When J.C. Penney Company, Inc. (JCP) Was Ahead Of the Game

When Ron Johnson left J.C. Penney Company, Inc. (NYSE:JCP), he left a trail of horrible marketing moves littering his past. As it turned out, Johnson was very good at selling things people liked to upper-end consumers, but when faced with a new set of circumstances, his strategy fell apart. One of his hit-and-miss moves was to establish shops within J.C. Penney stores. While no one seemed especially interested in shopping at the store because of the shops, it was an interesting idea, allowing J.C. Penney Company, Inc. (NYSE:JCP) to set itself up as a mall within a mall.

Now that idea has caught on with other big stores. As consumers become accustomed to shopping online and big-box retailers try to cut back on costs, the idea of giving space over to specific brands for a kickback of some sort makes a lot of sense. It turns out that Johnson may have really been on to something — just not for J.C. Penney Company, Inc. (NYSE:JCP).

The value of going small
It’s not totally fair to say that the shops didn’t work for J.C. Penney Company, Inc. (NYSE:JCP). While they didn’t rescue the chain from its own bad decisions, the shops did generate some good sales. Early figures had comparable sales in the shops 20% ahead of the rest of the store, on average. That’s a good return for setting aside a little bit of space.

Now that Mike Ullman is back in the CEO role, J.C. Penney Company, Inc. (NYSE:JCP) is going to keep the shop idea, but is going to start talking about them as “attractions.” The reason for the broader term is that the shops are going to be part of an overall plan to get shoppers interested in the stores again. This is what companies like Best Buy Co., Inc. (NYSE:BBY) are hoping to do, as well.

Best Buy has already opened some Samsung locations in its stores, and will be opening more Microsoft Corporation (NASDAQ:MSFT) shops in its stores later this year. The plan is generating lots of positive attention, and in its first analyst note after returning to coverage of Best Buy Co., Inc. (NYSE:BBY), Credit Suisse cited the shops as a big winner for the company. Analyst Gary Balter said, “If there is one line to describe the change, it is that [Best Buy] is turning its store base from a cost liability to an offensive weapon.” That change is coming from the new shops.