long time. As I've engaged with customers, as I've gotten data from the over thousands of surveys we did and focus groups and shop-alongs and things like that, our customer wants us to be restored to greatness, if you will, because they have great memories.

My take

Maybe so, but as Sears found out, you can’t run a business on memories. Nor can you do so on mission statements and soundbites. Soltau argues:

I place a high value on the fundamentals of retail. In my experience and with the last 15 years or so that I've been in situations where retail companies have lost their way, first and foremost, the fundamentals of retail have to be in place. But at the same time, you have to innovate and you have to grow and you have to run parallel paths so that you are creating innovation and becoming more relevant to the customer.

They’re sound enough words, but that’s all they are at this point. While I have no desire to see another iconic retail brand vanish and as such wish Soltau and her new team the best in pulling off a turnaround, there’s going to have to be a lot more detail on how the words will be backed up with action before my confidence levels rise.