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More mannequins, less clutter at heart of J.C. Penney plan

Price markdowns are seen in the Izod section at the J.C. Penney Herald Square department store location is seen in New York November 27, 201
Price markdowns are seen in the Izod section at the J.C. Penney Herald Square department store location is seen in New York November 27, 201

By Phil Wahba

NEW YORK (Reuters) - More mannequins are on the floors of J.C. Penney stores. About 40,000 more.

They are one of the most visible changes J.C. Penney Co Inc Chief Creative Officer Michael Fisher has made to try to revive the 110-year-old department store chain, whose sales plunged 26.6 percent last quarter and whose shares have tumbled more than 50 percent this year.

Penney has a plan to transform its 700 larger stores by 2015: each store will contain 100 boutiques, offering brand-name fashion and home merchandise ranging from Levi's to PVH Corp's Izod to Martha Stewart.

Eight boutiques have been rolled out so far and the feedback has been good. But these chic spaces take up only a small part of a store, and about 89 percent of the floor is still the so-called "Old J.C. Penney."

That's where Fisher's new mannequins come in. The goal is to spruce up old store areas and stem the sales slide as more boutiques are introduced.

"Customers don't know what to buy. They love a mannequin that shows you how to put the outfit together," said Fisher, 55, as he gave Reuters a tour of Penney's Manhattan store last week.

"We find anything we put on a mannequin sells out."

That may sound like Retail 101 but it reflects a radical rethinking of the Penney shopping experience under CEO Ron Johnson, who joined the company from Apple Inc in late 2011. He poached Fisher from Apple in February this year.

Their strategy is to make Penney look like an upscale specialty store that still offers inexpensive wares, not a bazaar overflowing with ordinary merchandise and discount signs.

Pants, ties and shirts used to be presented in separate blocks in the men's section, but are now mingled together to make it easier for a shopper to imagine mixing and matching - and to encourage customers to buy more than one item. Plastic wrapping has been removed from men's dress shirts for a more upmarket presentation.

Another trick of the trade Fisher is using is the "ballet bar" clothing rack, which has one bar set a few inches above another - so tops and bottoms can be displayed together, again to suggest a whole outfit to the shopper.

These changes are not without risk - they could backfire and alienate Penney's traditional, discount-obsessed shopper.

"It's going to be for people who have more money," said long-time Penney shopper Elizabeth Sadallah, 52, as she hunted for bargains at a Penney store in Elmhurst, New York.

Patty Edwards, chief investment officer at Trutina Financial, warned that Penney may be overdoing the overhaul, even as she called the new boutiques "gorgeous" and "Apple-esque" in their design.

"Here's my concern: that's not their consumer," she said, adding that it was more urgent for Penney to improve its marketing to convince shoppers they are getting good deals.

Penney, which has about 1,100 stores, has stagnated for years, and was slow to recover from the last recession compared with Macy's Inc or Kohl's Corp. But analysts blame the hemorrhage in revenue this year to Johnson's move to scrap most coupons and sales events in favor of an "everyday low price" strategy.

Edwards said Penney's recent effort to highlight its relatively low prices by putting manufacturers' suggested retail price on price tags is a step in the right direction.

AIMING HIGHER

Fisher and Johnson worked together on Apple's stores, which are widely admired and generate $6,060 in annual sales per square foot, according to research from RetailSales.

While Apple's 390 stores are very different from Penney's much larger chain, there is clearly room for improvement.

Johnson has said Penney's new boutiques are generating sales at an annual rate of $269 a square foot, twice what the old parts of the stores do. Johnson also has said Penney can eventually get to numbers comparable to a specialty chain's. Last year, Gap Inc posted sales of $391 per square foot.

Fisher, who worked for Bloomingdale's for 17 years and guided Coach Inc's expansion in Japan, grew up in Pottstown, Pennsylvania, and remembers a time when shopping at the local Penney was a special treat - a nicer place than the local Sears, he said.

That is the Penney he wants to help recreate, from sprucing up the kids sections to offer more than basics, to taking a page from IKEA for the home section, where products will be displayed as they would appear in a room.

Fisher said the importance of de-cluttering struck him one day when he saw a woman struggling to get to merchandise as she pushed a stroller at the Penney store in Manhattan.

"That's been my challenge, to turn 'J.C. Penney' into 'jcp' and treat it as a fashion specialty store," he said, referring to the hipper name the company is rebranding itself as.

Fisher sees signs of progress. Pointing to a young, hip shopper in red, skinny jeans, sneakers and a hoodie, he said he doubted that guy would have shopped in a Penney store before.

(Reporting by Phil Wahba in New York; Additional reporting by Poornima Gupta; Editing by Edward Tobin, Tiffany Wu and Maureen Bavdek)

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