Okay, so Ron Johnson is not the god of retail.
Even with his reputation for retail wizardry at Apple (AAPL) and Target (TGT), everyone knew it would be hard for him to work his magic at J. C. Penney (JCP). Instead of hawking cool, high-margin tech products for the hipster fan base of Apple, Johnson has to deal with busy moms, screaming kids, and the the broad swath of humanity that just wants a cheap pair of pants. Now, Johnson has been forced to reverse field, announcing that he’ll start holding sales again to boost the struggling department-store chain. It’s a bow to reality: Nobody goes to a J. C. Penney to drink in the ambience or check out what’s new with Joe Fresh. They’ve surfed the Web or seen an ad that tells them the store has Joe Fresh on sale.
Johnson has now displaced J.Crew’s Mickey Drexler as the most watched man in mass-market fashion. And with J. C. Penney’s stock price down about 40 percent since his appointment was announced in June 2011 (though it’s up almost 8 percent today, on the pricing strategy shift), he has plenty of critics on Wall Street. But it’s too soon to write off his tenure as a failure.
In late 2011, Johnson rode in from his heady success at Apple, promising to transform a ho-hum chain into the hub for a 21st century shopping experience. He has widened aisles, offered haircuts, set up jean bars, and brought in colorful newbies like Joe Fresh. As he told me in July, his goal is to have J. C. Penney look less like a merchandise mart than a retail street fair with “all the kinds of things that would entertain the kids while mom shops”—creating a relaxed social experience that brings families together and is “high touch.” Sounds good so far. That’s what Apple did, after all, with its Genius Bars and in-store events.
And what did he miss? That consumers want their coupons and sales, too. Unlike, say, the latest version of the iPhone, there’s nothing in a J. C. Penney that most ordinary people would classify as a “must have.” Even in July, Johnson was starting to realize his disregard for sales was perhaps misplaced. “I thought people were just tired of coupons and all this stuff,” he told me. “The reality is all of the couponing we did, there were a certain part of the customers that loved that. They gravitated to stores that competed that way. So our core customer, I think, was much more dependent and enjoyed coupons more than I understood.”
Back then, his answer was to reform the customer. The challenge, as he saw it, was to get people to understand they can get a good deal every day at J. C. Penney. Then he discovered they already have a place to do that. It’s called Wal-Mart (WMT). If cheap was the defining motivation for most shoppers, they’d never stray beyond Dollar Tree (DLTR) or Wal-Mart for most of their purchases. It’s not. Discounts and sales are just part of the game. It whets the appetite, gets people motivated to look twice at a pair of boots in the knowledge that someone else paid twice as much.
But that doesn’t change the real challenge for Johnson, which is to delight customers once they’re in his stores and motivate them to spend more. The reason J. C. Penney floundered in recent years was because it was boring: ho-hum merchadise, ho-hum layout, a lack of distinctive branding. That’s what has to transform if Johnson is going to move the needle on sales.
The mistake he made was in thinking people would simply visit out of curiosity or because they heard it’s a good deal every day. Wrong! Now he’s stepping up to bring back that sense of urgency. While spokeswoman Daphne Avila stressed in an e-mail this afternoon that “our return to sales in no way signifies a change to our pricing strategy, but rather an evolution of it,” the move feels like a reversal, of course. Good thing. As Johnson himself said, “We’ve got to earn traffic through merchandise and content and experiences.”
At Apple, even with the seamless experience, Johnson knew the products and brand essentially sold themselves. At J. C. Penney, he’s now discovered, customers need a reason to show up. If sales help, more power to him. The chain’s turnaround will ultimately be decided by what people find once they walk through the door.
Businessweek.com — Top News
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