At a time when many traditional department stores are plagued by debt loads, debilitating promotional activity and shrinking margins, the people at Penney’s are intensifying their drive to refine women’s fashion merchandising and store appearance.
The multifaceted effort includes renovating the apparel departments in about 500 metropolitan stores, developing in-store shops, appointing a new overseer to improve private-label fashion merchandising, reorganizing duties among its top executives, and strengthening its national brands.
Private label generally accounts for less than half the merchandise in any single department of Penney’s. The chain has been slowly picking up national brands but sometimes has been stymied by manufacturers who hesitate for fear they will lose other department store business if they sell to Penney’s.
“They (manufacturers) are concerned about their existing customer base and are not willing to face up to the fact that Penney’s is the future for the moderate pocketbook,” said one SA manufacturer — who asked not to be named. “Everybody is agonizing over it, but it’s inevitable. It’s sort of like the Eastern block: It’s going to fall.”
The foundering finances of major department stores is a key factor in the melting resistance to selling to Penney’s. “The department store business for many vendors today is not what it used to be,” Kurt Barnard, publisher of the Barnard’s Retail Marketing Report, pointed out. “With so many stores today being wobbly on their financial feet, increasingly we find vendors who are less reluctant to sell to them.”
Penney’s women’s apparel business, including accessories and cosmetics, racked up $4.7 billion in sales last year, according to market sources. This year, the chain is looking for a 6 to 8 percent gain. In total, Penney’s has 1,375 stores.
Penney’s says research shows that it draws the same customers as other traditional department stores, but its women’s merchandise hasn’t been fashionable enough to inspire their spending as much as Penney’s would like.
The company hopes to capture more of those dollars with two private labels introduced late last year, the slow but ongoing addition of national brands and a continued emphasis on improving the look and presentation of merchandise.
Under a restructuring that took effect this month, Marshall Beere will handle merchandising and marketing for sportswear in the stores and catalog, Bill McCarthy will assume those tasks for ready-to-wear and Ken Russo will be responsible for accessories.
McCarthy had supervised marketing for all three classifications, while merchandising was managed by Beere in all women’s apparel and Russo had the responsibility in accessories. All three remain divisional vice presidents.
The new breakdown is intended to help Penney’s present a stronger, more focused fashion image to consumers, said John McConville, president of the women’s division.
“One of the things we’re doing is increasing the amount of upper moderate merchandise that we are offering,” said Beere — which, he said, means retail prices between $30 and $55 for separates, as opposed to the $20 to $35 range where the bulk of Penney’s business currently is done. In their lexicon, the top price point would be around $110 for a dress.
“We’re reasonably pleased with the progress we’re making there,” he continued. “Our numbers show that in the first 11 months of last year we increased the percentage of our business in the over-$30 price point in excess of 25 percent.”
Penney’s also is adding slightly higher price points. On Penney’s new Jacqueline Ferrar updated line, for example, the average price for fall is $70. In dresses, Beere noted, some Penney’s stores have been successful with styles selling at $170 to $180.
The rise in the price range has enabled the retailer to improve the quality of its apparel — from fabric to styling, he pointed out.
A tour of Penney’s prototype stores here and a review of its fall lines reveals that the giant retailer has made significant headway in elevating its fashion offerings.
The company that once was a leader in marketing bullet-proof polyester to housewives is now imitating Adrienne Vittadini and Ellen Tracy when crafting its Jacqueline Ferrar line of sportswear in silk, wool and suede for career women.
Its Hunt Club traditional sportswear brand, which emulates the Ralph Lauren look, is styled in natural fabrics with an appealing hand.
Jacqueline Ferrar is projected to do $30 million in sales this year; Hunt Club is pegged at $35 million.
“We believe that our fashion image should address what is current in the fashion world — a very good fast second, if you would,” said Marilee Cumming, the newly appointed director of women’s merchandise development. That means riding a bit behind the cutting edge, added fashion director Lucille Klein.
“We want to project a fashion image appropriate for a department store in the Nineties,” continued Cumming, who was merchandise manager for women’s sportswear. “We will continue to focus our efforts to attract traditional and updated consumers, particularly middle-and upper-income women, men and their children.”
Industry observers give Penney’s high marks for the progress it’s made so far.
“How successful do I think Penney’s has been in updating its image? Very,” enthused Barnard. “And you can underline that and put three exclamation points after it.”
“I have a great deal of respect for these people because they have done an outstanding job,” Barnard continued. “They know exactly who their customers are. They found their own way of reaching those customers persuasively, compellingly and in a way that makes the J.C. Penney stores look attractive, appealing, well merchandised — and with prices that are in moderate ranges. That is a winning formula for today and it is going to be the winning formula.”
But Cumming acknowledges that Penney’s fashion merchandising could bear improvement. Asked if the suit she was wearing was a Penney’s line, she replied, “Not yet.”
In her new position, Cumming will supervise nine newly appointed brand development managers who are charged with elevating the taste levels of Penney’s private labels.
Two years ago, Penney’s divided its fashion offerings into five lifestyle groups — young junior, junior, conservative, traditional and updated. The retailer continues to arrange store layouts and merchandise according to those classifications.
National women’s sportswear brands that have excelled at Penney’s include Levi’s Dockers, Palmetto, Nilani, Counterparts, Francine Browner and Alfred Dunner. On a more limited basis, the retailer is selling Joneswear, Yes Clothing, Ms. Interpret and Componix.
Beere pointed out that Penney’s already sells about 20 of the top 30 brands in terms of market share. But, he notes, “We wouldn’t mind having Chaus and Liz Claiborne, for example, and we are constantly having discussions with others.” The brands are important, Beere noted, because “they provide a psychological attraction that private label does not.”
Besides the big moderate vendors, Penney’s also is looking to bring in a few national brands with higher price points — provided its customers will accept it.
“We do feel that based on the way the market is and where our competition is, we need to push our prices up some and hopefully get the customer to get along with that,” Beere said. “But we are going to let the customer tell us that, based on her acceptance of the mix we are offering.”
“In the next year or two we think our upper moderate merchandise will be better developed and we can support better brands in the proper way,” Cumming pointed out. She’d like to see Jones New York, Evan-Picone and Herman Geist in Penney’s. “There may be three or four brands by classification that we can support properly.”
One manufacturer was skeptical that Penney’s could sell higher priced merchandise without markdowns. “I believe they will have a difficult time getting the same rate of sale at regular price as major department stores in higher price points,” said the vendor.
Penney’s officials say they are zeroing in on a few brands in each merchandise category because the stores have limited floor space and they want the goods presented in coherent, shop-like environments.
“We want to make a dominant statement,” Beere said. “We are not interested in four-way racks.”
Penney’s will be cultivating shops in all women’s departments over the next two to three years, he said: “All of us are very much convinced that shop concepts are essential to success.”
One of the first boutiques will unfold this summer in lingerie, as Penney’s begins setting up 500- to 700-square-foot shops in more than 220 metropolitan stores. Another 250 stores are slated to get the boutiques next year.
Delicates, the name of Penney’s private label lingerie, will be displayed on satin-wrapped hangers in a boudoir environment with an armoire, potpourri, antique-looking furniture and the typical trappings that mimic Victoria’s Secret stores.
“We want to create a total shop, with separate packaging, bags and promotions,” said Russo, who supervises intimate apparel as well as accessories. “Our goal is to compete with the specialty stores.”
The lingerie, too, has been revamped. “The average retail price is close to $30 a piece,” he pointed out. “It was about $15 a year ago.”
Special attention was given to bringing in finer lace and more sophisticated prints and styling. “The quality of the merchandise is like night and day from where it used to be,” said Russo. “The quality of the lace a couple of years ago … I mean, my God, you could use it to clean pots with.”
Service in the stores also has been scrutinized and overhauled in a campaign that began in September 1988. Penney’s took pains to improve the appearance of its associates and to match people with the merchandise they sell.
A new program seeks to en associates about fashion trends and terminology. Through videotapes, posters and booklets that will be distributed to women’s merchandise managers and sales associates each season, starting this spring, Penney’s will coach store personnel about its fashion message. The program also will teach, for example, about different qualities of suede or weights of silk.
Nothing happens on a whim at Penney’s. Any new venture is meticulously researched and tested.
Before rolling sales commissions out to all associates in women’s merchandise, for example, Penney’s tried the concept in dresses and then expanded it to sportswear. This year, accessories salespeople also will start earning commission.
Penney’s penchant for testing is, perhaps, most finely developed in merchandising. Selections are based on an analytical process that begins with research, including shopping at international fabric markets, scrutinizing color from the standpoints of fashion and psychology, studying slides from designer fashion shows and tracking influential movies, art exhibits and street wear.
When a trial line is ready, Penney’s presents it to the public in 16 regional test centers, to evaluate the styles. These tests, in which about 400 people use computers to rank the looks, are conducted 20 to 25 times annually and as much as a year before the merchandise could hit the stores.
“It’s terrific for us,” said McCarthy, who heads ready-to-wear. “It helps the buyers decide whether they should put items in the top quartile or bottom quartile, and it helps with color selection.”
Penney’s also interviews shoppers in malls at least 25 times a year.
“It would be imprudent of us not to test to the nth degree with the size of our organization,” McConville noted. “We have stores all over the country, and we are able to pick stores in the Sun Belt or mountain area for activewear and we can do it with customers in the mall. That eliminates a lot of the risk.”
“We work very far ahead,” Klein pointed out. “Right now we’re working on spring ’91.” Does this impair Penney’s ability to respond to fast changing fashion?
“If you’re chasing something that’s in its infancy on the bell curve, it’s not too late,” McConville said. “Hopefully we’re bright enough that we’re not chasing something that is on its way down on the right side of the bell.”
Final lines are presented about three times a month to stores on Penney’s direct broadcast system, which offers one-way video and two-way audio communication. Buyers at the stores select merchandise they feel best suits their customers.
“We are consumer-driven so we have to really listen to that consumer and be ready for the consumer’s fashion needs,” noted Klein. “It’s a trend challenge, but I think we’re doing better.”