J.C. Penney Co. Inc. released its Christmas strategy on Monday, emphasizing new “affordable” products, greater values and shopping conveniences.
This story first appeared in the November 18, 2008 issue of WWD. Subscribe Today.
Following last week’s disclosure of a difficult third quarter — profits fell 52.5 percent and same-store sales dropped 10.1 percent — Penney’s has no illusions about what looms ahead, and is sharpening the offering and value message and shifting marketing dollars without raising the budget.
“It’s going to be tough. The customer will shop in line with the current environment,” Ken Hicks, Penney’s president and chief merchandising officer, said during an interview Monday in New York at the Sofitel Hotel, where key Christmas offerings were displayed.
Hicks believes customers will be spending on “practical gifts, such as slippers, underwear and sweaters, and affordable luxuries, such as leather coats, and a little less on flippant gifts and novelty.”
On a similar note, Tracy Mullin, president and chief executive officer of the National Retail Federation, observed: “Americans may be hesitant to purchase expensive gifts this holiday season, but personal and practical gifts will resonate most.” The NRF released results of a holiday survey of 8,758 consumers, conducted Nov. 5 to 11 by BIGresearch, suggesting the majority of U.S. consumers have not yet put a dent in their shopping list, with 72 percent completing less than 10 percent of their shopping and just 2.2 percent completely finished.
According to the NRF, traditional winter apparel and personal inexpensive items like DVDs, CDs, video games and books, will be highest on gift lists, followed by new game systems, Blu-ray DVD players, other electronic items, toys, gift cards/certificates, personal care and beauty items and jewelry. However, the NRF warned the nation’s price-conscious mentality will take a toll on gift cards, sales of which are seen falling nearly 6 percent this holiday season to $24.9 billion, from $26.3 billion last year. For the last few years, gift card purchasing snowballed, but this year fewer people plan to purchase gift cards this year — 53.5 percent versus 56.6 percent last year — and the overall per capita expenditure on gift cards will slip to $147.33, against $156.24.
Hicks stressed the importance of Penney’s private brands, following a flurry of introductions within the past two seasons, including Fabulosity by Kimora Lee Simmons, Decree, American Living and Flirtitudes. “Our new merchandise is selling extremely well,” he said, adding there’s no slowdown in product development. Penney’s will roll out additional private brands in 2009 in apparel and home categories, he said, without specifying.
“The biggest difference in our merchandise [this year] is that the level of style has gone up and there is better value,” he continued. With the Worthington private brand, for example, which has been around since the Eighties, seasonless, stretch, easy-care fabrics and additional pants fits, were recently added to modernize the career look.
Penney’s holiday program also focuses on a “red box” assortment of 60 items, priced $19 to $109, including $90 talking robots, $30 Einstein telescopes, and products under the Sharper Image label, such as $30 digital binoculars and $80 indoor-outdoor speakers. The red box offering is centrally situated in 500- to 700-square-foot areas, as well as on jcp.com and via catalogue. Red box areas were put up at the end of October and will remain until a few weeks after Christmas. The strategy this year has grown to 800 doors, from 600 last year, and Penney’s is adding associates to help consumers learn about products and make choices.
Holiday marketing dollars are flat but e-mailing is being stepped up, with jcp.com seen taking a greater share of consumer dollars. While acknowledging the Web site is relatively heavy on home goods considering how weak the home business is in many parts of the country, Hicks said, “Overall we are very bullish” about the Internet. Results could be flat for the season yet are expected to be positive for the year overall, he said.
The $19.9 billion Penney’s is also shifting more of the marketing budget to advertising on cable TV, local newscasts at 10 or 11 p.m., mobile and direct mail, and shifting some dollars out of advertising on networks and catalogues. Store hours will remain the same as last year, though there could be some selective tweaking of hours. He also said Penney’s runs ads in movie theaters where family oriented films are shown and has a prime spot, when the lights go out and the movie trailers begin.
Compounding the challenges associated with the nation’s economic turmoil and rising layoffs across several industries is the compressed holiday season, since Thanksgiving is on Nov. 27, compared with last year. However, Hicks said it’s not entirely unfavorable. “Instead of two lull weeks between Thanksgiving and Christmas, now there’s one.” He also said Penney’s will seek to get more shoppers in the stores the week before Thanksgiving and during post-Christmas shopping week.
The regions where the middle-market Penney’s sees the most softness are those where the housing crisis is deepest, such as Southern California, Nevada, Florida, New England and Arizona, and in such cities as Detroit and Baltimore.
Penney’s also touted certain conveniences, saying customers can create greeting cards at the stores’ portrait studios. In addition, customers can check online to see if sale items are in stock at their local stores. �