J.C. Penney (NYSE: JCP) is a leading department store retailer of apparel, accessories and home furnishings. They produce their own private brands in addition to selling products from other companies.
The company has faced changing consumer tastes in the past years--consumer traffic is being drawn to Wal-Mart (WMT) and Target (TGT) at the expense of department stores such as J.C. Penney and Macy's Inc. (M). In addition, J.C. Penney relies heavily on private labels Although private label products--in order to appeal to as many customers as possible--are not unique enough to compel fashion-conscious consumers to purchase them, they are still a viable option for customers who do not follow trends. JCP also faces lower profit margins in the due to rising commodity costs which will increase its clothing costs.
The company divides its merchandise into several categories which include: men's, women's and children's apparel, accessories and cosmetics; home furnishings; leisure and recreational equipment; jewelry and watches.
Private label brands are produced exclusively for a particular store. For example, J.C. Penney has a number of private label brands including Arizona Jeans Co. and Stafford. Retailers such as Macy's and J.C. Penney find private labels very attractive because the pieces often have higher margins than branded merchandise from other companies. However, the economic crisis of 2008-2009 has made people more reluctant to spend. When consumers have less money to spend, they will be more inclined to spend it on something that excites them. Private label brands, in an effort to appeal to as many consumers as possible, are less likely to spur a person to buy them when disposable income is already scarce. Also, the proliferation of discount retailers such as Wal-Mart, Target and Kohl's (some with their own exclusive brands) means that consumers can trade down to another store if they can no longer afford prices at J.C. Penney. Private label merchandise, by its nature, is not differentiated enough to keep fashion-conscious consumers purchasing them in lieu of lower-priced alternatives.
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