By  on August 23, 2005

NEW YORK — The next phase of J.C. Penney's growth will focus on developing an emotional connection with its customer.

The retailer, which on Aug. 16 posted a 79.4 percent jump in second-quarter income from continuing operations as well as a ninth consecutive quarter of same-store sales gains, has proven that the moderate consumer is willing to spend. But to grow and maximize sales, the retailer is looking to reposition its private brands to meet consumer lifestyles.

J.C. Penney's initial focus is on further strengthening its "Big 7" private brands: Arizona, St. John's Bay, Okie Dokie, JCP Home, Worthington, Delicates and Stafford. About 40 percent of its business is private label, with the Big 7 contributing 83 percent of private brand sales in 2004. Three of the brands — JCP Home, Arizona and St. John's Bay — each do $1 billion in annual volume, while the others are somewhat less, said Kenneth Hicks, president and chief merchandising officer, in a recent exclusive interview with WWD.

Reflecting on sales during the quarter ended July 30, Hicks said during a conference call, "Among the highlights, our private brands continue to grow with sales gains on our Big 7 private brands well above the store average. Private brands like Arizona and Worthington play a key role in building customer loyalty and providing a compelling reason for current and new customers to shop J.C. Penney versus the competition."

In the WWD interview, Hicks said the company has completed a "tremendous amount of research on our customers through focus groups" and tracking their purchasing habits. In formulating the new profiles, the company has moved away from the typical focus, which is identifying customers by demographics and annual household income. Instead, the retailer is working on the right combination to suit how consumers live, work and play.

"We took a group of customers, sat down with them in their homes and saw what they had in their closets. We went with them to our stores and watched them shop in our stores and at our competitors," Hicks said.

The company has built profiles of their customers from the research, combining ethnographic and lifestyle data. "We've developed brands to make sure that we create an emotional connection by offering them brands that fit within their lifestyles," Hicks said.At the same time, the brands are designed to cut across different age groups and ethnic backgrounds. While an ethnic group might have a preference for one brand over another, J.C. Penney's answer for serving that consumer is to go deeper in certain categories, such as color or size range, on the store level, according to Hicks.

The president explained, "We have the capability with our new systems to ensure sizing for [a particular] customer base. We can send more extra smalls and smalls of a St. John polo shirt to El Paso and more of the larger sizes to Minneapolis."

J.C. Penney has identified four different customer lifestyles: traditional; conservative; modern and trendy. The traditional customer still represents a significant portion of the retailer's customer base, followed by consumers who fit into the "conservative" category.

Brands such as St. John's Bay is considered a casual brand for the traditional consumer in men's and women's. Bisou Bisou, popular among Hispanic women, is the trendy brand for the female customer, while Nick(it) is the counterpart in the men's business. Arizona, targeted at teens, suggests a modern brand, but is more for the traditional teen looking for casual apparel. Stafford is the men's career traditional line, while Worthington is the career brand for the modern woman. Nicole and W are the new modern lines at J. C. Penney for career and casual apparel.

The retailer is also changing its store layout, changing adjacencies based on lifestyle rather than by classification. The sales floor features more outfits and coordinated pieces as a way to make that emotional connection with shoppers. In addition, the retailer has dedicated teams for each brand to ensure a consistency and continuity for each line, from product development to marketing and advertising.

For the fall, J.C. Penney is betting on cable knits as a winner in its sweater collections.

"A very traditional cable knit in coloration and silhouette, for example, would be updated for the modern customer by featuring a different [coloring] and type of cable, whereas it would be given a shorter cut, larger yoke and fashionable colors for the trendy customer. It's the same idea for all customers within a style [group, but] its just how they wear it that's different," Hicks said.

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