Can J.C. Penney Make a Comeback?

The return of hokey discounts is luring customers back to the ailing retailer.

A couple walks by a J.C. Penney store in Arcadia, California March 1, 2013.

A J.C. Penney store in Arcadia, Calif. Can the store turn around its fortunes?

Photo by Mario Anzuoni/Reuters

I recently found myself with about an hour to kill near New York City’s Penn Station when my eye caught a glimpse of a J.C. Penney. Good old J.C. Penney. Back in March of 2012 they hired Ron Johnson, the head of Apple’s retail efforts, to turn the ailing department store around and reinvent the stodgy category for a new era. About a year later I visited one of his stores, in suburban Maryland’s Wheaton Plaza, and found a disaster. Johnson’s new approach had alienated J.C. Penney’s core customers while doing nothing to bring in new ones. Amid record losses, he found himself fired in April. To replace him, the board rather lamely tapped 64-year-old former CEO Myron Ullman. Could simply doing a 180 save the company?

The New York store was the first I’d visited since Ullman had resumed his post. Into the doors I went, hoping to discover whole new levels of disastrousness as the retailer attempted to restodgify itself.

Initially, things looked promising. The shop in question is on the two lower levels of the Manhattan Mall building. Descending via escalator, I came face-to-face with one of the signature dumb Johnson-era initiatives: a sign promising free Wi-Fi in the store, as if the opportunity to sit down and pop open your laptop while shopping has any value. At the foot of the escalator was a Sephora mini-boutique—branded stores-within-stores being another Johnson signature. The space looked lively, but there were several staff members and just one customer.

I put on a smug grin and checked my iPhone. Suddenly it became clear that things were different now. Unlike Wheaton Plaza’s, the Wi-Fi was fast and reliable. More to the point, around the corner from the Sephora there were—customers.

Not an insane crush of customers by any means, but it was the middle of the afternoon on a weekday. And these were definitely customers. Right here in the middle of Manhattan, any number of middle-aged women of all ethnic backgrounds were meandering—alone or in small groups—looking at clothing. And surrounding them? Sales.

Sales, sales everywhere. The very antithesis of Johnson’s no-discounts, everyday-low-price philosophy. There were sales on Liz Claiborne handbags and buy-one-get-half-off sales on mix-and-match jewelry. Coupons are back, too, both traditional ones and special digital coupons for online shopping. Arizona short-sleeve V-neck tees were on sale, and so were Star City pants. “Special occasion dresses” were marked down, some of them marked “CLEARANCE TAKE AN ADDITIONAL 25% OFF.” Up on the women’s floor, it was hard to find anything that didn’t purport to be on sale. A veritable bonanza of bargains. Enough to make you feel like a sucker for buying just one piece of jewelry when a second could be had at half price.

People liked it. They were scrutinizing the wares and considering the discounts very seriously. I descended further. The men’s section was much smaller than the space for the ladies, sharing floor space with housewares and kids’ stuff. The client base here was even more diverse: I saw moms with kids in tow, wives shopping for their husbands, couples shopping together, and even a handful of lone men trying to outfit themselves. All told, the men’s section was less crowded despite its smaller size. The alcove for dress shirts and ties seemed deserted altogether—affording me the space and peace I needed to choose a new blue tie, its predecessor having been ruined a few days ago in a spill. Fortunately a discount was available, to the tune of buy-one-get-a-second-for-half-off. Why buy a blue tie for $30 when I could get a blue tie and a red tie for $45? I felt like a savvy bargain hunter.

Best of all, since the ties were from J.C. Penney’s J. Ferrar house brand, there was no way to comparison-shop at other stores. Shifting to housewares in a reverie, I briefly considered buying the cheap nonstick small saucepan that my home desperately needs in the wake of our current cheap nonstick small saucepan’s losing its nonstick surface.

The thought of carrying a saucepan with me on the track back to Washington broke the reverie. I could just order this stuff on Amazon, and have it delivered for free with my Prime subscription.

Once broken, the spell was gone forever. A sign on a KitchenAid stand mixer: Normally $450, it could be mine for $349.99. As the longtime owner of such a mixer, I was confused by the price. Had inflation made these things more expensive? The KitchenAid website offers the exact same price as J.C. Penney’s, claiming to be marked down from a regular price of $429.99, while Amazon says $349.99 is the list price and sells ’em for less than $320. The discounts, in other words, start looking illusory once you have the chance to shop around.

The comparison issue was the real flaw in the Johnson era: He neglected the J.C. Penney house brands. In the Internet age, J.C. Penney will stand or fall on the appeal (or lack thereof) of St. John’s Bay, J. Farrar, Stafford, A.N.A., and “masstige” sub-brands like MNG by Mango. Critics have panned these styles for years, but even in Manhattan they seemed to have some loyalists. (Admittedly, the PATH station directly beneath the store serves as a Hellmouth-like portal for New Jersey residents.) The fact is that practical people who want to look respectable without spending much money need to shop somewhere. My ties may not really have been on sale at all, but they were pretty cheap and they look fine. A portfolio of mid-market, private-label brands aimed at the not-especially-stylish is not the most exciting business idea in the world, but it does make some sense.