The Wall Street Journal has a good piece about the steps being taken by JC Penney’s new CEO Ron Johnson, who formerly ran Apple’s retail business.
Here’s how the story is framed by the Journal:
“Shortly after taking the top job at J.C. Penney Co. last fall, Chief Executive Ron Johnson signed up for the company's email alerts. He was shocked by what landed in his inbox. The former Apple Inc. retail executive was deluged by sales announcements, sometimes two a day. He and his team counted 590 separate sales last year. They didn't bring in shoppers—Mr. Johnson's team found the average customer purchased only four times a year—but they did crush prices. Alarmingly, he learned nearly three-quarters of Penney's products sold at discounts of 50% or more.”
The story goes on:
“Now three months into his job, the new chief executive is hoping to turn things around with a far-reaching but risky overhaul of the department store format in an effort to lure consumers back to a chain that's often criticized as dowdy.
“Mr. Johnson, who won plaudits for reinventing the retail experience with Apple stores' clean lines and empty space, laid out an ambitious plan Wednesday that involves carving stores into a warren of specialty shops, turning the high-traffic center selling space into an entertainment and hang-out area, and eschewing constant ‘sales’ in favor of lower prices every day.
“The idea is to make stores more inviting, highlight brand names and gain more control over pricing.”
Here’s how the story is framed by the Journal:
“Shortly after taking the top job at J.C. Penney Co. last fall, Chief Executive Ron Johnson signed up for the company's email alerts. He was shocked by what landed in his inbox. The former Apple Inc. retail executive was deluged by sales announcements, sometimes two a day. He and his team counted 590 separate sales last year. They didn't bring in shoppers—Mr. Johnson's team found the average customer purchased only four times a year—but they did crush prices. Alarmingly, he learned nearly three-quarters of Penney's products sold at discounts of 50% or more.”
The story goes on:
“Now three months into his job, the new chief executive is hoping to turn things around with a far-reaching but risky overhaul of the department store format in an effort to lure consumers back to a chain that's often criticized as dowdy.
“Mr. Johnson, who won plaudits for reinventing the retail experience with Apple stores' clean lines and empty space, laid out an ambitious plan Wednesday that involves carving stores into a warren of specialty shops, turning the high-traffic center selling space into an entertainment and hang-out area, and eschewing constant ‘sales’ in favor of lower prices every day.
“The idea is to make stores more inviting, highlight brand names and gain more control over pricing.”
- KC's View:
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It is hard to know whether Johnson’s efforts will be enough to revive Penny’s and make it a vibrant, relevant retailer for 21st century consumers. And there will be those who will quibble with him, suggesting that cutting prices is the same as generating excitement, and that he is making a mistake with what essentially is an EDLP strategy.
I think they’re wrong.
First of all, I’m not sure he had much of a choice. All those sales and price cuts were not working. In most cases, if all you do is advertise sales - and you don’t actually have the lowest prices in town - all you really end up doing is devaluing your brand. Johnson has to reverse that trend.
Johnson is trying to reinvent the department store for a new age, and he deserves a lot of credit for his efforts. We don’t know yet if it will work, but he had to do something.
His goal - first and foremost - has to be to create a retailing environment that people want to come to. Where there are interesting products at fair prices. Where the experience is as much about effectiveness as efficiency. Where the combination of place plus products seems relevant. And that can offer something that online competitors cannot.
I’m rooting for him.
