Failure at JCP

Ron Johnson is out as J.C. Penney’s CEO.  The hallmark of Johnson’s short tenure was a radical shift away from the mid-range department store that J.C. Penney had been for years in favor of the more cosmopolitan “JCP,” an attempt to identify at once as both upscale and discount.

The failure is predictable to anyone who has observed JCP closely.  (I have, because I have owned stock in the company, had old friends who work at corporate HQ, have shopped there almost religiously since I knew how to spend money, and most importantly because my Dad and sister worked there for a combined 44 years.  Most of that time belongs to my Dad.)

Johnson’s background involves Target and Apple, and that’s telling – especially the Apple connection.  The most obvious visual changes was the stylized retail environment and the iPhone-powered mobile checkout units that replaced some counters.  The pricing structure famously moved from a sale-driven model to more stable prices that were never slashed – not even for Labor Day or Memorial Day.  There were more nuanced changes, too: St. John’s Bay left the shelves.  The styles got trendier and skinnier.  The labels came to dominate the product; buying “Arizona Jeans” was more important than buying a pair of jeans.

It sounds a bit like Apple, doesn’t it?  Remember the late Steve Jobs’s War on Flash;  The Apple mogul said he didn’t care what websites like YouTube used, he didn’t think Flash was worth supporting on iPhones, iPods, and eventually iPads.  Apple customers must accept that Apple sets the rules for the walled garden.  And they do: Apple is a very large and valuable company.  Here’s the problem, though: Apple customers are different from typical customers.  They are early adopters, and are even willing to spend more for style points.  They don’t necessarily spend like drunken sailors, but price is not the main driver.

If an Apple user were more price conscious, they might end up buying a cheaper Dell or HP laptop over a MacBook, or an Android phone or tablet instead of an iPhone or iPad.  In fact, that’s probably a big reason Android enjoys higher market share than iPhone.

J.C. Penney legacy customers have shopped sales and sought low prices for generations.  Changing the store’s philosophy would have worked if they were the only player in the space, or if JCP customers had the unwavering loyalty of Apple disciples.

Stuck in between discount clothing stores like Wal-Mart and Target and higher-end department stores like Nordstrom, there’s no doubt that J.C. Penney needed a facelift.  Johnson tried to perform a face lift, breast augmentation, and liposuction at the same time.  One wonders if Johnson ever shopped at J.C. Penney before his time as CEO.

A better strategy might have started with more in-depth analysis and testing in select markets before rolling out national shot-in-the-dark initiatives like the the “No Coupons Ever” debacle.  Had Johnson been more patient, he might have been able to carry out smaller changes, such as incorporating online sales into the in-store shopping experience or redesigning the retail environment without alienating the core shopper.

Instead, Johnson’s year and a half of leadership led to a rudderless company that somehow felt it could dictate terms to its customers.  Brand loyalty, for most people, extends only so far as price; not every brand can sell the way Apple does.  Learning that lesson cost Ron Johnson his job.