Stunning news today that JC Penney CEO Ron Johnson–former Apple Store retail whiz and former Target merch
executive–has been fired after causing a roughly 50 percent drop in JCP share price over the relatively short length of his tenure as CEO. There’s so much, much more to this than just the drop in share price. It’s also the purported damage that Johnson may have done to the brand with his innovative strategies that certainly did not fit the needs nor wants of the consumer.
Now, I was pretty sanguine about Johnson taking the helm of JCP, hoping that the brand would fill the gap left by Sears (which has become nothing more than a Land’s End store combined with an upscale K-Mart. K-Mart now specializes in a particular kind of ghettowear typified by the Sofia Vergara collection….but I digress….) I’d hoped they would give some slightly hipper, somewhat better quality clothing than I could find at Target or Kohl’s. Yet Johnson made some key missteps that left consumers confused about pricing and about who among the various consumer groups JCP sought to lure. Here are in, no particular order (except for the first mistake) are six consumer-observered ways that Johnson mucked up:
First Mistake: getting rid of coupons nixes our dopamine high. Johnson completely forgot that to the American Consumer, a coupon is like bargaining. Since we can’t haggle with merchants, we like them to give us a percentage off. The American Consumer Sentiment is that the price on the tag is always too high and that the coupon is the vehicle by which we will get the fair price. If we find a missing button, or a lipstick stain, or a ripped hem, we ask for an additional 10 percent off–and usually get it. Register jockeys are allowed to give that much in percentage off for damages. Like Pavlov’s Dogs, we salivate when the coupons come in the mail or email, and studies have shown we get a dopamine boost from getting that coupon deal. With his “fair and square” pricing scheme, Johnson took away the dopamine high we get from shopping. Bad, Ron Johnson! Bad! Bad!
Second Mistake: spurning the Alfred Dunner Crowd, neglecting Boomers & Gen X Johnson wanted to court the next generation of retail shopper into the store, so he set up Sephora outlets, brought in brands like Mango and Buffalo jeans. But that did not make the Alfred Dunner retiree crowd happy. Some pundits have been saying that it was the Boomers that Johnson let down–but it’s really the Alfred Dunner crowd who relied on JC Penney for their wardrobe staples and drastically slashed grandbaby and teen clothes. By courting the young hipster demographic, Johnson left out the Boomers, Gap-gen (those too young for Woodstock/Viet Nam and too old for tattoos) as well as Gen Xers (who now have their own families.) The brands that are now being hyped by JCP–such as Cosabella and Pearl Georgina Chapman of Marchesa, and others–are more towards the customer who will shop the I <3 Ronson line, even though they are being marketed as “women’s” clothing. This is another Target-like strategy that alienates anyone over the age of 21.
Third Mistake: Replicating Target in their marketing collateral I hadn’t realized that Johnson was a Target exec because most of the early press around Johnson emphasized his stellar role with Apple. But the problem with Johnson was his strong ties to Target’s re-branding and re-launch as a cool place to buy staple clothing and some stylish housewares. He even brought in Michael Francis, the dude who was responsible for Target’s mega-successful whimsical family ads!! (Francis left after 8 disastrous months) I remember how friends and I sat and looked at the ads and scratched our heads, wondering if these ads were all part of a new Target campaign–since Target had just made some big changes in their flagship stores to include groceries and designer collaborations– or if something else was brewing . It took awhile for it to register that the ads were for a revamped JC Penney. That lag-time in ad recognition did not help.
Fourth Mistake: The Martha Stewart collaboration and subsequent lawsuit which is still unresolved. Not that a collaboration with Martha is a bad thing. It’s just that with Martha, one has to check everything twice, with an attorney, to make sure there’s no misunderstandings in the fine print. Martha made the jump from K-Mart to Macy’s pretty smoothly (after she could see K-Mart going to the ghetto dogs,) but she hasn’t been happy with Macy’s. I can’t blame her. Her goods are treated like they are second-class, tucked behind other brands such as Ralph Lauren, Kitchen Aide, and Fiestaware. She hasn’t been the stand-out at Macy’s, and JCP offered her the shop-within-a-shop idea that they’d pulled off with Sephora. JCP did not, however, bank on Macy’s reading the fine print and perhaps re-interpreting it to their benefit. The lawsuit has cost JCP dearly in money they don’t have to spend on lawsuits that might end up being “frivolous.”
Fifth Mistake: Target-like design collaborations I recently received an email from JCP announcing the launch of collaborations with Michael Graves and Jonathan Adler’s Happy Chic. Not impressive for a number of reasons other than that these are design collaborations iterative of those Target had with the same designers. While we won’t be able to purchase teakettles with little birds on them, or super cool luggage shaped like cello cases (both designed by Graves. I have the suitcase) at JCP, we will get some other Graves designed housewares that resemble those from Target. And might be just as cheaply made as those at Target. Not all of Graves’ goods were good nor durable and turned out to be wastes of money. As for Adler’s design esthetic: can well call it American Teen-Ager? I’m not impressed with the doo-dads, geegaws and various knickknacks that are being trotted out. Target has cut back on the tchochkies probably because most people are watching their pennies and might have shelves full of bric-a-brac already. I don’t envision Adler’s stuff selling all that well.
Sixth Mistake: Minimizing the brands that worked What happened to Nicole Miller? and Bisou-Bisou? and Jones New York? or the A.N.A. line? These were great brands that offered very nice crossover career-wear for the 30-55 age group. The Worthington and St. John’s Bay lines were also pushed to the side. SJB offered very nice, better quality staples (tees, jeans, sweaters) than Target, K-Mart or Sears. Worthington offered great wardrobe builders for anyone working the all-black retail or other service industry jobs. But if part of the strategy was to move away from Jobwear and Casualwear, what about the slightly upper-scale brands? The only one that got its own shop was Liz Claiborne, and not a lot of the LC pieces seem all that exciting (I haven’t purchased any.) Also, JCP seems to be doing away with petites and talls. Bad, bad move. Not everyone can afford to take a $40 pair of Joe Fresh trousers and have them altered–which is what’s needed for a petite such as myself. JCP will lose me as a loyal customer if the only stuff I can find in the petites section are Alfred Dunners.
Most retailers are struggling to get that middle bracket of consumers–those 30-55 or 60–back into stores. This demo has been neglected for quite a while, and has taken to shopping at specialty retailers like Chico’s or Ann Taylor Loft, or online. This middle bracket also likes coupons because they’ve grown up with them (and are pretty well conditioned to getting them.) Ron Johnson did very little to court this group, did a lot to alienate the retirees, and went after the young folks with a half-assed, iterative marketing strategy that completely backfired. I liked shopping in the stores, but I enjoy taking my time–lots of my peers don’t have that kind of time, and can only go by what they are seeing in ads and getting in the mail. Johnson may have been successful with Apple–it was one line of products that already had a strong brand and a carved market niche. Adding up all the mistakes made at JCP, including hiring Michael Francis, it appears that Johnson was trying to turn JCP into Target Redux.
Consumers didn’t need another Target–and that became evident with every step that Johnson took to change JCP. We need a fresh JCP, with new styles that walk somewhere between the classic and the trendy, and new designs that are more than dorm-style patterns and boastful bric-a-brac. We need our weekly dopamine fix with “deals” that don’t scream “fire sale” but do give us the price we believe is “fair and square.” So what if that price comes in a circular on a Wednesday with a coupon only good on Friday, Saturday, and Sunday. We are used to this pattern, and with over-scheduled kids and two working parents, we don’t have time to allocate to any new pricing schemes.
The JCP board has announced it will be bringing back former CEO Mike Ullman, who was resoundingly criticized by activist board member William Ackman. If anything, this may stop the hemorrhaging for now. Over the long haul though, JCP is going to have to come up with something that will lure the mommy and middle customers away from online and back into the stores, while stimulating the younger generation. This is a big, big job that will require someone who can think both old and new simultaneously. I don’t know if there’s that kind of creativity in the C-suite these days, but I will be following this next move on the part of JCP just as closely as I did the tenure of Ron Johnson. It’s probably the most exciting adventure story in retail these days.
- Is the End Near for J.C. Penney Company, Inc. (NYSE:JCP)? (marketdailynews.com)
- J.C. Penney CEO is out (money.cnn.com)
- J.C. Penney axes CEO Ron Johnson (bizjournals.com)
- Ron Johnson Out At J.C. Penney, Mike Ullman Back in Charge (blogs.barrons.com)