Steven Dennis made some interesting observations about JC Penney on his blog. He might very well be proved right – the JCP turnaround is no sure thing – but I thought I’d like to react to some of the points he raises, which I’ve placed in bold.
No doubt Ron Johnson learned much from his Apple experience, but little of it is directly translatable to JCP.
Johnson has success at both Target and Apple. I’m going to start from the basis that he knows a thing or two about retailing. Having seen Guy Kawasaki’s , I am convinced that there are many many transferrable skills that can be learnt be transferred to JCP. In fact, it’s Johnson’s approach to the turnaround looks to me a very “Steve Jobs” way of transformation, rather than a conventional approach.
It’s too early to say. Either Johnson will bankrupt JCP, or else he really will transform the way people think about shopping. We need to wait for two years to find out which one it is going to be. If I’m being optimistic, then Ackman’s choice of Johnson is total genius, and he will approach things in a way nobody else would ever dream.
JCP’s products serve a more diverse demographic, are in totally different pricing segments, serve a wide variety of purchase occasions and, by and large, are frequently purchased.
What, you don’t like it that people make frequent purchases?
JCP has many poor, under-maintained locations and most are multiple levels with multiple entrances
The under-maintained locations might pose a problem. What’s the problem with multiple entrances?
Apple stores are supported by hundreds of millions of dollars in parent brand advertising; JCP must fend for itself
He makes it sound like JCP doesn’t spend any money on advertising.
Mall-based department stores have been losing share to general retail for decades. The competition is intense. For Penney’s strategy to work they basically have to double their share on the mall.
This will be the challenge for JCP, and a test of Johnson’s creativity. He has to figure out a way to make JCP both unique and valuable. They don’t have to double their share on the mall, what they have to do is make a unique offering that others wont or can’t copy. Will he do this – nobody knows for sure – but there are signs that Johnson is on the right lines. I refer specifically to “new JCP”, where he has shown that he can double revenues per square foot. If Johnson can keep this momentum going, he will win big.
by bailing on their historical promotional strategy and displacing traditional brands, they are basically firing a large chunk of their current customer base.
Maybe that’s actually the point. He wants to attract customers that value his new JCP proposition, not people cheapskates who are just there for the price.
While this may work over the long-term, this is simply way too much, way too soon.
Do you think that’s the way Steve Jobs would think?
It’s very hard to find ANY brands, much less such a well-known brand such as JC Penney, that have been able to quickly shift their core customers.
Fair enough. It’s a good point. But look at it this way. Suppose there was a poorly-performing Ford dealership in affluent town. Then, magically, overnight, the Ford dealership disappeared and was replaced by a BMW dealership. Would it not be reasonable to assert that the change from a Ford dealership to a BMW dealership might radically alter the dynamics of the business?
“Sale” is not a bad word and a promotion is a promotion.
Surely the point is that Johnson is trying to get away from that.
Free haircuts and free portraits are promotions. So are $10 “thank you” coupons and the 30% off clearance event.
OK, I concede you on that point.
Plenty of department stores have shops.
Perhaps the important point is not what they are, but what they sell. The fact that JCP is able to double revenue per square foot using this concept means that they’re doing something right. After all, you could argue that there’s not “point” to Apple stores as, after all, their products are freely available elsewhere.
I’m all for Big Hairy Audacious Goals, but this sort of vision statement can do more harm than good
Evidence suggests that it is doing more harm than good. The bears have a definite case here. Everything depends on whether JCP’s mis-steps can be rectified, or whether Johnson’s grand experiment will end in bankruptcy. I’m aware that my arguments are sounding increasingly desperate at this stage.
The key to JCP getting back on track is to become much more clear about which consumer segments, purchase occasions and price points it wishes to own. To date, they’ve provided little granularity on this.
Agreed. Time may be required to clarify these things – assuming we don’t get to a stage where it’s too late.
E-commerce is a disaster.
Hopefully that’s where the pins will come in.
Quite a few analysts were encouraged by the sales productivity of JCP’s new shops. Unfortunately the comparison was not to the space that these shops replaced but to the chain average. The new shops are mostly in prime real estate. The new shops are getting most of the advertising.
I will be using this list to see if Penney’s can make the move from Awareness to Acceptance to Action.
Yes, you raise a valid point. As Ackman said, Johnson is not being doctrinaire about his execution. You must remember that, he worked for Apple, so he’s a smart guy. JCP seems to have made a marketing disaster, and has paid a price for this. The fact that Johnson has fired Michael Francis, the head of marketing, suggests to me that he is aware of the problem, and its source. It looks to me that Johnson isn’t asleep at the wheel here, and that he is acutely aware of the situation. Whether he is able to do anything about it is an undecidable question just now.
I hold shares in JCP – so I fully accept the accusation in advance that I might be viewing the situation through rose-coloured glasses.