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JCPenney's Smart New Innovation: A Fashion Thinktank

What can a big retailer do when sales are pretty flat and a big investor is breathing down managers' necks? It's time to innovate and discover some new niche businesses that complement the main concept. That's exactly what JCPenney (JCP) is doing, bringing on new executives who'll be let loose to operate their own organization within the company. Sounds like a much-needed breath of fresh air at a company that's been limping along on an oxygen tank for several years now.

The chain has created a small, independent thinktank within the company to cook up new ideas. Dubbed the Growth Brands Division, the new initiative has already struck a canny alliance with Hearst Corp.'s magazines to cross-promote apparel from two new ecommerce sites -- Clad is a young men's brand, while Gifting Grace targets frequent gift givers. The Clad merchandise will be featured in Esquire, with fashion editors there "curating" pieces from the Clad line to feature in special ad sections.

In the magazine's online edition, Clad apparel will be clickable straight through to the shopping cart on Clad's site. It'll be a similar setup for Gifting Grace with Redbook and Good Housekeeping. Seems like a recipe for slam-dunk success.

JCPenney has big hopes for it, too -- company CEO Myron Ullman is looking to Growth Brands to become a $1 billion business in five years. To make that happen, Penney has hired a team of seasoned executives that includes Will Swillie from Retail Convergence, parent of hot fast-fashion chain Rue La La. An injection of this kind of current fashion sensibility is exactly what JCPenney badly needs. Even the selection of Mary Drolet -- founder of controversial tart-up-your gradeschooler chain Club Libby Lu, which parent Saks (SKS) closed in 2008 -- indicates a willingness to perhaps get a little edgier that in Penney's case could be a good thing.

The best part of the whole initiative is the structure in which these new managers are being handed their own little kingdom and reporting directly to Ullman, instead of being mired in an existing chain of command. Hopefully that'll keep them from being bogged down in big-company decisionmaking red tape.

The third initiative JCPenney has planned is a little more of a question mark: It's opening 10 big-and-tall stores in an as-yet-unnamed brand next year, with hopes of expanding from there.

Opening stores costs more than opening an online store and involves lease commitments, so it's more of a risk than starting new ecommerce sites. Also, the big-and-tall niche is already covered by Casual Male (CMRG) and other competitors. On the other hand, given America's growing obesity problem, maybe there's room for a new entrant in this sector.

Launching new retail store chains is always a dicey plan. In recent history, Gap (GPS) dropped its Forth & Towne chain, Abercrombie & Fitch (ANF) closed its Ruehl women's stores, American Eagle (AEO) shut all its Martin + Osa stores, and Aeropostale (ARO) shut down Jimmy'Z. None of these featured specialty menswear, so JCPenney's situation may not be directly comparable. Still, this one is more of a question mark.

The ideas that come out of this new division likely won't all be winners. But that's OK. Shaking up a big company by bringing in new blood and giving them the freedom to innovate is bound to be a positive development. The team is already bringing some new ideas forward -- and JCPenney urgently needs to do just that.

Photo via Flickr user tinou bao