January 26, 2012
Penney CEO Brings ‘Reality Distortion Field’ From Apple
Current J.C. Penney CEO Ron Johnson must have spent a lot of time with Steve Jobs when he was at Apple because it appears as though he too has the power to create a “reality distortion field.” The question is whether he has the same ability to make everyone around him believe and then create results that match his grand vision. With yesterday’s announcement of J.C. Penney’s “transformation” plan, customers, employees, vendors, competitors and others will get to find out.
“Just like Apple, we’re going to learn that the best days aren’t in the rear-view mirror, they’re right down the road,” Mr. Johnson told Advertising Age. “I believe the department store is the No. 1 opportunity in American retail. And this isn’t something I decided last June when I took the job. This is something I decided 10, 15 years ago.”
Mr. Johnson outlined three key initiatives to remake the department store chain including “fair and square pricing,” “Main Street merchandising” and new marketing initiatives.
“Pricing is actually a pretty simple and straightforward thing,” Mr. Johnson told The Associated Press. “Customers will not pay literally a penny more than the true value of the product.”
According to Mr. Johnson, the majority of Penney customers have only been buying items when on sale so the perceived real value of the goods sold is much lower than the chain’s everyday retail. With the new initiative, Penney’s sale prices, typically about 40 percent lower, will become the everyday price on goods throughout the store.
To keep things simple, Penney will also reduce the number of promotions it runs. Mr. Johnson noted that Penney ran 590 separate sales last year even though the average customer shopped the chain only four times a year.
“I thought to myself, ‘This is desperation,’” Mr. Johnson told The Wall Street Journal.
Now, Penney will run only two types of special discount events: Month-Long Values, and Best Prices, which always happen on the first and third Fridays of every month to make room for new items.
“We want customers to shop on their terms, not ours. By setting our store monthly and maintaining our best prices for an entire month, we feel confident that customers will love shopping when it is convenient for them, rather than when it is expedient for us,” Mr. Johnson said in a statement.
Penney is also set on “reinventing the in-store experience” and to achieve that the company is launching its Main Street initiative with the entire store merchandised in a series of 80 to 100 brand shops such as the deal recently announced with Martha Stewart.
“Some may call it crazy, but I don’t think there is an alternative,” Mr. Johnson was quoted by the Journal. “In an internet age where you can have exactly what you want with one keyword, people won’t tolerate big stores. You have to break it down for them.”
The chain will also feature its Town Square section at the center of the store offering services that “customers will enjoy before they buy, while they shop and afterwards.” The section, which will be at least 10,000 square feet will offer rotating attractions such as free hair cuts one month or free food in another. Penney said the Town Square “will merge the physical and digital worlds, assuring the physical retail stores’ vital role as the centerpiece of retailing’s future.”
Finally, Penney introduced a new red, white and blue logo and its new spokesperson, Ellen DeGeneres.
Michael Francis, president of J.C. Penney, said in a statement, “We are redefining the J.C. Penney brand so we become a store for all Americans, by offering an experience they cannot get anywhere else.”
- CEO Ron Johnson Outlines Blueprint to Make jcpenney America’s Favorite Store – J.C. Penney Company, Inc./PRNewswire
- J.C. Penney gets rid of hundreds of sales – The Associated Press/Google
- J.C. Penney to Change Prices Amid Revamp – Bloomberg News
- J.C. Penney revamps strategy to include major markdowns – Los Angeles Times
- J.C. Penney Chief Thinks Different – The Wall Street Journal
- JC Penney Reinvents Department-Store Retailing – Advertising Age
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Discussion Questions
Discussion Questions: What do you think is the most exciting aspect of the plan to turn J.C. Penney around? What if anything leaves you underwhelmed? Will the plan make Penney into “a store for all Americans?”
Poll
Our research has shown for a long time that a) retailers continue to increase the number of price changes sent to stores and b) they truly have no idea of the impact of these price changes. Someone finally did the math. I am really excited to see a reduction in the number of promotions.
I think it’s also true that consumers don’t like to shop in “big boxes,” but I’m not sure that stores-within-a-store will have legs. Still, it’s the most exciting thing to watch in retail since, well…since the Apple stores.
The changes around pricing, promotions, and personality all seem good for JCP. We know it’s tough to compete on pricing and promotions these days, so the personality changes are what will determine success. The Main Street and Town Square concepts sound intriguing, so I can’t wait to eventually visit a new store. If Wall Street allows for the full four-year transformation, I predict success.
The new pricing strategy at JCPenney is a bold experiment, and time will tell whether it will cause JCP to gain or lose market share. (It’s certainly a “statement” about brand differentiation.) I do wonder how the re-pricing affects national brands with broad distribution and “suggested retails”…everyone from Cuisinart to Nike to Seiko.
But I often find that retailers should address issues of merchandising and the store experience before (not after) dealing with branding and other marketing issues. JCP is tackling its brand position first, perhaps because it was the easiest to get done right away.
Mr. Johnson drew several parallels to the Apple “narrative” during his presentation yesterday, and many skeptics have pointed out the differences. (The Apple Store sells a narrow assortment from a single brand with a “cool factor” drawing crowds to new product introductions.) As JCP evolves its merchandising and store experience — on a rather slow timetable — it would be smart to infuse the sort of excitement surrounding short-duration promotions that has driven traffic to retailers like Target and H&M.
You have to give Ron Johnson high marks for his Apple-esque boldness. He essentially is turning Penney into a whole new concept. This is understandable for someone who was running a chain of stores with average sales per square foot of over $2700. There was not much there you could do without success.
What puzzles me is his haste. This is not a new channel. It has a long history and is continually evolving. It has daunting competition. Penney specifically has lots of baggage. Will these changes work? Maybe. Will they work exactly as he and his advisers think? Unlikely.
Why would you make changes on a scale this dramatic without testing them in a couple of markets and then adapting empirically?
First of all there isn’t — and maybe shouldn’t be — a, “store for all Americans.” If you are trying to be something to everybody you probably aren’t being enough to anybody. The Town Square idea is the most interesting idea in the article, in large part because it is the most unconventional. And here — contrary to my usual position — I’m not necessarily associating unconventional with good.
I’ve done a ton of pricing research over the past decade so the move to EDLP — or rather a modified EDLP with fair and honest pricing at its core — is one I would have recommended. Ditto for decreasing the number of promotions. Johnson is dead right, excessive promotions and promiscuous promotion don’t do anything except erode margins, confuse shoppers and, in the end, drive business out the door to retailers with more easily understood pricing models.
As for the Main Street initiative I guess it all depends on what “shops” are featured.
And there’s the bottom line. The Devil, as always, is in the details. Unless somebody has a crystal ball out there, at this point nobody can say whether or not Johnson’s plan will work. That said, I’ll go out on a very thick limb and note if he doesn’t do something drastic he is certain to lose.
Oh … as for the new logo … it always amazes me that companies that are in financial trouble always seem to have enough free cash lying about in the file cabinets to invest in new logos and/or rebranding activities. Maybe Johnson should ask Gap how well that pays off.
Hats off to Mr. Johnson and JCPenney for thinking big! Unless retailers start coming to terms with the fundamental shift of their relevancy in this digitally empowered shopper world and having the commitment to make changes, they will simply become irrelevant and go out of business. There are a myriad of challenges ahead for JCPenney, but their willingness to distort their reality may be the one thing that saves them in the years ahead. The ‘town square’ and the ‘shop-in-shop’ concepts are bringing back the days of the street bazaar where the shoppers can indeed discover and be surprised and delighted by their ‘finds’. Additionally, the vendor brands can control their unique brand message. This concept may open the way to a less antagonistic, and more collaborative relationship between the retailer and their brand vendors. Now that would be shift in the reality distortion field!
I like the philosophy. But the phrase “a store for all Americans” feels off to me. It implies that Americans are a homogenous group. Nothing could be further from the truth. It appears the merchandising concept will offer choices, but the marketing concept could use a tweak to recognize and celebrate the differences of both the shoppers and the merchandising that will hopefully suit them better.
The services offerings, priced right, could easily give shoppers more solutions. The watch out is that over thirty years, shoppers have abandoned many of the same services classic department stores used to offer. I hope they did some shopper homework to determine if that kind of investment might pay out.
I think it’s all exciting. In particular The Town Square concept is a means of engaging the shopper every visit…just for a look see. I worry a wee bit about that daily low pricing will set expectations for even lower pricing. However, that part is up to the consumer. Hat’s off to JCP!
Cutting out 529 “desperate” price promotions a year, creating a diverse sense of theater in Penney stores, and using a popular contemporary spokesperson (Ellen DeGeneres) all enhance what Penney stores will be offering tomorrow.
JCPenney has come a long way from its early roots in Wyoming, but it got real tired; a bloated persona and overworked its past practices. Now, at least, it will go off on a new retail adventure and that will increase its chances for future success. But the jury is still out.
The Board of Directors wanted change, and they got what they asked for. I am very surprised that JCP is making this depth of change without testing first, but their management likely wasn’t given the “luxury,” so I am certain some depth of qualitative and quantitative study was executed.
I agree that the “fresh” concept within the store is intriguing. It will create some buzz within the mall and g-d knows we haven’t seen much of that in a long time. The store has a heavy commitment to private label goods and apparel. Who thinks the logo is fashion forward? Awful.
I hope that as this new store concept and pricing strategy will be given time to evolve. Certainly will give us plenty of things to observe and comment on in the months to come!
Love the pricing model — but do they have the supply chain excellence to support it? Department stores have struggled for years and this is certainly a differentiated approach to turning them around. I agree with the comments about “America’s stores” though. Freebies in the store don’t really work for me because it’s just another discount to draw people in. I’d love to see them feature local merchandise in the town square or special experiences, something that makes you want to come in and shop and see what’s new. That’s what the Apple store has in spades — people just want to hang out there. Tall order for JCP but I think they could get more creative and lasting than “free haircuts.”
These are certainly bold moves that will generate a lot of short-term excitement.
The question is whether these are actions based on a comprehensive strategic analysis of JCP’s business situation, marketplace equity and customer base, or if they are driven move by a dream to create an “Apple” in the department store space.
Clearly, JCP could not continue to follow the path to obsolescence, and bold new steps were required. But I question whether JCP can easily be transformed so dramatically from discount to cool.
The appearance of a radical move is exactly what JCPenney needs right now. And promoting and cultivating that perception is exactly what the retailer needs — the exciting aspect of the plan.
The approach is nothing new, it’s already in practice by other retailers. The marketing and re-branding aspect of the effort will determine if JCPenney survives.
The most exciting aspect of this turnaround is Ron Johnson’s willingness to reinvent a long broken retail model. I look forward to watching this transpire over the next few years. Too many retailers, especially the supermarket channel, have buried their head in the sand and refused to disrupt their own business models.
Whether of not the store becomes a store for all Americans is yet to be seen, but I think targeting the main street concept for all Americans is a good focus.
This will be a very exciting transition to stay on top of
Arthur Martinez, during his tenure at Sears, tried the everyday value pricing tactic and it failed miserably because U.S. Dept stores have programmed the shopping behavior of the average American.
Jordan Marsh (remember that chain?) in Florida use to run a major sale or event the third weekend of every month. And customers only frequented the stores on the third weekend of every month.
The rear view mirror analogy that Mr. Johnson states seems appropriate as he is perhaps repeating history.
I think it is the most dramatic strategy change in retailing in decades. Time will tell if it is successful, but I find it wildly appealing. I had started to see the ads before hearing the news and they immediately grabbed my attention. I think this has been executed well.
Cutting the promotions is intended to reduce consumer confusion over pricing. But, the consumer may ultimately be more confused by the change, assuming JCP’s competitors continue with their aggressive promotional strategies. I think EDLP works great for supermarkets because it’s a routine shopping experience for the consumer — like a commodity. EDLP provides a convenience for pricing; the consumer doesn’t need to worry about who has the best promotion this week for cereal, for example. Department stores are a more discretionary spending opportunity, where the consumer has been trained to shop promotions. Can JCP break this consumer habit?
Creating something new and exciting is necessary to create an attractive shopping experience. Changing the pricing strategy to an EDLP or monthly low price strategy is reasonable, but does not create an exciting shopping experience in and of itself. While the Main Street and Town Square ideas are unique, this appears to be an in-store copy of what the newer shopping malls are trying to create. The success of this idea remains to be seen — what is in these sections? Is it attractive to consumers? How does it relate to the rest of the store? Will consumers want to shop in these sections AND the rest of the store?
If the new experience is exciting and fresh, consumers will want to shop there even if the logo stays the same. If the new experience is not exciting to consumers, they will not shop there, new logo or old. And why change the logo and confuse consumers?
I can not see how this helps solve JCP’s problem. Is taking a shopping center concept into a department store and creating a monthly pricing strategy the solution? The proof is in the details and it remains to be seen how this idea is transformed into reality.
I perceive both pros and cons to Mr. Johnson’s revamp of JCPenney.
On the positive side are the simplification and sharpening of the stores’ price image, and the focus on shopper experience.
On the negative side, the Town Square seems like a tacit admission that its existing store footprints are simply too big.
On the pro side, the Town Square might add some actual fun for shoppers. I particularly like the idea that the retailtainment will vary month to month, giving customers a non sale-related reason to stop in.
On the con side, the “store for all Americans” does not seem to address the innate variation in shopper needs, wants and preferences from region to region and store to store and time to time. To plagiarize a little bit from its rival, “My JCP” should ensure that both store experience and merchandise mix are relevant.
On the pro side, the company is talking big and with persuasiveness about its strategic concept. It seems to embrace change and define the benefits in shopper-centric terms.
On the unbelievably con side is the “scream” commercial JCP started running last night to launch the changeover. I can’t recall another ad so obnoxious and grating. It’s plenty disruptive, but in such a bad way that I fear I won’t be able to go near a revamped store without becoming physically ill.
On the pro side, the commercial could be donated to the folks at Guantanamo for use in breaking hardened terrorists, thereby preserving American global hegemony.
Like many of the other commentators, I agree that the switch to an EDLP strategy is a wise one. It will immediately reduce complexity in store ops and merchandising and will eventually retrain the behavior of the core Penney consumer.
The rest of the strategy is a huge bet that Johnson is right that department store retail presents a big opportunity. The store remodel costs to create Main Streets and Town Squares may be significant enough that if the strategy fails, Penney won’t have the resources or the time to recover. The current consensus is that the department store is a dying breed, so we will see if Johnson proves us all wrong.
I’m also perplexed by the absence of a multi-channel strategy in these announcements. Given the strength of Apple’s digital retail channel, you’d think Johnson would more strongly emphasize extending Penney’s online presence.
Overall, I like the message. Consumers want an experience and clearly Mr. Johnson understands that from his years with Apple. Creating a unique Town Square theme that incorporates 80+ mini stores within the store is a great idea. This allows JCPenny to quickly change out mini stores keeping the shopping experience fresh. The idea of incorporating services like back-to-school haircuts is great. Amazon can’t offer that experience.
I really like the new logo and want to encourage Mr. Johnson to back it up by carrying a lot more Made in America items. Yes, they may cost more, but it creates jobs and people that have jobs shop. I truly believe there is a growing group of Americans (me included) that are searching for Made in America, American brands. With the new logo and the Town Square theme Mr. Johnson has the potential to be the destination for those brands. Made in America, by Americans for Americans
Mr. Johnson is taking some really bold and exciting steps that have real potential.
Brand shops? Thumbs up. Finally, a move to differentiate the brandapalooza that is Penney’s. I still think a bit of pruning is in order.
Cleaning up promotions? Thumbs up. Speaking of brand, when Penney’s upscale brand launches such as American Living hit the floor at 25% off, the message is clear “You’re paying too much.” Martha is getting in at a good time.
Logo? Thumbs down. What the . . .?
It is not difficult to find comparable models tried in similar ways in the past to each element of the strategy articulated, and to point out that most of them failed. That said, I agree with the point of view that a revolutionary approach is needed to produce distinctly different results. Tweaking the existing model won’t break the paradigm or materially change the P&L.
An observation that I think bears reinforcing is the need to make the in-store changes as quickly as possible in the wake of the announcement of the intention. And to do them all together, efficiently, and with fanfare. Which is so much easier to do than it is to type.
Pursuant to a comment above, I remember the Sears failure. Could you re-post this in September after “Back to School” is finished? It should be evident at that time if Mr. Johnson is a visionary or a latter day Mr. Martinez.
There are a lot of interesting ideas here, and I suspect some will work and some won’t. What will determine how successful Penney’s is with this plan is how quickly they will figure out which components are working and which aren’t. Take the brand shops, for example. It will be easy to tell which generate the most sales. Harder is understanding which brand stores — by location — actually drive incremental traffic and sales across other brand stores and the rest of the store. That will be the key to creating a coherent store offering. JCP has plenty of work ahead to make those calls the right way, but done right it has a lot of potential.
Of course the strategy is risky…but staying stuck in the middle with no growth and six quarters of lower profits is even riskier. I love how JCPenney brought in Ron Johnson to reinvent itself, and he’s doing it.
Will it all work? Probably not. But it will get them moving forward so they define their future rather than stay stuck in the past.
I thought what was interesting was the moving away from private label and more into brands. All the multiple brand store-in-a-stores makes me think JCP will be a mini-mall at the mall. And I think it will work!
I like the Town Square element IF they really work on developing that space beyond seating and music. I think the key will be how much of a destination the Town Square really is, and how much they also invest in elevating the experience the JCP staff delivers.
By some miracle known only to the blog gods, I ended up reading a different article than everyone else. They read about, apparently, “big,””bold,””exciting” changes; I read about EDLP ( which we read about earlier in the week, and which Macy’s and Walmart — among hundreds — have tried), a center ring (which P.T. Barnum tried), and a new logo (which as Ryan noted, every troubled company on earth has tried).
OK, maybe I’m being bit cruel. The Town Square concept is innovative, and if we overlook its vaudevillesque aspects (and the fact that a seemingly random set of events offered up at the store’s calling rather than the customer’s is exactly what they claim to not want), some claim of new thinking can be offered; but mostly what I see is tweaking. Maybe that’s all that is needed, or all that’s possible, but it’s evolutionary, not revolutionary. All my life — thru 3 or 4 logo changes — JCP has been a store that was nicer than Ward’s or Sears, but not as nice as (insert here your local department store that’s now Macy’s)…and I don’t see any of this changing that.
Count me as not sold. Much of this has been tried before with little success. Transitioning from a promotional pricing model to ELDP is particularly problematic. Customers have been trained to equate value with discount percentages. Customers respond to promotional offerings. There’s very little about ELDP which creates any sense of urgency, so they just wait for your competitor’s promotion. Promotional pricing is a very slippery slope and it’s very difficult to get back off it once you’ve stepped out onto it.
Well here we go again — anyone remember Montgomery Ward and the different “shops” concept? “You have to break it down for them” seems to have been tried and failed.
Many questions to this program and few answers:
What will they do about the goods that have been sold during this transition period at the old higher price — when they lower the price, will they refund the difference to the customer that requests it? If not they can kiss that customer goodby.
With month-long promo periods, how well will they stay in stock so the customer on the last week will be able to purchase the product? If they had issues with a three day ad, what will 30 days do to them?
How will they interest a customer in coming in to shop if they only run a large tab once a month (and we all know the staying power in the home for an ad)?
I could go on but just one other comment — JCP is not Apple and if he came up with this 10 or 15 years ago then TIME WILL TELL just as it has for others.
Oh my. First Martha and now Ellen. A few sales, ESDP, a new logo and ad campaign. So very 1988. At least that’s when Sears rolled out its version. Maybe JCP will sort it out in the execution?
Reinventing phones or the music business might not need a deal, but when the assortment isn’t much different from the competition, why will she drop the mop? Or as we like to say, “retail ain’t for sissies.”
According to Mr. Johnson, Steve Jobs knew of his plans and approved of them. He told the New York Post, “I remember our last conversation. He said, ‘Ron, you’ve figured it out.’ I said, ‘I think so.’ He said, ‘I think you did, too.”
I appreciate the NY Post link George posted about the conversation Johnson had with Jobs.
I think all industries need an injection of creative thinking to keep abreast of our changing society, especially in retail. It should be about taking a chance on change, once you have done your due diligence by really inspecting what has been going on (this is so crucial).
The fact that he first approached it from the standpoint of what the customer is seeing/receiving by signing for his companies customer emails already shows a “step back and let me see what is going on” approach without getting caught up in the current retail muddle.
Just based on what I have seen and read so far I think what Johnson has planned is a step in the right direction to remake the retailer.
As JCPenney looks to reinvent itself as the smart, forward-looking department store with more customer focus, I would be interested to understand how measurement fits into these plans. Will the retailer continue to hold itself accountable to the traditional yardsticks, or will it focus on building a deeper understanding of customers, their wants, and their behaviors? With its technology roots, its relative youth (compared to a blue chip retailers like JCPenney), and its bravado for breaking accepted norms, it certainly appears that Apple focused on “getting it right” for the consumer, following what it learned about its customer whether or not that corresponded to what accepted wisdom had to say on the topic.
Initiatives from the top are always good, but hundreds of thousands of employees have an inertia all their own. The rhetoric is great. Now it will be interesting to see if the chain as a whole can walk the walk.
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Our research has shown for a long time that a) retailers continue to increase the number of price changes sent to stores and b) they truly have no idea of the impact of these price changes. Someone finally did the math. I am really excited to see a reduction in the number of promotions.
I think it’s also true that consumers don’t like to shop in “big boxes,” but I’m not sure that stores-within-a-store will have legs. Still, it’s the most exciting thing to watch in retail since, well…since the Apple stores.
The changes around pricing, promotions, and personality all seem good for JCP. We know it’s tough to compete on pricing and promotions these days, so the personality changes are what will determine success. The Main Street and Town Square concepts sound intriguing, so I can’t wait to eventually visit a new store. If Wall Street allows for the full four-year transformation, I predict success.
The new pricing strategy at JCPenney is a bold experiment, and time will tell whether it will cause JCP to gain or lose market share. (It’s certainly a “statement” about brand differentiation.) I do wonder how the re-pricing affects national brands with broad distribution and “suggested retails”…everyone from Cuisinart to Nike to Seiko.
But I often find that retailers should address issues of merchandising and the store experience before (not after) dealing with branding and other marketing issues. JCP is tackling its brand position first, perhaps because it was the easiest to get done right away.
Mr. Johnson drew several parallels to the Apple “narrative” during his presentation yesterday, and many skeptics have pointed out the differences. (The Apple Store sells a narrow assortment from a single brand with a “cool factor” drawing crowds to new product introductions.) As JCP evolves its merchandising and store experience — on a rather slow timetable — it would be smart to infuse the sort of excitement surrounding short-duration promotions that has driven traffic to retailers like Target and H&M.
You have to give Ron Johnson high marks for his Apple-esque boldness. He essentially is turning Penney into a whole new concept. This is understandable for someone who was running a chain of stores with average sales per square foot of over $2700. There was not much there you could do without success.
What puzzles me is his haste. This is not a new channel. It has a long history and is continually evolving. It has daunting competition. Penney specifically has lots of baggage. Will these changes work? Maybe. Will they work exactly as he and his advisers think? Unlikely.
Why would you make changes on a scale this dramatic without testing them in a couple of markets and then adapting empirically?
First of all there isn’t — and maybe shouldn’t be — a, “store for all Americans.” If you are trying to be something to everybody you probably aren’t being enough to anybody. The Town Square idea is the most interesting idea in the article, in large part because it is the most unconventional. And here — contrary to my usual position — I’m not necessarily associating unconventional with good.
I’ve done a ton of pricing research over the past decade so the move to EDLP — or rather a modified EDLP with fair and honest pricing at its core — is one I would have recommended. Ditto for decreasing the number of promotions. Johnson is dead right, excessive promotions and promiscuous promotion don’t do anything except erode margins, confuse shoppers and, in the end, drive business out the door to retailers with more easily understood pricing models.
As for the Main Street initiative I guess it all depends on what “shops” are featured.
And there’s the bottom line. The Devil, as always, is in the details. Unless somebody has a crystal ball out there, at this point nobody can say whether or not Johnson’s plan will work. That said, I’ll go out on a very thick limb and note if he doesn’t do something drastic he is certain to lose.
Oh … as for the new logo … it always amazes me that companies that are in financial trouble always seem to have enough free cash lying about in the file cabinets to invest in new logos and/or rebranding activities. Maybe Johnson should ask Gap how well that pays off.
Hats off to Mr. Johnson and JCPenney for thinking big! Unless retailers start coming to terms with the fundamental shift of their relevancy in this digitally empowered shopper world and having the commitment to make changes, they will simply become irrelevant and go out of business. There are a myriad of challenges ahead for JCPenney, but their willingness to distort their reality may be the one thing that saves them in the years ahead. The ‘town square’ and the ‘shop-in-shop’ concepts are bringing back the days of the street bazaar where the shoppers can indeed discover and be surprised and delighted by their ‘finds’. Additionally, the vendor brands can control their unique brand message. This concept may open the way to a less antagonistic, and more collaborative relationship between the retailer and their brand vendors. Now that would be shift in the reality distortion field!
I like the philosophy. But the phrase “a store for all Americans” feels off to me. It implies that Americans are a homogenous group. Nothing could be further from the truth. It appears the merchandising concept will offer choices, but the marketing concept could use a tweak to recognize and celebrate the differences of both the shoppers and the merchandising that will hopefully suit them better.
The services offerings, priced right, could easily give shoppers more solutions. The watch out is that over thirty years, shoppers have abandoned many of the same services classic department stores used to offer. I hope they did some shopper homework to determine if that kind of investment might pay out.
I think it’s all exciting. In particular The Town Square concept is a means of engaging the shopper every visit…just for a look see. I worry a wee bit about that daily low pricing will set expectations for even lower pricing. However, that part is up to the consumer. Hat’s off to JCP!
Cutting out 529 “desperate” price promotions a year, creating a diverse sense of theater in Penney stores, and using a popular contemporary spokesperson (Ellen DeGeneres) all enhance what Penney stores will be offering tomorrow.
JCPenney has come a long way from its early roots in Wyoming, but it got real tired; a bloated persona and overworked its past practices. Now, at least, it will go off on a new retail adventure and that will increase its chances for future success. But the jury is still out.
The Board of Directors wanted change, and they got what they asked for. I am very surprised that JCP is making this depth of change without testing first, but their management likely wasn’t given the “luxury,” so I am certain some depth of qualitative and quantitative study was executed.
I agree that the “fresh” concept within the store is intriguing. It will create some buzz within the mall and g-d knows we haven’t seen much of that in a long time. The store has a heavy commitment to private label goods and apparel. Who thinks the logo is fashion forward? Awful.
I hope that as this new store concept and pricing strategy will be given time to evolve. Certainly will give us plenty of things to observe and comment on in the months to come!
Love the pricing model — but do they have the supply chain excellence to support it? Department stores have struggled for years and this is certainly a differentiated approach to turning them around. I agree with the comments about “America’s stores” though. Freebies in the store don’t really work for me because it’s just another discount to draw people in. I’d love to see them feature local merchandise in the town square or special experiences, something that makes you want to come in and shop and see what’s new. That’s what the Apple store has in spades — people just want to hang out there. Tall order for JCP but I think they could get more creative and lasting than “free haircuts.”
These are certainly bold moves that will generate a lot of short-term excitement.
The question is whether these are actions based on a comprehensive strategic analysis of JCP’s business situation, marketplace equity and customer base, or if they are driven move by a dream to create an “Apple” in the department store space.
Clearly, JCP could not continue to follow the path to obsolescence, and bold new steps were required. But I question whether JCP can easily be transformed so dramatically from discount to cool.
The appearance of a radical move is exactly what JCPenney needs right now. And promoting and cultivating that perception is exactly what the retailer needs — the exciting aspect of the plan.
The approach is nothing new, it’s already in practice by other retailers. The marketing and re-branding aspect of the effort will determine if JCPenney survives.
The most exciting aspect of this turnaround is Ron Johnson’s willingness to reinvent a long broken retail model. I look forward to watching this transpire over the next few years. Too many retailers, especially the supermarket channel, have buried their head in the sand and refused to disrupt their own business models.
Whether of not the store becomes a store for all Americans is yet to be seen, but I think targeting the main street concept for all Americans is a good focus.
This will be a very exciting transition to stay on top of
Arthur Martinez, during his tenure at Sears, tried the everyday value pricing tactic and it failed miserably because U.S. Dept stores have programmed the shopping behavior of the average American.
Jordan Marsh (remember that chain?) in Florida use to run a major sale or event the third weekend of every month. And customers only frequented the stores on the third weekend of every month.
The rear view mirror analogy that Mr. Johnson states seems appropriate as he is perhaps repeating history.
I think it is the most dramatic strategy change in retailing in decades. Time will tell if it is successful, but I find it wildly appealing. I had started to see the ads before hearing the news and they immediately grabbed my attention. I think this has been executed well.
Cutting the promotions is intended to reduce consumer confusion over pricing. But, the consumer may ultimately be more confused by the change, assuming JCP’s competitors continue with their aggressive promotional strategies. I think EDLP works great for supermarkets because it’s a routine shopping experience for the consumer — like a commodity. EDLP provides a convenience for pricing; the consumer doesn’t need to worry about who has the best promotion this week for cereal, for example. Department stores are a more discretionary spending opportunity, where the consumer has been trained to shop promotions. Can JCP break this consumer habit?
Creating something new and exciting is necessary to create an attractive shopping experience. Changing the pricing strategy to an EDLP or monthly low price strategy is reasonable, but does not create an exciting shopping experience in and of itself. While the Main Street and Town Square ideas are unique, this appears to be an in-store copy of what the newer shopping malls are trying to create. The success of this idea remains to be seen — what is in these sections? Is it attractive to consumers? How does it relate to the rest of the store? Will consumers want to shop in these sections AND the rest of the store?
If the new experience is exciting and fresh, consumers will want to shop there even if the logo stays the same. If the new experience is not exciting to consumers, they will not shop there, new logo or old. And why change the logo and confuse consumers?
I can not see how this helps solve JCP’s problem. Is taking a shopping center concept into a department store and creating a monthly pricing strategy the solution? The proof is in the details and it remains to be seen how this idea is transformed into reality.
I perceive both pros and cons to Mr. Johnson’s revamp of JCPenney.
On the positive side are the simplification and sharpening of the stores’ price image, and the focus on shopper experience.
On the negative side, the Town Square seems like a tacit admission that its existing store footprints are simply too big.
On the pro side, the Town Square might add some actual fun for shoppers. I particularly like the idea that the retailtainment will vary month to month, giving customers a non sale-related reason to stop in.
On the con side, the “store for all Americans” does not seem to address the innate variation in shopper needs, wants and preferences from region to region and store to store and time to time. To plagiarize a little bit from its rival, “My JCP” should ensure that both store experience and merchandise mix are relevant.
On the pro side, the company is talking big and with persuasiveness about its strategic concept. It seems to embrace change and define the benefits in shopper-centric terms.
On the unbelievably con side is the “scream” commercial JCP started running last night to launch the changeover. I can’t recall another ad so obnoxious and grating. It’s plenty disruptive, but in such a bad way that I fear I won’t be able to go near a revamped store without becoming physically ill.
On the pro side, the commercial could be donated to the folks at Guantanamo for use in breaking hardened terrorists, thereby preserving American global hegemony.
Like many of the other commentators, I agree that the switch to an EDLP strategy is a wise one. It will immediately reduce complexity in store ops and merchandising and will eventually retrain the behavior of the core Penney consumer.
The rest of the strategy is a huge bet that Johnson is right that department store retail presents a big opportunity. The store remodel costs to create Main Streets and Town Squares may be significant enough that if the strategy fails, Penney won’t have the resources or the time to recover. The current consensus is that the department store is a dying breed, so we will see if Johnson proves us all wrong.
I’m also perplexed by the absence of a multi-channel strategy in these announcements. Given the strength of Apple’s digital retail channel, you’d think Johnson would more strongly emphasize extending Penney’s online presence.
Overall, I like the message. Consumers want an experience and clearly Mr. Johnson understands that from his years with Apple. Creating a unique Town Square theme that incorporates 80+ mini stores within the store is a great idea. This allows JCPenny to quickly change out mini stores keeping the shopping experience fresh. The idea of incorporating services like back-to-school haircuts is great. Amazon can’t offer that experience.
I really like the new logo and want to encourage Mr. Johnson to back it up by carrying a lot more Made in America items. Yes, they may cost more, but it creates jobs and people that have jobs shop. I truly believe there is a growing group of Americans (me included) that are searching for Made in America, American brands. With the new logo and the Town Square theme Mr. Johnson has the potential to be the destination for those brands. Made in America, by Americans for Americans
Mr. Johnson is taking some really bold and exciting steps that have real potential.
Brand shops? Thumbs up. Finally, a move to differentiate the brandapalooza that is Penney’s. I still think a bit of pruning is in order.
Cleaning up promotions? Thumbs up. Speaking of brand, when Penney’s upscale brand launches such as American Living hit the floor at 25% off, the message is clear “You’re paying too much.” Martha is getting in at a good time.
Logo? Thumbs down. What the . . .?
It is not difficult to find comparable models tried in similar ways in the past to each element of the strategy articulated, and to point out that most of them failed. That said, I agree with the point of view that a revolutionary approach is needed to produce distinctly different results. Tweaking the existing model won’t break the paradigm or materially change the P&L.
An observation that I think bears reinforcing is the need to make the in-store changes as quickly as possible in the wake of the announcement of the intention. And to do them all together, efficiently, and with fanfare. Which is so much easier to do than it is to type.
Pursuant to a comment above, I remember the Sears failure. Could you re-post this in September after “Back to School” is finished? It should be evident at that time if Mr. Johnson is a visionary or a latter day Mr. Martinez.
There are a lot of interesting ideas here, and I suspect some will work and some won’t. What will determine how successful Penney’s is with this plan is how quickly they will figure out which components are working and which aren’t. Take the brand shops, for example. It will be easy to tell which generate the most sales. Harder is understanding which brand stores — by location — actually drive incremental traffic and sales across other brand stores and the rest of the store. That will be the key to creating a coherent store offering. JCP has plenty of work ahead to make those calls the right way, but done right it has a lot of potential.
Of course the strategy is risky…but staying stuck in the middle with no growth and six quarters of lower profits is even riskier. I love how JCPenney brought in Ron Johnson to reinvent itself, and he’s doing it.
Will it all work? Probably not. But it will get them moving forward so they define their future rather than stay stuck in the past.
I thought what was interesting was the moving away from private label and more into brands. All the multiple brand store-in-a-stores makes me think JCP will be a mini-mall at the mall. And I think it will work!
I like the Town Square element IF they really work on developing that space beyond seating and music. I think the key will be how much of a destination the Town Square really is, and how much they also invest in elevating the experience the JCP staff delivers.
By some miracle known only to the blog gods, I ended up reading a different article than everyone else. They read about, apparently, “big,””bold,””exciting” changes; I read about EDLP ( which we read about earlier in the week, and which Macy’s and Walmart — among hundreds — have tried), a center ring (which P.T. Barnum tried), and a new logo (which as Ryan noted, every troubled company on earth has tried).
OK, maybe I’m being bit cruel. The Town Square concept is innovative, and if we overlook its vaudevillesque aspects (and the fact that a seemingly random set of events offered up at the store’s calling rather than the customer’s is exactly what they claim to not want), some claim of new thinking can be offered; but mostly what I see is tweaking. Maybe that’s all that is needed, or all that’s possible, but it’s evolutionary, not revolutionary. All my life — thru 3 or 4 logo changes — JCP has been a store that was nicer than Ward’s or Sears, but not as nice as (insert here your local department store that’s now Macy’s)…and I don’t see any of this changing that.
Count me as not sold. Much of this has been tried before with little success. Transitioning from a promotional pricing model to ELDP is particularly problematic. Customers have been trained to equate value with discount percentages. Customers respond to promotional offerings. There’s very little about ELDP which creates any sense of urgency, so they just wait for your competitor’s promotion. Promotional pricing is a very slippery slope and it’s very difficult to get back off it once you’ve stepped out onto it.
Well here we go again — anyone remember Montgomery Ward and the different “shops” concept? “You have to break it down for them” seems to have been tried and failed.
Many questions to this program and few answers:
What will they do about the goods that have been sold during this transition period at the old higher price — when they lower the price, will they refund the difference to the customer that requests it? If not they can kiss that customer goodby.
With month-long promo periods, how well will they stay in stock so the customer on the last week will be able to purchase the product? If they had issues with a three day ad, what will 30 days do to them?
How will they interest a customer in coming in to shop if they only run a large tab once a month (and we all know the staying power in the home for an ad)?
I could go on but just one other comment — JCP is not Apple and if he came up with this 10 or 15 years ago then TIME WILL TELL just as it has for others.
Oh my. First Martha and now Ellen. A few sales, ESDP, a new logo and ad campaign. So very 1988. At least that’s when Sears rolled out its version. Maybe JCP will sort it out in the execution?
Reinventing phones or the music business might not need a deal, but when the assortment isn’t much different from the competition, why will she drop the mop? Or as we like to say, “retail ain’t for sissies.”
According to Mr. Johnson, Steve Jobs knew of his plans and approved of them. He told the New York Post, “I remember our last conversation. He said, ‘Ron, you’ve figured it out.’ I said, ‘I think so.’ He said, ‘I think you did, too.”
I appreciate the NY Post link George posted about the conversation Johnson had with Jobs.
I think all industries need an injection of creative thinking to keep abreast of our changing society, especially in retail. It should be about taking a chance on change, once you have done your due diligence by really inspecting what has been going on (this is so crucial).
The fact that he first approached it from the standpoint of what the customer is seeing/receiving by signing for his companies customer emails already shows a “step back and let me see what is going on” approach without getting caught up in the current retail muddle.
Just based on what I have seen and read so far I think what Johnson has planned is a step in the right direction to remake the retailer.
As JCPenney looks to reinvent itself as the smart, forward-looking department store with more customer focus, I would be interested to understand how measurement fits into these plans. Will the retailer continue to hold itself accountable to the traditional yardsticks, or will it focus on building a deeper understanding of customers, their wants, and their behaviors? With its technology roots, its relative youth (compared to a blue chip retailers like JCPenney), and its bravado for breaking accepted norms, it certainly appears that Apple focused on “getting it right” for the consumer, following what it learned about its customer whether or not that corresponded to what accepted wisdom had to say on the topic.
Initiatives from the top are always good, but hundreds of thousands of employees have an inertia all their own. The rhetoric is great. Now it will be interesting to see if the chain as a whole can walk the walk.