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JC Penney’s Million Women Walkout

October 30, 2012 Leave a comment

While shying away from using the word coupon, JC Penney’s recent delivery of a $10 “gift” to its email newsletter recipients demonstrated that the beleaguered department store was finally bending to what its customers have been asking for all along: a deal. Since the commencement of its “Fair & Square” promotional strategy in Q1 of 2012, JC Penney has been fighting a losing battle with its dwindling customer base, trying to spoon feed shoppers everyday low pricing like its ice cream, while in reality they were tasting [insert your least favorite veggie here]. What did JC Penney forget? In this economy, consumers have the upper hand with retailers.

With sales set in a tailspin during the first half of the year, it’s obvious that “Fair & Square” was a costly turnabout for both JC Penney and its customers.  But what price did JC Penney pay in terms of lost shoppers?

According to the Consumer Equity Index™ for the highly competitive women’s clothing segment, JC Penney’s share of female customers shrank 13% in the past year, leaving the department store with an index of 86.9 (baseline index = 100).* That equates to a loss of 1.3 million of the department store’s most loyal female women’s clothing shoppers.

With their million woman march out of JC Penney, these shoppers appear to have gravitated to Kohl’s (index = 104.5), Macy’s (116.1), Target (121.6), and even Walmart (112.2) for their women’s apparel purchases. Female shopper share for each of these competitors has increased over the past 13 months:

A million shoppers are a lot to lose in a year’s time – especially in just one category – but the numbers become even more sobering when you consider how much potential revenue JC Penney let slip from its grasp. With the average female spending more than $500 per year within the women’s clothing segment, an estimated $745 million in potential revenue has walked out of JC Penney’s women’s department over the past year – that’s a big share of purse, if you will.

JC Penney’s $10 gift comes at a pivotal time for retailing: the all-important holiday season. And with shoppers continuing to be drawn to sales, coupons, and promotions like moths to a flame, JC Penney is likely to see a short-term increase in the foot traffic it so desperately needs. However, while the department store indicates that this “gift” does not signal their return to couponing, if they want repeat customers, they may have to keep the coupons gifts coming.

* The Consumer Equity Index™ from BIGinsight™ is a year over year index showing growth or decline of consumer preference share. An index of 100 is flat, an index of 105 indicates 5% growth, while an index of 95 denotes 5% decline.

This post originally appeared on Forbes.com as a contribution to the Prosper Now blog.

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Can an iPhone 5 Save JC Penney?

It seems that Apple has the Midas Touch, and when JC Penney brought former SVP Ron Johnson on board in late 2011, it was heralded by many as a genius decision. Long relegated to the back of consumers’ minds [along with Sears], it appeared that this department store dinosaur was finally making a conscious effort to reinvigorate its stodgy image and arming itself to compete with its more present day foes: Macy’s, Kohl’s, and TJ Maxx.

With the advent of m-commerce, social media, and increasing connectivity, it seemed that this marriage between an Apple exec and JC Penney was a solid union – at least enough to advance the department store into 21st century retailing. However, as 2012 has progressed, it has become clear that the new “Fair & Square” JC Penney has gotten off to a very rocky start.

While JC Penney certainly has taken some steps in the right direction – focusing on exclusive brand names from the likes of Nicole Miller, Liz Claiborne, Mango, and even the Olsen twins takes a page from Kohl’s and Macy’s successful playbooks. Today’s consumers demand quality products at great prices, and they want to feel good about their purchases when walking out of the store. Here’s where JC Penney missteps: they have eliminated the excitement from the shoppers’ buying process. Having an extra 10-20% off coupon or buying an item on sale – which Kohl’s and Macy’s offer in abundance – gives the shopper the feeling that they’ve one-upped the retailer, i.e. the customer wins.

This shopping euphoria is essential when marketing apparel in an uncertain economy. Consumers already had closets full of clothes, and when it came time to really trim budgets during the “Great Recession,” apparel was one of the easiest budget cuts to stomach. It’s interesting that even during a downturn in the economy, electronics sold – maybe with a little less frequency and at somewhat lower price points, but the latest HDTVs, tablets, notebooks, smartphones, and all things iOS were, and continue to be, hot selling items. Budget-conscious consumers could justify the purchase of a new TV or computer; these were items that the whole family could enjoy, helped us multitask, and in some cases, assist with homework. In other words, electronics were fun, practical, and educational. Consumers literally couldn’t buy into this same reasoning when it came to apparel or home goods, categories that JC Penney so desperately needed to move on the selling floor.

When Johnson joined JC Penney last year, it appeared that the Apple “ego” followed him as well. Apple is an innovative brand with a heady following, and its retail outlets, which Johnson cultivated, served to build on this loyalty and brought out the curiosity in others – they were what shoppers demanded and gravitated toward.

JC Penney lacks the Apple cachet, and its “Fair & Square” overhaul – ditching coupons and weekly promotions in the process – failed to make a compelling argument as to why shoppers needed to check out their revamped stores. Sure low prices are great, but the new normal directs shoppers to seek out that extra incentive when it comes to buying non-essentials like apparel and home décor. The “new” JC Penney already has proof of this – just look at its successful free haircut promotion for Back-to-School; the operative word here, of course, is free.

A glance at what motivates shoppers to make apparel purchases shows us the continued importance of instore promotions and coupons in this category. According to BIGinsight’s semi-annual Media Behaviors and Influence™ survey of 25,000 consumers, apparel sales and promotions are the #1 driver for shoppers of many of the top U.S. retailers, including JC Penney, Kohl’s, Macy’s, Gap, H&M, and Nordstrom – yes, even promotions are key with luxury shoppers. And, in instances where instore promotions aren’t the top motivation for apparel purchases, they are still likely top of mind. At TJ Maxx, for example, while 42.3% rely on word of mouth, nearly as many (40.4%) value a good sale.

While word of mouth is the #2 influencer for apparel purchases among JC Penney shoppers (at 36.3%), coupons are almost as important (35.5%). JC Penney customers’ attraction to apparel coupons is stronger than that of the general population (30.7%) as well. Coupons don’t carry nearly as much clout over in Apple’s wheelhouse – electronics – so it’s plain to see why Johnson was so quick to axe those money-savers at JC Penney.

So can an iPhone save JC Penney? Can a marketing approach borne from Apple revive a struggling department store? Can pigs fly? Clearly not. What works for Apple – what used to work for Ron Johnson – simply has no place in JC Penney’s strategy. Today’s apparel shoppers have honed their bargain-hunting skills and crave a good deal on their terms. Instead of trying to force “Fair & Square” on the buying public – much like the launch of a great, new, innovative product à la Apple – JC Penney really should have first become more attuned its target customers.

This post originally appeared on Forbes.com as a contribution to the Prosper Now blog.

The Not-So-Jolly Holiday Outlook for JC Penney Shoppers

September 25, 2012 Leave a comment

2012 hasn’t been kind to JC Penney. And, it doesn’t appear that Q4 will get any better for the department store, which has struggled to shake up its stodgy image this year and in the process has rattled its core customer base. According to the Prosper Spending Index, JC Penney shoppers’ outlook for holiday gift spending falls below that of the general population, with an index of 95.9 (baseline index = 100).* Among JC Penney shoppers with holiday spending plans in mind, two in five (44.2%) plan to spend less on holiday gifts this year than they did for 2011, while fewer than one in ten (7.4%) plan to spend more.

As could be expected, the holiday spending outlook is similar among those shopping Walmart (index = 94.4). Still, a slightly larger proportion of shoppers at the discounter, known to cater to more cash-strapped, lower income households, plans to spend more for the upcoming holiday season (9.5%) compared to JC Penney shoppers (7.4%).

Among the customers analyzed, shoppers at Macy’s, a retailer which has arguably benefited from JC Penney’s EDLP strategy switch-up, maintain the most positive outlook on holiday gift spending, with a Prosper Spending Index of 110.9. TJ Maxx loyalists also hold a brighter-than-average outlook (index = 106.3). Target (102.4) and Kohl’s (101.0) shoppers’ holiday spending plans are in line with the overall average.

So we know JC Penney shoppers will be trying to cut back on their holiday gift spending this year, but just how do they intend to accomplish this?

Memo to Ron Johnson: Your shoppers (or what’s left of them) are still motivated to buy based on sales and coupons.

Among JC Penney customers, nearly half say they are shopping for sales more often (45.4%) and/or are clipping coupons (42.1%) in efforts to help balance their budgets – higher than the overall average. Among the retailers mentioned, Kohl’s shoppers – rabid for that Kohl’s Cash – are the only ones eclipsing both of these figures.

With economic uncertainty pervading consumer mindsets, today’s shoppers – JC Penney’s included – continue to possess an innate need to feel good about spending their hard earned dollars, particularly when it comes to spending on those not-so-essentials like gifts and apparel. And in shoppers’ “feel-good” toolkit are coupons, weekly promos, and special sales. These items are, of course, generally absent from JC Penney’s promotional strategy – setting the department store up for additional customer loss during the critical holiday season.

Think about it like this: getting a $60 sweater on sale for $30 is something to write home tweet about. Simply buying a sweater for the $30 ticket price? It’s a little ho-ho-hum.

* Holiday outlook insights are based on celebrants who have holiday spending plans in mind.

This post originally appeared on Forbes.com as a contribution to the Prosper Now blog.

Amazon #1 In Customer Service, But Will This Lead To Sustainable Loyalty?

September 5, 2012 Leave a comment
Recently our friends over at the National Retail Federation directed us to Amazon.com, where Founder and CEO Jeff Bezos had once again posted a public letter to customers, this time stating:

I’m happy to report that Amazon has been rated #1 in the National Retail Federation Customers’ Choice Awards…

Why were we excited to see this? BIGinsight compiled the list of Customers’ Choice Award recipients for the NRF Foundation, which was unveiled at their BIG Show earlier this year. These awards recognize the retailers that provide the “best” customer service and were nominated through an unaided, write-in question by (who else?) consumers.

2011 Customers’ Choice Awards: Top Ten (source: NRF Foundation)

  1. Amazon.com
  2. L.L. Bean
  3. Zappos.com
  4. Overstock.com
  5. QVC
  6. Kohl’s
  7. Lands’ End
  8. JC Penney
  9. Newegg.com
  10. Nordstrom

Customer service in the conventional sense has generally implied face-to-face communication: greeting a customer; providing him/her with product information, demonstrations, additional options, or size assistance; suggesting add-ons or complementary products; and finally, completing the sale. Historically, the best opportunity to cultivate great customer relationships is within an environment where personal interaction between the retailer (i.e. sales associates) and customers is at its peak: a physical store.

So does it surprise you that a traditional brick-and-mortar retailer didn’t top this year’s list? Further, just three of the retailers (Kohl’s, JC Penney, Nordstrom) who graced the top 10 aren’t primarily entrenched in e-commerce, catalog selling, or home shopping.

So how does Amazon rank #1 in customer service?

The digital age has forced the evolution of customer service. In a world where emails and texts have replaced more intimate forms of communication, where shoppers can complete a sale 24/7 via online transactions, and where showrooming is linking the physical shopping experience with the virtual, the modern definition of customer service seems to have downgraded the importance of direct human interaction. And, let’s not forget that customer service in the traditional sense has also been crippled in recent years by an economy fostering a trend toward part-time, minimum wage, less “invested” sales associates.

As the world’s largest online retailer, Amazon has been a driving force behind the e-commerce movement and changing standards for customer service excellence. Some of the words consumers used in their reasons to nominate Amazon for Customers’ Choice included “efficient,” “fast,” “reliable,” “no hassle,” “easy,” and of course, “free shipping.” Note that these terms differ vastly from those who nominated Nordstrom, THE purveyor of traditional customer service: “experience,” “friendly,” “personal,” and “knowledgeable.” [More specific reasons can be found here for each retailer included in the top 10.]

Consider too the e-commerce services that online shoppers (a growing group) value. While the majority indicates that toll free “live” customer service very important or important, this figure has declined nearly 10% from 2007. With customers increasingly gravitating to such services as low prices, free shipping, and easy to use websites over the past few years, it’s obvious that verbal communication isn’t a service prerequisite when it comes to buying online.

Important/Very Important Services when Shopping Online

But are Amazon’s low prices, free shipping, and efficient turnaround enough to capture sustainable customer loyalty? After all, the troubled economy did create a new consumer – one who shops around, is value-oriented, and may find it increasingly difficult to create ties with one retailer over another.

One of the most fascinating parts of the retail industry is that we are always looking toward for what’s “next” – hot new trends, advancements in technology, gotta-have products, or evolving practices that change the way we do business. Retailers like Best Buy and JC Penney have already announced efforts to ramp up one-on-one interaction to drive customers back to their stores, looking ahead to perhaps a renaissance of traditional customer service.

With its history as a game-changer, though, Amazon just might remain what’s “next” for the foreseeable future.

This post originally appeared on Forbes.com as a contribution to the Prosper Now blog.

Fresh Consumer Insights for July

July 17, 2012 3 comments
BIGinsight Executive Briefing - July 2012

Click to view the July 2012 BIGinsight Executive Briefing.

Early each month, we release our Executive Briefing – complimentary topline insights from our latest Monthly Consumer Survey of more than 8,000 consumers.

And, we’ve just released our latest edition for July. Here’s what you may have missed:

– Economic sentiment perked up from June, though consumers failed to set off any fireworks compared to years past. This month’s reading (32.8%) looks a little stagnant when placed in longer-term perspective – and well below Jul-07’s pre-recession figure of 47.8%.

– Workers show signs of concern for personal job security. 4.2% admitted they were anxious about becoming laid off, up from last month as well as one year ago.

– With the campaign season about to hit full throttle, consumers seem to be bracing for the onslaught of political propaganda. Overall, though, consumers seem a little less apprehensive this Presidential go-around they did during the 2008 McCain vs. Obama election. Plus: how would you score in a Presidential Pop Quiz?

– The uptick in consumer confidence this month may be leading a few shoppers off the practicality platform. Before you start thinking “spending rebound,” though, keep this in mind: practicality remains well above the sensible shopping tendencies we witnessed before the Great Recession.

– July pump price prediction: $3.49/gal, 25 cents below the forecast for the end of June ($3.75/gal). For more on this topic: Pain at the Pump: Who (or What) is Controlling Pump Prices?

A bit of Christmas cheer might be in store for retailers: one in ten says they plan to spend more on gifts this year, up from 6.5% in Jul-11.

Was JC Penney’s Fair & Square strategy a gift to Macy’s in Women’s Clothing? For the sixth consecutive month, Macy’s bests JC Penney in this category, though Kohl’s and Walmart continue to lead overall.

In the well-documented Shoe Wars, one retailer is M.I.A. in July. Yes, that’s right (and you heard it here first)…JC Penney (now #6) has been bounced from the Top 5 by Foot Locker.

– 90 Day Outlook: Back-to-School (i.e. Children’s Clothing) looks to be a bright spot in consumers’ spending plans. However, with the majority of categories facing DOWNward compared to June, revenues may fizzle instead of sizzle as we make our way through summer.

– What’s Hot? Farmers’ fresh fare beats out Spider-Man, Dark Knight.

To sign up to receive the monthly BIGinsight™ Executive Briefing, please click here.

And, to view the latest BIG Executive Briefing in its entirely: July 2012.

Source: BIGinsight™ Monthly Consumer Survey – JUL-12 (N = 8509, 7/2 – 7/9/12)

© 2012, Prosper®

BIGinsight™ is a trademark of Prosper Business Development Corp.

Confidence Cools Off As Summer Heats Up + How Does the Stockholm Syndrome Relate to Savings?

June 27, 2012 1 comment

This month, my co-host for the BIG Call was John Mariotti, President/CEO & Founder of the Enterprise Group. John also currently serves as a Director on several corporate boards and is an award winning author.

For this month’s BIG Call, John supplemented our favorite data on confidence, employment, personal finances, and spending plans with his unique analysis and understanding of these topics.

Here’s what we talked about:
– Confidence in the economy cools off as summer heats up, marking the second consecutive month of decline
– Just 16% of consumers are calling for “fewer” layoffs – a figure that has decreased [i.e. grown more pessimistic] over the past two years
– Last month’s “dip” in practicality appears to have been a “blip” on consumers’ spending radar
– Why are consumers seemingly holding back when it comes to paying down debt or increasing their savings?
– Scary fact: One out of three consumers isn’t saving any income
– Improvements in 90 Day Outlook may not be as positive as they appear
How is JC Penney’s “Fair & Square” faring?

To listen to the recorded webinar, click here.

For the full, complimentary June 2012 BIG Call slide deck, please click here.

For more information on this data, please contact BIGinsight™.

Source: BIGinsight™ Monthly Consumer Survey – JUN-12 (N = 8760, 6/5 – 6/12/12)

© 2012, Prosper®

BIGinsight™ is a trademark of Prosper Business Development Corp.

June Insights – Hot Off the Press!

June 18, 2012 1 comment

Early each month, we release our Executive Briefing – complimentary topline insights from our latest Monthly Consumer Survey of more than 8,000 consumers.

BIGinsight June Executive Briefing

Click to view this month’s Executive Briefing

And, we’ve just released our latest edition for June. Here’s what you may have missed:

– As the summer weather heats up, confidence in the economy cools off. This month, just 31.3% feels very confident/confident in chances for a strong economy, down from last month and marking the second consecutive month of decline for this indicator.
Good luck, Class of 2012: With the official U.S. unemployment remaining a discouraging 8.2%, an increasing number of consumers foresee a rise in layoffs over the next six months compared to May.
– May’s dip in practicality appears to have been just a “blip” on consumers’ spending radar. Additionally, practicality remains elevated from the June readings we recorded during the recession, suggesting that fault lines in the macro-economy are still rattling spending plans on a micro level.
Pain at the Pump: No gas price “fireworks” expected to set off for upcoming the holiday. Drivers are anticipating an average pump price of $3.75/gal by the end of June, 20 cents lower than their prediction for the close of May.
– Walmart wins in Women’s Clothing, while JC Penney is slipping.
– Consumer Migration: While Walmart’s travails are well-documented in Women’s Clothing, does the big discounter’s outlook look any brighter over in Men’s section?
– 90 Day Outlook is looking UPward compared to the past two years.  However, with spending for the majority of merchandise categories weakening compared to May, look for practical consumers to continue to exercise caution when spending.
– What’s Hot? Saving is in style, with Coupons taking the top spot in our list of What’s Hot for June. [#attentionJCP]

To sign up to receive the monthly BIGinsight™ Executive Briefing, please click here.

And, to view the latest BIG Executive Briefing in its entirely: June 2012.

Source: BIGinsight™ Monthly Consumer Survey – JUN-12 (N = 8760, 6/5 – 6/12/12)

© 2012, Prosper®

BIGinsight™ is a trademark of Prosper Business Development Corp.

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