Chapter 14: New Blood

In the early 1980s, the company issued a positioning statement. This attempted to define how JCPenney would become the value-fashion "Department Store of the '80s." Gale Duff-Bloom, about whom much more will be heard in subsequent chapters, was excited by this. She had finished her stint managing a big Bay Area anchor and was headed across the continent to the New York Office. She believed in the company's direction and was eager to help create this national department store.

But the positioning statement dodged the big problem of gaining fashion credibility, which had gotten no easier. High-end women's designers had joined the better men's wool brands like Botany 500 and Hart Schaffner & Marx in refusing to do business with huge but humble JCPenney. Most feared getting toasted by association with the old commodity merchant. And for the few inclined to sell out, there was a production quandary . Penney had 1,600 stores at the time. Macy's, in contrast, had a solid reputation but only 13 stores in 1982. Putting 20 designer pieces into each Macy's meant a production run of 260. For Penney, it would mean 32,000. And the flip side of meeting the production challenge, of course, seemed to be turning the designer brand into a commodity. So a big Penney contract did not seem to be worth it to the majority of upscale suppliers. It was a lose-lose situation.

Vertical Integration!

Still, there were some victories. In addition to men's designer Lee Wright's signing, Halston, who was fading in stature but still well known, agreed to design a women's line for Penney. Also, the company's developing private brand expertise in wool was revved up further. If more big names wouldn't sign on, Penney would produce and promote more private brand apparel.

Fashion ”even value fashion ”would never be easy for JCPenney. Nevertheless, soft goods played to Penney's strength, and fashion provided an edge. It was worth the struggle.

Before Neppl and Seibert were fully out the door, the "new blood" waiting in the wings was given full rein to develop a radical change in an old organizational structure. This was to give the "fashion forward" program more teeth. It turned out to be a serious mistake, although the idea initially looked great on paper and got the nod from Neppl and Seibert.

But first, a little clarification for the lay reader. The retail industry has needed a better vocabulary for a long time. The word spelled "merchandise," for example, has two distinctively different meanings. One, pronounced "mer-chan- dice ," means goods for sale. The other, pronounced "mer-chan- dize ," always means the presentation of goods for sale, and sometimes means the selection of those goods ("buying") as well. And a derivative word, " merchandising ," represents the combined meanings of "merchandise."

Merchandise, merchandising, and marketing had formerly been separate departments. Now six "merchandising divisions" had been created, a grab-bag term relating to multiple functions and not just actual "merchandising" per se. Each division contained three general areas along with support functions: merchandise (buying), merchandising (presentation), and marketing (promotion). The idea was that vertically integrated divisions ” women's, men's, children's, home, home improvement, and automotive ”would spawn faster, more focused results. Overall plans would still come from the executive suite, but important day-to-day moves would be decided much closer to the action.

Bill Howell, the former field leader who had been handpicked by Seibert over the other finalists, Bob Gill and Dave Miller, immediately praised this new arrangement (to which he had contributed ). He would back its further development in the next few years . And he added a wrinkle. For a more intense companywide merchandising effort, he made the divisions competitive among themselves . Another benefit of the change was to further isolate merchandising areas in order to more easily attack and obliterate the people and merchandise in conflict with the soft goods and fashion swing.

Indeed, as the worry beads came out, by the end of Howell's second CEO year, automotive, home improvement, cameras , electronics, and major appliances were gone. Although the decisive heavy lifting for soft/fashion had been led by Seibert and Neppl, Howell was credited with a courageous follow-through. The company was walking away from over $1 billion in annual business, while another billion had to be committed for remodeling the store space freed up by the dearly departed.