J.C. Penny is moving on up, taking full aim at the department store’s core customer!

Implications: -With the launch of the “American Living” Brand, the first created by Ralph Lauren’s Global Brand Concepts Group (GBC), Penny’s (JCP) is entering into the aspirational lifestyle merchandise world. This will certainly be successful as it is GBC’s first major initiative and they are going to ensure its success.

-The American Living concept will permeate throughout the store luring the traditional/classic customer away from the department stores as it will be developed for the Men’s, Women’s, Children’s Intimate apparel and Accessories classifications.

-Ralph Lauren’s GBC group will be in charge of all the qualitative and marketing agendas inclusive of design. marketing, advertising and production. If this is executed with the merchants the sales should exceed $500 million in the first year.

-As CEO mike Ullman has shown with his joint venture with the upscale Sephora line he has a lot of credibility in the market and he is using his connections to benefit JCP with great adeptness.

Analysis:

-The launch of the exclusive and aspirational “American Living” brand is an outstanding stratagem that will not only increase the company’s legitimacy as a life style driven merchant but will undoubtedly drive their average unit retail (AUR) to new heights.

-This launch is the largest in J.C. Penny’s history. With this being a multi channel and multi classification launch qualitative and quantitative benefits will be realized almost immediately.

-Another positive of the structure of this agreement is that GCP is taking full responsibility for the advertising and marketing of the brand. Ralph Lauren has built an empire on the marketing and selling of aspirational lifestyle branding. Their experience will bring an aspirational feel permeating the entire company.

-It is almost certain that Penny’s and Mr. Ullman will hire a “brand coordinator” to work as a liaison between Pennys and GCP. This position introduced for the Sephora launch ensured a seamless integration of that launch into the company.

-There are intrinsic risks such as a similar strategy being introduced by Kohls or another direct competitor. There is also limited growth left for department store square footage as this channel is at saturation. As with all national brands there is the risk of encountering contradistinctive regional trends but this should be mitigated by the complexion of the assortment.

-The margins for this initiative will not be as high as a “home grown” brand but will exceed those of open market branded merchandise. In summation Mr. Ullman is proving himself to be one of the most astute retailers today and has filled Alan Questrom’s rather large shoes quite comfortably.