After facing near financial disaster, J.C. Penney is slowly recovering. Under former CEO Ron Johnson, the company struggled with a strategy that abandoned traditional sales. Now Marvin Ellison, J.C. Penney’s current CEO, is determined to rebuild by adopting a strategy of efficiency. Ellison explains, “We are taking a serious stance at making J.C. Penney a more efficient and low-cost operator….”
J.C. Penney’s latest strategy to minimize costs can, at times, increase organic growth. Being the low cost provider doesn’t mean that J.C. Penney will become the retailer with the cheapest prices. Instead, they will focus on “restraining expenses” by using e-commerce in an effort to become leaner, and in particular save on the costs associated with inventory at physical stores.
The strategy to minimize costs is one of the five pathways to growth. I sometimes refer to it as the “jellyfish strategy”: you go up when the tide comes in and down when the tide goes out. With this strategy J.C. Penney will certainly survive, but the store cannot expect robust growth by following this pathway alone.
The retail industry as a whole is struggling and companies are weathering the storm differently. Macy’s has cut its full-year sales forecast and Kohl’s has reported weak sales. Walmart is grappling with rising employee wages, but remains optimistic about investing in e-commerce for long-term growth. On the other hand, other retailers like American Apparel may not be in business for much longer. If this dip continues, J.C. Penney, will struggle to grow as well.
When faced with a shrinking market, more competition and other challenges, cutting costs will not be enough. When organic growth stalls, business should consider using mergers and acquisitions to spur growth. Perhaps the jellyfish strategy is what J.C. Penney needs to recover from near financial collapse, but if the store wants to do more than just survive, it will need to adopt a new and positive strategy for long-term growth.
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