We just shared a news on our team chat about JCP on the verge of going bankrupt. Many of us in our team worked for JCPenney on various stints, have good memories of working there together and still feel attached to the company. So, sharing the news started a round of good discussion on changing retail landscape.
Sharing the excerpt of our team chat which brought lot of good insights and perspective on retail.
Disclaimer: Limited editing. There are typos and spelling mistakes due to chat.
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Manoj: JCP failure: what may be the reasons for that? They deployed best planning and forecasting software (RPAS) along with best retail solution (oracle retail). Does that mean the business is lacking something? Morrisons also could not do any good with their huge oracle apps and oracle retail platform? where is the gap?
Varun: Amazon as competition and low online capability/infrastructure is what’s and will kill them all
Manoj: Amazon is a challenge everywhere. Still some retailers ready doing well. What else may be differentiating factor for the collapse of JCP? I think sears retail also collapsed which, once upon a time, was a big one.
Harish: I see lack of innovation in their business model, this is typical challenge with age old family-based businesses I feel. They are late in the game be it omni channel Or online sales
Manoj: Were too late to go online? Is the online supply not good enough? Is the business not good enough to plan properly? Are shareholders conflicting with business?
Harish: One of the areas they also noticed are their old-fashioned outlets, they tried to remodel last few years to attract people but already late by then
Manoj: Very strong point. Thanks Harish.
Manoj: Does that mean they could not address the demographics? The store outlet may be ideal for the old people, but not for the youngsters who form the majority of the shoppers now a days. Is it the same with their merchandise?
Harish: Yes both with merchandise and demographics. Recently they have brought fresh look to their outlets (last time i saw may be couple of years back) when they remodeled and it was looking good but they couldn’t market their new look
Manoj: Amazon is definitely the killer. Government of India tool some preventive measures to save the small retailer from such online giants. Yeah. Changing the notion in the minds of people is very tough unless it has a very deep pocket.
Varun: Retailers who are doing well have different retail models/type like Walmart for groceries, dollar tree, seven eleven, Ikea for furniture…or have done a lot in branding like Target. Customer go to them for their special need which Amazon doesn’t fulfil completely as of now. But they are also getting tough competition. Especially since Amazon has bought whole foods and tied up with Kohl’s. Among all this I feel Dollar tree and 7-eleven are comparatively safer. I can be wrong though. Jcp has nothing unique left to visit them except Sephora!
Manoj: Good points. Thanks again.
Manoj: Ikea in India are not doing well as they are not able to sell furniture. It is just next to my office. I keep visiting their shops in order to understand their business plans. Their boring all white color will not work in India. Not very sure how long will they be able to survive with this store model.
Varun: They are focused right on demographics. But can’t do much if that demographics stop buying from them and go to Amazon. ???? It’s a tectonic shift we are going through in retail. Also Amazon is a marketplace than a regular retailer which helps them put lot more variety with zero investments. They just need to focus on their supply chain. JCP, toys r us, Sears had issue of inventory and investments along with supply chain. Too much work! Shoppers have stopped going to stores. Stores overhaul might not bring them. It may bring some conversion if store goers though. India is a different retail landscape altogether. I was just talking about US for now.
Manoj: This is message for chaps in India. Recently I met with a person who works in Amazon as a Chinese interpreter. He told me not to buy costly electronics from Amazon if it is not fulfilled by Amazon. Most of electronic sellers on Amazon are from China with some Indian or American name and they sell crap items at a cheaper rate.
This decade will be very interesting for Indian retailers.
Varun: Almost all electronics are made in China. ???? Good electronics ke liye …may be just go for known brands. But I doubt FBA has anything to do with good or bad electronics. Instead check for free return policy to trust more.
Manoj: God made the world and rest are made in China. ????????????
Varun: IMO Govt should promote Amazon and other marketplaces. They have empowered common person to run a business, without too much investment on store front. Maybe they should put policies on their commission limits and separate taxation for marketplace and vendor.
Manoj: The steps by Indian government are mostly to reduce the heavy discount they give in various ways in order keep the pricing competitive. Yes, people are selling on Amazon platform and it is promoted in many places now.
Manoj: I am eager to her from Priyanka, the longest serving war-horse for JCP.
Priyanka: Their online channel was a major culprit. their portal is completely messed up. People are not able to search what they want even though Jcp may have the stock.. I did one project last year where the users and business Was not trained enough and they continuously left the key attributes as Null or update it to some legacy world value and hence literally thousands of items didn’t appear dotcom channel. I was working on BIP reports to find of such items by divisions. I myself tried searching many items many times but didn’t get anything. The point that Harish spoke about business was very valid. They didn’t want to change. The New CEO Jill really tried to make it happen. Last one year there were many new efforts to rebrand stuff and change the type of merchandise etc. but still nothing much
I did see lots of difference in the stonebriar store layout and look and feel in the last one year. They tried making it jazzy etc. but sad that nothing worked out. A bit attached to JCP for working that long so feeling sad and will really to upset if they shut down
Manoj: Thanks Priyanka.
Priyanka: Coming to shopping, I shopped most of my stuff from JCP as they were not as expensive as Macys or cheap as Walmart. They did have variety but not sure about the American mindset
Naveen: Issues with JCP:
1. Decline of JCP started in Ron Johnson’s era, Jcp was always a mid-aged, middle class American store. That is their customer segment which went upside down, remember that segment of customers seldom do online.
2. Let’s not forget that Amazon is still a supply chain company and not a retailer, of course there is competition but not giant killer.
3. Own brand label forms 60% of JCP business, again the customer segment loss hit this part, Sijcp & Disney inside Jcp did balance out but not much penetration
4. Did not focus on acquisition & internationalization (especially for its size of business)
5. Flux in top leadership?
6. I personally thought appliances would life them up but looks like no.
7. Have been following the stock from past 6 months. I thought
Varun: Very good points. Not sure on point 2 though. Online shifted the buying behavior of people. Amazon and other online marketplaces have taken over the fair share from almost all mall- based retailers.
All these retailers generally compare their store sales vs online sales. Where online is a very small percent. So, it never gets enough focus. The bigger issue is that their store sales is shrinking/stagnated due to competition from outside, which is prominently online.
Manoj: Thanks everyone for this discussion!