J.C. Penney Faces Uncertain Future

JC Penney Closing, Automated Retailing and Kiosks Surge

J.C. Penney announced that it will close 130 to 140 stores. That represents about 13% to 14% of their total stores. It is a big step for a company that had to pledge inventories to secure a loan a couple of years ago.

It is vital to close unproductive stores, and essential for this company to regain sales and earnings momentum. The recent satisfactory earnings results must have convinced management that it was the right time, financially and strategically, to close some stores.

The list of which stores on are slated to close will be released in early March. Some of the tiny Midwest units, known as Yellow Front stores, may be on the closing list. Unable to show all of the merchandise available in a larger J.C.Penney store, these very small stores were kept open because of cheap leases and a positive contribution to earnings in the past.

But the times have changed. Even people in Oshkosh, Wisconsin, shop online and buy from cheaper providers such as Amazon. Or, more and more, they purchase from kiosks, automated stores, and custom vending machines.

The import tax is a wild card.

The Trump Administration has floated a new tax plan that would apply a 20% tax on imports, known as the Border Adjustment Tax, from Mexico and other countries where the United States has a trade deficit. If implemented, this tax could have a disproportionally negative impact on merchandise imports now sold by retailers throughout the U.S. While details are sketchy, J.C. Penney and many other companies would be adversely impacted. J.C. Penney’s forecast for flat sales in fiscal 2017 attests to the fact that management is concerned.

 

Aggressive competition against Amazon.

Most retailers will take bold steps to compete with Amazon. There is likely to be limited success. J.C. Penney’s aggressive stand to improve their internet presence will benefit the company but will continue to pressure margins.

Data, data and more data.

Psychographic data, information on customer habits, hobbies, and spending patterns will become even more important for retailers this year. Retailers, who have traditionally focused on demographics, will want to learn more about their customers. J.C. Penney’s management will actively participate in new programs to know more about millennials and Gen-Z customers.

Automated Retailing and Kiosks are now part of the retail environment

Kiosk manufacturers like Alps Kiosks have jumped into the void left behind by big box retailers, by offering a snazzy selection of merchandise to savvy, time-weary customers. Now, consumers can get just about anything they want, either online, or at an “Automated Store” or kiosk.

Take a look at Japan, where real estate costs an arm and a leg. Thousands of companies opt to have vending machines function as their only stores. Recently, a custom vending machine – or “automated store” built by Alps Kiosks, was put into use by Chatty Cupcakes, a small baker in Pittsburgh. The kiosk is essentially the companies only “store,” and sales have been brisk.

As traditional retailers continue to struggle, expect to see a rise in automated, self-service stores. Kiosk Manufacturers are working feverishly to design newer and better models that attract consumer interest, and provide a quick and convenient, engaging shopping experience.