Like most other mid-market retailers of its time, J C Penney was disadvantaged by the discounters and specialized retailers. To survive, it had to cut costs to beat the discounters and offer better merchandise to compete with specialized retailers.
in
1902 James Cash Penney opened his first retail store,
called the Golden Rule Store, in the mining town of
Kemmerer, Wyoming. Later, in 1913, the chain was
incorporated as J C Penney Company, Inc. Since then
the company had been growing steadily. Between 1920
and 1930, the company, indeed, became a Nationwide
Institution, with more than 1,250 stores. After World
War II, the company cashed in on the brisk growth of
suburbs by remodeling its stores and offering a wider
selection of merchandise. In the process, it grew from
the Main Streets of America to Suburban Shopping
Centers in the 1950s and 1960s. By the 1970s, it
acquired an enviable position as a quality
merchandiser with a strong emphasis on customer
service.
Despite
the efforts to change so as to meet the changing
customer preferences, the company ignored the
increasing competition from specialized and discount
retailers. While specialized retailers offered better
merchandise, the discounters offered better prices,
and mid-market players like J C Penney were left in
the lurch. By the late 1990s, the company found itself
struggling with cost cutting and merchandize updating.
As a result, there was a great deal of duplication of
styles and heavy reliance on private brands, and poor
timing in responding to major trends. Richard D
Hastings, Vice-President, Chief Economist, Retail
Sector, Bernard Sands (a unit of Cyber Business Credit
LLC), agrees, "J C Penney's department stores
business lost market share to Kohl's Corporation and
to Wal-Mart Stores, Inc. during the second half of the
1990's. Revenues decelerated, resulting in cost and
expense pressures as these tend to react slowly to
cost-cutting initiatives. Additionally, cost and
expense pressures required the management to look at
internal operational risk, and the benefits from
improvements in this area were slow to
actualization." On top of that, the company's
`laid-back' culture prevented a quick response to
these changed situations. Hastings echoes similar
views, "The company's culture under the
management, prior to the appointment of current Chief
Executive Officer, Allen Questrom, reflected a
regional American culture with no optimal
understanding of changing demographics and consumer
mind shares. Cultural geography determines retailing,
and slow responses by a retailer can be
damaging."
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