Katlyn Whelan 11/3/2015 JC Penney “Square “Square Trade” Trade” Case Analysis
Evaluate the overall efectiveness o the “Fair and Square” repositioning strategy. How well or poorly do all o the elements work together or work at odds with one another to deliver a coherent whole !hat elements are missing The “Fair “Fair and Square” re!siti!nin" re!siti!nin" strate"y is a #alue$%ased r!!siti!n& r!!siti!n& 'here J(C( Penney )JCP* is atte+tin" t! ,ature +!re #alue thr!u"h e#eryday l!' ri,es )-.P* and alter the er,eti!n ! ,ust!+ers t! see JCP as an e#eryday sh!in" eerien,e #ersus a st!re that thri#es !n deals and r!+!ti!ns( This issue that JCP is runnin" int! is ri,e is n!t a 'ay t! ,reate #alue& it is a strate"y t! ,ature #alue( A ,!+any strate"y that is !,used !n ri,e ne"le,ts the #alue ,reatin" ele+ents ! the +aretin" +i that really ,reate l!n"$ter+ #alue and su,,ess ! the !#erall strate"y( e"le,tin" t! ,!ndu,t +aret resear,h resear,h t! assess ,ust!+ers4 ,urrent ,urrent er,eti!n ! JCP and their th!u"hts !n the ri,in" ,han"e 'as the rst ,riti,al +istae( 6n ter+s ! er!r+an,e& JCP n!'s they are !siti!ned %et'een ri,e$!riented +ass +er,handisers& su,h as Wal$7art and Tar"et and hi"her end deart+ent st!res lie 7a,y4s and !rdstr!+( 8!'e#er& the la, ! in!r+ati!n a%!ut ,ust!+er er,eti!n %e!re +ain" %rand/,!+any$,han"in" strate"y de,isi!ns al+!st see+s !!lish( With!ut ,lear in!r+ati!n a%!ut ,ust!+er4s er,eti!n ! the %rand& it is di9,ult t! n!' “'here y!u are "!in"” 'ith!ut n!'in" “'here “'here y!u stand(” JCP4s see+in"ly se,!ndary se,!ndary e:!rts t! ,reate ,reate #alue al!n" 'ith this ri,in" strate"y in,luded a ne' l!"!& s!esers!n& s !esers!n& st!re st!re desi"n& and sales stru,ture( The ne' l!"! and a nd st!re desi"n '!r 'ell t! r!+!te the ne' “Fair “Fair and Square” ri,in" strate"y in the #isual dei,ti!n; essentially they are literally square( 8!'e#er& 8!'e#er& 'ith the additi!n ! +!re hi"h$end %rands and +!re us,ale/se,ialty st!re st!re lay!ut it see+s a little ,!nusin" !r ,ust!+ers t! in,rease the #alue ! the r!du,ts in the st!re %ut ee ri,es “airly” “airly” l!'
< it l!'ers the er,ei#ed #alue ! th!se r!du,ts !r the ,ust!+ers( The ,han"e in sales stru,ture als! see+ed t! +iss the +ar& as ,!++uni,atin" the strate"y t! the sales tea+ and elainin" their ,riti,al r!le as “r!du,t eerts” in the !#erall lan sh!uld ha#e %een the rst ste < #ersus =ust tain" a'ay their ,!++issi!ns( With!ut the ,!++uni,ati!n t! the sales tea+& it is sendin" a +essa"e that they are #alued less 'hen in reality the strate"y is relyin" !n the+ +!re( The al+!st n!n$eistent ,!+!nent ! the strate"y4s +aretin" +i is r!+!ti!n in the !r+ ! a s!esers!n( -llen .e>eneres %rin"s a resh a,e t! the %rand& %ut 'ith!ut the +aret resear,h n!'led"e ! their ,ust!+ers < it is di9,ult t! say 'hether JCP ,ust!+ers identied& ,!nne,ted 'ith& !r trusted -llen .e>eneres en!u"h t! %uy int! the ne' JCP( Th!u"h the s!esers!n +ay ha#e %een a "reat t& the ad#ertisin" ,a+ai"n +issed the +ar %y ,!++uni,atin" 'hy ,ust!+ers sh!uld dislie and dis,!ntinue arti,iatin" in the ,!+le hi"h$l!' ri,in" +!dels and ailin" t! ,!++uni,ate and edu,ate h!' their ne' ri,in" stru,ture ,reated #alue( This la, ! ,!++uni,ati!n r!%a%ly ,aused the %ul ! ,ust!+er ,!nusi!n and er,eti!ns ! l!'er #alue$er,eti!n& hi"her ri,es& and less %ar"ains( Pri,in"& the lar"est and +!st ,riti,al ,han"e in the re!siti!nin" strate"y& !,used !n three tiers < “-#eryday Fair and Square”& “7!nth !n" ?alues -#ent”& and “@est Pri,e Fridays(” With this ele+ent %ein" the %i""est ,han"e )and ur!se %ehind the strate"y* it see+s !!lish that a"ain& +aret resear,h 'asn4t ,!ndu,ted t! deter+ine h!' JCP ,ust!+ers '!uld rea,t and there 'asn4t +!re ,!++uni,ati!n a%!ut these tiers t! ,ust!+ers( Th!u"h JCP ar"ues that hi"h$l!' ri,in" is ,!nusin" 'ith !ne ri,e slashed t! %e !n sale& ha#in" 3 di:erent ri,in" stru,tures in =ust !ne st!re ,an %e etre+ely ,!nusin" !r ,ust!+ers( Th!u"h this ne' ri,in" stru,ture ,reates a ath !r l!n"$ter+ su,,ess !r retailers lie JCP and eli+inates all the ri,e "a+es& the la, ! ,!++uni,ati!n and ,!heren,e 'ith !ther +aretin" +i ele+ents t! ,reate #alue !r ,ust!+ers inhi%its its su,,ess(
!hat do the "rst and second quarter results indicate a#out the “Fair and Square” strategy $re the "rst two quarters o results enough to validate or invalidate the changes How would you respond to them First and se,!nd quarter results indi,ate that the “Fair and Square” strate"y had a su%stantial ne"ati#e i+a,t !n JCP( The qui,est ,han"e& n!ted in -hi%it & 'as the s'it,h !r adult '!+en t! sh! !r their ,l!thin" at 7a,y4s #ersus at JCP < the s'it,h !,,urred ri"ht ater the “Fair and Square” laun,h in Fe%ruary 2012( Se,!ndly& the ,han"e ,aused sh!ers t! d! the ea,t !!site ! the re!siti!nin" strate"y in ter+s ! ur,hase ri,es( A,,!rdin" t! -hi%it B& e#enue -arned r!+ Pr!du,ts S!ld at -#eryday/7!nth !n" ?alue Pri,es )the ne' stale in the ri,in" strate"y* dr!ed r!+ D(5E in D$7!nths -nded 2011 t! E in D$7!nths -nded 2012( 6n additi!n the e#enue -arned r!+ Pr!du,ts S!ld !n Clearan,e )the ene+y in “Fair and Square”* in,reased r!+ 13(5E in D$7!nths -nded 2011 t! 1DE in D$7!nths -nded 2012( The rst t'! quarters ! results d! sh!' a #ery ne"ati#e rea,ti!n t! the “Fair and Square” strate"y; th!u"h& as dis,ussed in the rst questi!n& there are a l!t ! +is,!++uni,ati!n and h!les in the re!siti!ns strate"y( The results are en!u"h t! in#alidate the ,han"es in the sh!rt$ter+ %ased !n lan ,!++en,ed in Fe%ruary 2012( 8!'e#er& %ased !n the in#est+ents +ade in the s!esers!n& l!"! ,han"es& and e#erythin" else in#!l#ed in the lan 6 '!uld ush the strate"y !r'ard 'ith an a""ressi#e r!+!ti!nal t! edu,ate ,ust!+ers !n 'hy this ne' ri,in" +!del and the eerien,e$%ased sh!in" %rin"s the+ the +!st #alue( 7aretin" eenses a,tually dr!ed r!+ G2&50 7illi!n in D$7!nths -nded 2011 t! G2&5BB 7illi!n in D$7!nths -nded 2012 < +eanin" en!u"h +!ney 'as n!t sent t! ,!+letely ,han"e the !siti!nin" ! JCP in the +inds ! ,!nsu+ers in D +!nths( -ssentially& !ther than the -llen ad#ertise+ents& they ha#e n! idea 'hy they sh!uld ur,hase at an -.P #ersus a dis,!unt(
$re the results due to a aulty strategy or to a aulty e%ecution o a solid strategy !ould you e%pect similar or dissimilar results i the changes had #een implemented more slowly or in a diferent timing sequence The results are due t! %!th a aulty strate"y and a aulty ee,uti!n ! a s!lid strate"y( H#erall& JCP has "reat intenti!ns t! eli+inate the ,ust!+ers4 relian,e !n dis,!unts and return t! an -.P ri,in" +!del& as hi"h$l!' ri,in" ,an di+inish the !siti!nin" and r!ta%ility ! a %rand qui,ly( 8!'e#er& as dis,ussed in the rst questi!n& ele+ents ! the strate"y lie the s!esers!n and the sales stru,ture la,ed the ,!hesi#eness 'ith the rest ! the strate"y t! really +ae it '!r ,!+any/st!re$'ide( ie'ise& the ee,uti!n ! the strate"y 'as !!r se,i,ally in re"ards t! the r!+!ti!n ! the ri,in" and !siti!nin" ,han"e( There 'as #ery li+ited r!+!ti!n a%!ut the ,han"es t! %rin" a'areness and #alue t! the ,ust!+er; ,ust!+ers needed +!re than a ne' s!esers!n t! %e +ade a'are ! the ,han"es and 'hy the ,han"es %eneted the+ !n a #ery lar"e s,ale( Further+!re& 6 '!uld ee,t si+ilar results i the ,han"es had %een i+le+ented +!re sl!'ly !r in a di:erent ti+in" sequen,e( While the results +ay ha#e %een +ar"inally %etter in a sl!'er +anner& 'ith!ut the r!er r!+!ti!n the l!n"$ ter+ results '!uld ha#e %een the sa+e as ,ust!+ers '!uld still ha#e rea,ted ne"ati#ely t! the la, ! sales and ull$ri,es(
&s '.(. )enney a #rand that can #e “*arget+i,ed” or “$pple+i,ed” !hy or why not &n what undamental ways does '.(. )enney difer rom these two #rands -oes 'ohnsons plan address these diferences in ways that make the success o '.(. )enneys new strategy more or less likely JCP ,an %e “Tar"et$iIed”& as it '!uld +ae sense !r the+ t! add hi"her$end %rands t! their r!du,t +i t! tar"et ,ust!+ers 'h! are 'illin" t! ay the -.P t! ur,hase +!re stylish yet a:!rda%le r!du,ts $ as in,luded in the “Fair and Square” strate"y 'ith 7artha Ste'art and Seh!ra( Th!u"h JCP
di:ers r!+ Tar"et %e,ause its "!al is n!t t! %e !n the l!'er end ! the +aret as a +ass +er,handiIer( J!hns!n is addressin" these di:eren,es %y airin" l!"i,al hi"h$end %rands 'ith the dated ri#ate la%el %rands t! ,reate a sales %!!stin" en#ir!n+ent 'ith ne' )and i+r!#ed* r!du,t line( JCP ,ann!t %e “Ale$iIed”& as the r!du,ts ur,hased at JCP d! n!t require eert ad#i,e !r assistan,e( Th!u"h& in the sa+e ,!ntet& ,ust!+er re#ie's and eer eed%a, has %e,!+e etre+ely i+!rtant in the %uyin" r!,ess( There!re& usin" Ale$lie te,hn!l!"y t! inte"rate these ,ust!+er de,isi!n a,t!rs and !+ni,hannel +aretin" '!uld %e etre+ely #alua%le !r JCP( JCP4s unda+ental di:eren,e r!+ Ale is the r!du,t line %readth& tar"et +aret& and ,!nsu+er ur,hase r!,ess( J!hns!n ails t! address these di:eren,es& as eert ,ust!+er ser#i,e res aren4t ,riti,al t! the %uyin" r!,ess in ,l!thin" and the ailure t! ,!++uni,ate #alue t! the sales tea+ )eli+inate ,!++issi!ns* hurts the !#erall strate"y e:!rts(
-o you agree with the changes 'ohnson is making to the pricing scheme that are set to take efect $ugust /st $re they enough to turn things around 6 the l!n"$ter+ "!al ! JCP is t! +!#e !r'ard 'ith the -.P& then n! 6 d!n4t a"ree 'ith the ,han"es J!hns!n is +ain" t! the ri,in" s,he+e( 8e is %rin"in" %a, the hi"h$l!' ri,in" 'ith %u+in" r!+!ti!nal send !r %a,$ t!$s,h!!l Fridays& eli+inatin" a ri,in" tier that %uildin" the “Fair and Square” ri,in" strate"y& and ,!+letely eli+inated “Fair and Square” all t!"ether( With the eli+inati!n !r “Fair and Square”& all re#i!us r!+!ti!nal ads ran 'ith -llen are n!' 'asted& the ne' l!"! has l!st its inherent +eanin"& and the #alue ! (00 ri,es and n! dis,!unts is l!st( 6n additi!n& 'ithin 1 year& the ri,in" +!del has ,han"ed si"ni,antly 'hi,h ,an !nly ,reate +!re ,!nusi!n !r ,ust!+ers( 6 the "!al in this ,han"e is t! %!!st sales in 3 and & then +!#in" %a, t! +!re sales is denitely an e:e,ti#e +anner < th!u"h 6 ,an4t ,!nd!ne it as e9,ient in the l!n" ter+( JCP in these 3 e:!rts 'ill "ain %a, s!+e !
its ,ust!+ers 'h! let due t! the ,!nusi!n in ri,in" an la, ! sales; h!'e#er& it +i"ht als! ,reate +!re ,!nusi!n t! ,ust!+ers 'h! ha#e stu, ar!und thr!u"h the ,han"es( 3 'ill %e a ,riti,al !int in deter+inin" i the ,han"es are e:e,ti#e& as there aren4t a se'ed nu+%er ! sh!ers lie in ( 6 d! n!t& h!'e#er& thin that ,!nstantly ,han"in" a +!diyin" the ri,in" and r!+!ti!nal strate"ies is a "!!d strate"y !r JCP; n!r d! 6 thin it 'ill %e en!u"h t! turn thin"s ar!und ater the r!ller ,!aster it has led its ,ust!+ers !n in the ast 2 quarters(
!hat should 'ohnson do now 0&gnore what you know a#out what '() actually did1 going orward2 put yoursel in 'ohnsons shoes1 as o $ug. /1 and tell me what you would do3#roadly3going orward.4 F!r the l!n"$ter+ health ! the ,!+any 6 thin J!hns!n has t! +!#e !r'ard and ush !r 'hat he thins is ri"ht $ an eerien,e$%ased retail st!re that !,uses !n e#eryday #alue and ,!n#enien,e& and eli+inate the ,ust!+er relian,e !n deals and r!+!ti!ns( 8!'e#er& this transiti!n ,ann!t %e !#erni"ht( P!siti!nin" and er,eti!n taes ti+e t! ,han"e& and it is d!ne 'ith a %i" r!+!ti!nal %ud"et t! edu,ate and inuen,e ,ust!+ers t! a"ree 'ith y!ur ne' strate"y and assin" the #alue al!n" t! the+ )i(e( !,usin" !n ,!n#enien,e& n! "i++i,s/"a+es*( Se,!ndly& J!hns!n 8AS t! d! s!+e +aret resear,h !n the ,han"es he is +ain" t! redi,t the uture 'ith!ut ailin" !r t'! +!re quarters in a r!'( 8!'e#er& !n the i side& J!hns!n 'ants t! ee his =!%( Ln!rtunately& C-Hs and +ana"ers are =ud"ed !n the sh!rt$ter+ and d!n4t al'ays ha#e the ti+e t! 'ait !r ,ust!+ers t! see the #alue in the ri,in" ,han"es( There!re& +!#in" !r'ard he sh!uld ,!ntinue t! tae a,ti!ns t! +ae sales < run sh!rt$ ter+ r!+!ti!ns !,used !n seas!ns& si+liy the ri,in" +!del& edu,ate ,ust!+ers !n 'hat “Fair and Square” really +eans < %ut ee stri#in" !r'ard !r the l!n"$ter+ "!als ass!,iated 'ith this re!siti!nin" strate"y as it is truly in the %est interest ! JCP as a ,!+any 'h! h!es t! %e ar!und a little l!n"er(
