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We went to JCPenney to see why sales are sinking - and it revealed why giant mall-based department stores are dying

First, let's tour the shopping mall-based stores.

First, let's tour the shopping mall-based stores.
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We spotted clearance signs throughout these stores, signaling the company's ongoing efforts to clear out inventory, as Soltau discussed on the earnings call.

We spotted clearance signs throughout these stores, signaling the company's ongoing efforts to clear out inventory, as Soltau discussed on the earnings call.
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These efforts seemed to be working a little too effectively in the shoe department of one store.

These efforts seemed to be working a little too effectively in the shoe department of one store.
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Many shelves in this department were entirely empty.

Many shelves in this department were entirely empty.
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Others were sparsely decorated with boxes and shoes.

Others were sparsely decorated with boxes and shoes.
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We also found dozens of "sale" signs offering steep discounts throughout the stores.

We also found dozens of "sale" signs offering steep discounts throughout the stores.
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Soltau called the company's pricing strategy "confusing" and said "you might not know exactly when you can get the best value at JCPenney, which, in fact, every day you should be able to get a great value at JCPenney."

Soltau called the company's pricing strategy "confusing" and said "you might not know exactly when you can get the best value at JCPenney, which, in fact, every day you should be able to get a great value at JCPenney."
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We found several unattended checkout registers that appeared to be permanently closed.

We found several unattended checkout registers that appeared to be permanently closed.
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Signs covering these closed registers encouraged shoppers to visit the company's website.

Signs covering these closed registers encouraged shoppers to visit the company's website.
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Several fitting rooms throughout the stores were closed as well.

Several fitting rooms throughout the stores were closed as well.
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Moving on to the handbag department, we found more signs offering steep discounts ...

Moving on to the handbag department, we found more signs offering steep discounts ...
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... and a mess of bags on display.

... and a mess of bags on display.
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Some tables overflowed with bags ...

Some tables overflowed with bags ...
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... while other areas featured near-empty shelves.

... while other areas featured near-empty shelves.
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JCPenney said accessories and handbags were among its worst-performing categories during the holiday quarter.

JCPenney said accessories and handbags were among its worst-performing categories during the holiday quarter.
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A few steps away, this crumpled sign met us at the jewelry department.

A few steps away, this crumpled sign met us at the jewelry department.
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The jewelry department also featured furniture that was packed inside its shipping box.

The jewelry department also featured furniture that was packed inside its shipping box.
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This appeared to be a theme throughout the stores.

This appeared to be a theme throughout the stores.
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Displaying boxed furniture could be an attempt to fill empty floor space or reduce employees' trips to the back room.

Displaying boxed furniture could be an attempt to fill empty floor space or reduce employees' trips to the back room.
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The Sephora concept was a major bright spot in both stores. It was well-lit, well-stocked, clean, and creatively merchandised.

The Sephora concept was a major bright spot in both stores. It was well-lit, well-stocked, clean, and creatively merchandised.
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Soltau said she recently met with Sephora's new CEO, Jean-André Rougeot, and "had a very exciting conversation." "We see great things for Sephora inside JCPenney as we move forward," she said.

Soltau said she recently met with Sephora's new CEO, Jean-André Rougeot, and "had a very exciting conversation." "We see great things for Sephora inside JCPenney as we move forward," she said.
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JCPenney said apparel was among the strongest performing categories during the holiday quarter.

JCPenney said apparel was among the strongest performing categories during the holiday quarter.
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But we were underwhelmed by the apparel displays in the shopping mall-based stores.

But we were underwhelmed by the apparel displays in the shopping mall-based stores.
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Some racks were stuffed with mismatched items, like athletic shorts and sleepwear.

Some racks were stuffed with mismatched items, like athletic shorts and sleepwear.
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Other racks were nearly empty.

Other racks were nearly empty.
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We saw stained carpets as well.

We saw stained carpets as well.
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In many parts of the stores, it seemed like employees had tried to spread out inventory to cover up what would otherwise be empty wall and floor space.

In many parts of the stores, it seemed like employees had tried to spread out inventory to cover up what would otherwise be empty wall and floor space.
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This may soon improve. JCPenney is in the process of removing major appliances from its stores due to lackluster sales.

This may soon improve. JCPenney is in the process of removing major appliances from its stores due to lackluster sales.
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As appliances are removed, JCPenney is exploring new layout options, including the reduction of store space, the company said.

As appliances are removed, JCPenney is exploring new layout options, including the reduction of store space, the company said.
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"While configurations will vary by store, we are finalizing new layout options, including the possible reduction of store space previously dedicated to appliance and furniture showrooms," JCPenney senior vice president of finance Trent Kruse said on the company's earnings call.

"While configurations will vary by store, we are finalizing new layout options, including the possible reduction of store space previously dedicated to appliance and furniture showrooms," JCPenney senior vice president of finance Trent Kruse said on the company's earnings call.
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He said these measures aimed to "maximize efficiencies, reduce inventory and create an enhanced experience that inspires repeat shopping trips and customer loyalty."

He said these measures aimed to "maximize efficiencies, reduce inventory and create an enhanced experience that inspires repeat shopping trips and customer loyalty."
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It seems like reducing store space could solve a lot of the problems we spotted during our first two store visits.

It seems like reducing store space could solve a lot of the problems we spotted during our first two store visits.
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But the company also has to find a way to draw in more customers. We didn't see many shoppers during our visits to the mall-based stores.

But the company also has to find a way to draw in more customers. We didn't see many shoppers during our visits to the mall-based stores.
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"Our customer wants us to be restored to greatness," Soltau said on the earnings call, adding that customers have "great memories" associated with the "storied" JCPenney brand.

"Our customer wants us to be restored to greatness," Soltau said on the earnings call, adding that customers have "great memories" associated with the "storied" JCPenney brand.
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"We just have to be better and improve how we are showing up for her shopping experience and what we are selling," she added.

"We just have to be better and improve how we are showing up for her shopping experience and what we are selling," she added.
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Our first two store visits left us feeling skeptical about the company's future and its ability to win back customers.

Our first two store visits left us feeling skeptical about the company's future and its ability to win back customers.
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Then we visited a JCPenney store in a strip mall. We were blown away by this store from the moment we walked in the door.

Then we visited a JCPenney store in a strip mall. We were blown away by this store from the moment we walked in the door.

The demographics of the areas around all three stores were similar, and they were all within a 15-minute drive from one another.

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It appeared to be less than half the size of the previous two stores we visited.

It appeared to be less than half the size of the previous two stores we visited.
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And it looked nothing like them.

And it looked nothing like them.
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The store was bright, updated, and immaculately clean.

The store was bright, updated, and immaculately clean.
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The floors throughout the store glistened, and there was a steady flow of customers in most departments.

The floors throughout the store glistened, and there was a steady flow of customers in most departments.
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Each branded store-in-store concept, like this Levi's display, featured unique lighting fixtures.

Each branded store-in-store concept, like this Levi's display, featured unique lighting fixtures.
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There were no empty racks or obvious holes in the displays.

There were no empty racks or obvious holes in the displays.
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Backlit shelving lined the walls of the handbag department and made this section of the store feel high-end.

Backlit shelving lined the walls of the handbag department and made this section of the store feel high-end.
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All the handbags on display were meticulously arranged. Nothing seemed out of place.

All the handbags on display were meticulously arranged. Nothing seemed out of place.
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We were stunned to find this level of tidiness carried over to the accessories department.

We were stunned to find this level of tidiness carried over to the accessories department.
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Small accessories are difficult to keep tidy in retail stores, even for the best-merchandised stores in the business.

Small accessories are difficult to keep tidy in retail stores, even for the best-merchandised stores in the business.
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We were also impressed by the shoe department.

We were also impressed by the shoe department.
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This department was clean, organized, and had few empty shelves.

This department was clean, organized, and had few empty shelves.
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We didn't find any cardboard boxes clogging aisles in this store, unlike the others we visited.

We didn't find any cardboard boxes clogging aisles in this store, unlike the others we visited.
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JCPenney appears to thrive in a smaller store layout, like this one, that isn't tied to a shopping mall. It doesn't just look better; it's also more convenient to shop due to the smaller size.

JCPenney appears to thrive in a smaller store layout, like this one, that isn't tied to a shopping mall. It doesn't just look better; it's also more convenient to shop due to the smaller size.
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The stark differences between the first two JCPenney stores and this store highlight the struggles that department stores have faced to remain relevant and well-merchandised in giant, outdated, shopping mall-based boxes.

The stark differences between the first two JCPenney stores and this store highlight the struggles that department stores have faced to remain relevant and well-merchandised in giant, outdated, shopping mall-based boxes.
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These store visits also show that under the right conditions, JCPenney is capable of delivering flawlessly on the fundamentals of great retail. The fate of the company now depends on its ability to execute this shopping experience across its entire fleet.

These store visits also show that under the right conditions, JCPenney is capable of delivering flawlessly on the fundamentals of great retail. The fate of the company now depends on its ability to execute this shopping experience across its entire fleet.
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