Never underestimate the power of ancient technology. In a move that seems to run counter to the digital age we live in, J.C. Penney (JCP) is bringing back its paper catalog next month. Formerly known as “The Big Book,” Penney’s tome was once so full of merchandise that it occasionally topped 1,000 pages.
J.C. Penney is hoping that catalog 2.0 will help return its business to where it was when it stopped issuing the catalog in 2009. Is that too much to expect from a stack of paper?
Initially, at least, J.C. Penney’s catalog will be only a skeleton of yesteryear’s monster. It’ll total a bit over 100 pages,and will feature products in the retailer’s Home department. This differs substantially from the original, a kitchen-sink offering featuring a dizzying range of goods.
The timing is good for a catalog comeback. According to data compiled by the Direct Marketing Association, as quoted by NPR, around 11.9 billion catalogs were mailed from retailers to American consumers in 2013, representing a 1 percent increase from the previous year. That bump was unexpected; since 2006, there has been only one other year-over-year rise.
This is at least partially a result of digital saturation. Big retailers like Penney, Target (TGT) and Macy’s (M) have sprawling inventories. No matter how neatly organized products are across a website, for serious shoppers, finding what you want sometimes requires plenty of mouse clicking, entries in the search window and taps on the browser’s “back” button to navigate.
A paper catalog, then, can often be quicker to sort through. Additionally, flipping through a physical book stuffed with products increases the browse factor: Many more goods are displayed this way than can often be displayed on a set of webpages (especially if the shopper has done a focused website search), increasing the potential for impulse buys.
The retail sector, with its high costs, its need to manage inventory as efficiently as possible, and its typically low profit margins, is a difficult one to succeed in. As a result, retailers that have survived for a long stretch of time have seen their fortunes rise and fall, often in very quick succession.
J.C. Penney has been in a valley for some time. What’s worrying is that the slope has deepened considerably of late. From 2011 to 2014, the company’s revenue fell every year, dropping precipitously over that stretch (from $17.6 billion in 2010 to under $12 billion last year, a decline of almost one-third). The company’s annual bottom line has been in the red since 2012, with the loss deepening every year (2014’s shortfall: $1.4 billion).
Much of the recent difficulty has been laid at the feet of short-tenured CEO Ron Johnson, the former retail chief of electronics titan Apple (AAPL). Poached from Apple in 2011 at the insistence of activist investors who had big stakes in Penney, Johnson set about to radically rework the retailer’s approach to selling.
Essentially, this completely eliminated the company’s longstanding model of cranking prices high, then offering a slew of near-constant discounts and sales events to drum up customer interest (and, of course, make it seem as if shoppers were getting more of a bargain than they actually were). Prices were instead set at “fair and square” levels.
Abrupt changes in a company’s business model certainly can work, but they have to be appealing to customers, well-considered, and even then, tinged with good timing and luck. None of the above happened with Penney, and the result was the revenue free fall and deepening losses.
Johnson stepped down from his job in 2013. The man he had replaced two years earlier, Mike Ullman, once again became the company’s CEO.
Journey From the Past
Although there might be some element of nostalgia in bringing back the catalog (or for Ullman, of regret, considering he was the one who discontinued it back in 2009), its key purpose is to help juice those sales and deliver profitability.
Of course, that’s only one element of a many-pronged approach to recovery… which might be working.
For the nine months ended Nov. 1, Penney’s top line grew by 4 percent on a year-over-year basis to $8.4 billion — not an impressive gain by any means, but a gain nonetheless. The company posted a net loss that was far less drastic than in the same period the previous year — $712 million, compared to $1.4 billion.
Yet J.C. Penney still has a long way to go to reach the sort of revenue and comfortable profitability it was hitting only a few years ago. Longtime Penney devotees will welcome the return of the catalog; investors will be hoping it and other initiatives will bring back the healthy company they used to know.
[source : dailyfinance.com]