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Ron Johnson Reinvents Retail With Boutiques, Joe Fresh, and Haircuts Analysts optimistic as turnaround plan nears completion

JC Penney is one step closer to completing its turnaround plan. The Plano, Texas based retailer unveiled the first trial run of its new retailing model, which hinges on multiple shop-in-shop boutiques.

683 Penney stores nationwide will feature the new boutiques by August 1. The firm is starting with denim – a steady consumer mainstay – offering separate in-store shops for Levi’s and Penney’s own Arizona brands, as well as a line called “i jeans by Buffalo,” designed by David Bitton.

“It will represent the most innovative and unique retail experience for Levi in the country,” former J.C. Penney president Michael Francis said recently.
In a nod to CEO Ron Johnson’s Apple past, the Levi’s shop will feature a “denim bar,” where prospective shoppers can use iPads to figure out the best fitting pair of jeans from 11 different cuts and 88 different washes or finishes.
JC Penney also inked a boutique deal today with Toronto fast fashion chain Joe Fresh. The store has only 6 stores in the US, meaning JCPenney will be most American consumer’s first acquaintance with the chain. Joe Fresh boutiques will appear in all US JC Penney stores and will debut with women’s apparel. The company offers clean styling and simple, bright designs on a manufacturing timeline that appeals to fashion forward consumers.
The company stands to benefit from the strong back to school season anticipated this year. The National Retail Federation projects that total back to school spending will reach $83.8 billion, and the average parent will spend $246.10 on clothes.
In-store boutiques will expand beyond jeans in September and by 2015 the company hopes to have 1100 stores remodeled. The remodeled stores will feature over 100 vendor boutiques and a “town square,” in the center. In a homey touch to draw in shoppers, JC Penney will be offering free haircuts to school children in the town square.
Technology will facilitate the new design. The firm is moving to radio frequency ID tags for all products, which will make purchases on mobile devices and through self-checkout possible. Employees will carry iPads, enabling them to check customers out on the shop floor. Instead of traditional cash registers, the stores will have multi-purpose customer service desks where customers can pay with cash, return items, pick up an online order, or get gifts wraped.
The internet will be available at public iPads throughout the store, and there will be sofas and coffee bars to encourage browsing and lounging. This represents a sharp departure for department store chains, which have recently suffered from increased comparison shopping by consumers. Johnson, with his background in technology, appears to be embracing the new trend, and seems confident that his firm will be able to compete in an increasingly difficult market.
The company is offering Levi’s at $40 a pair, Arizona jeans at between $16-$20, and tops starting at $6. Signs in the store trumpet the firm’s “no sales” pricing strategy, rolled out earlier this year. The firm is betting that shoppers will prefer permanent discounting to specific sales.
Vendors are going to Dallas this week to tour a mock up of the future stores and to learn about new requirements. JC Penney is expecting each vendor to submit a 3D model of their future boutique and a complete product list, and is sharply trimming the number of brands it will be offering. The company is attempting to create a more cohesive image.
Despite optimism from analysts and investors, each stage of the firm’s turnaround plan appears to have caused lower foot traffic and sales numbers. The most recent numbers show same store sales down 18.9% from the same quarter in 2011. The firm recently raised $248 million by selling its stake in a unit of Simon Property Group. This is in line with its plan to focus on its core retail business.
“We are trying to essentially convert the Titanic into 1,100 WaveRunners, and that is really hard to do,” Johnson said recently. “But we are making a heck of a lot of progress, and I am really pleased with that.”
Analysts remain optimistic, with some going so far as to call the new discounting plan and store layout, “the inevitable next step in retail.”

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