JCPenney looks to recreate success of Sephora shops with Nike

The move mirrors what JCPenney has been doing in partnership with Sephora since 2006: opening miniature shops within existing department store locations to drive foot traffic to a secondary brand or retailer, by offering full selections of product and putting more time and effort into the branding experience of the shop-within-the-store. When a JCPenney shopper visits a Sephora inside a department store, it looks and feels the same way it does at a full Sephora store, with JCPenney merchandise looming closely in the background.

The Sephora partnership has been a success for JCPenney. The company reported last year that annual sales per foot in Sephora shops were $600, more than three times the JCPenney average. Sephora shops are currently in almost 600 JCPenney locations, with a new “miniature” shop concept being tested in six.

“The clear differentiation and the ongoing success of Sephora has allowed us to expand our product offering by introducing new compelling industry-leading prestige brands into our assortment,” said Marvin Ellison, JCPenney’s CEO, in a November earnings call. Basically, you can’t walk into a Macy’s and find a robust Sephora offering.

JCPenney looking to recreate the business formula with Nike is an example of another department store betting high on the newfound prominence of activewear in customers’ everyday lives and budgets. Department stores of all levels of luxury are being pulled toward the light of athleisure, which still has a firm grip on the apparel market. Kohl’s began a partnership to sell Under Armour in stores this year. In October, Neiman Marcus launched a new active line, adding brands like Fenty Puma and Common Projects to its selection in order to grab hold of the dollars its customers are spending on streetwear. Similarly, Bergdorf Goodman now sells Kith and Puma.

“People used to go to these retail outlets, department stores, to find out what’s cool, and now that influence is in a million other places,” said Steve White, vp of commerce strategy at Razorfish. “Mass retailers navigating this landscape are having a hard time — it’s like steering a big ship.”

JCPenney, along with competitors like Macy’s, Nordstrom and Kohl’s, saw abysmal sales over the holiday season. At JCPenney, same-store sales in November and December fell by .8 percent.

Right now, department stores can’t afford to stay on the straight and narrow, and expected. To combat dwindling sales, these retailers are getting creative with brand partnerships, as well as in-store experiments. Neiman Marcus opened its first Rent the Runway location inside of a San Francisco store in order to pad out luxury fashion purchases with a recurring cycle of rental items. Nordstrom operates a monthly “pop-in” series, curated by fashion editor Olivia Kim, that brings in a variety of up-and-coming indie brands into the stores. Most recently, Korean sunglasses brand Gentle Monster set up shop in select Nordstrom locations.

For these retail experiments to be successful, they have to be fully incorporated, according to Malinda Sanna, the founder of the agency Spark.

“If it’s left out to dry like a one-time pop up, that would be a bad move,” she said. “It has to be well incorporated into the experience.”

JCPenney reportedly spent months testing the visual experience of the Nike brand shops in a Portland, Oregon store before launching the partnership. John Tighe, chief merchant officer for JCPenney, said the goal is to meet existing customer demand for athletic wear, as well as boost foot traffic and sales in the same way Sephora has.

“JCPenney is an activewear destination, and by partnering with a perception-shifting national brand like Nike, we can deliver both the performance and athleisure products that customers want,” he said.