Can J.C. Penney Differentiate the Customer Experience?

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Customer Strategy
Customer Experience
There's been a lot of buzz about J.C. Penney lately now that the fledgling retailer has tapped former Apple retail czar Ron Johnson as its white knight. Much of the buzz has centered around Johnson's fair pricing strategy which is designed to keep prices low on the types of products its shoppers typically look for and, in part, by setting up its stores with low-priced merchandise on a monthly basis.

There's been a lot of buzz about J.C. Penney lately now that the fledgling retailer has tapped former Apple retail czar Ron Johnson as its white knight. Much of the buzz has centered around Johnson's fair pricing strategy which is designed to keep prices low on the types of products its shoppers typically look for and, in part, by setting up its stores with low-priced merchandise on a monthly basis.These radical changes, along with a new logo, a new spokesperson, etc. are why Forbes columnist Laura Heller is calling J.C. Penney "the most interesting retailer in 2012." Given Johnson's successes at Apple and Target and the plans he's got in store, Penney's should be the one to watch in 2012. But ultimately, the future success of the company will depend upon whether or not Johnson & Co. are able to transform and differentiate the customer experience across the various channels J.C. Penney customers use.

It's not so much that J.C. Penney is suffering from poor customer experiences - or poor business performance, for that matter. Even though J.C. Penney and other department stores have seen their market share in clothing and other categories decline from 57 percent in 1992 to 31 percent last year amid the rise of specialty retailers such as H&M, J.C. Penney's same-store revenues grew in 2011, albeit by a paltry 0.7 percent, according to recent article about the company by The Associated Press. By comparison, same-store sales for Macy's rose 5.4 percent while Kohl's inched up 1.1 percent.

Meanwhile, J.C. Penney has fared decently from an overall customer experience standpoint. For instance, as part of Forrester's 2011 Customer Experience Index, J.C. Penney was among 10 companies that were rated "excellent" by customers, including 8 other retailers such as Borders, Barnes & Noble and Kohl's.

Still, despite previous leadership changes, J.C. Penney really hasn't done much to differentiate itself from Kohl's and other department stores that target middle-class shoppers. Some shoppers I know show greater loyalty to Kohl's. They feel like they're getting a better value for the quality of goods offered and have a stronger connection to the brand.

Ask yourself: Has J.C. Penney set itself apart from the pack and differentiated the customer experience? My guess is that most people would answer "No." However, if J.C. Penney is able to differentiate the customer experience and provide customers with the kind of "wow" experience commonly associated with Apple or Amazon, it could have a significant bearing on the company's business performance and set it apart from other department stores or even specialty stores.

Research by Temkin Group reveals that even a modest improvement in customer experience can generate $287 million in additional revenues for $1 billion-plus retailers over a three-year period.

Perhaps Johnson can help J.C. Penney pull this off. Under his direction, Apple's retail operations achieved record growth, exceeding $1 billion in sales within two years of their debut. Although no one can reasonably expect Johnson to make J.C. Penney the next Apple, whatever gains the company does achieve over the next year or two will hinge upon whether J.C. Penney is able to distinguish the customer experience from its competitors and make it the go-to store, even for a certain segment of customers.

How do you see it?

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