Photo: Wikimedia Commons
It’s hard to talk this week’s retail news without passing judgment on JC Penney’s recent announcement that, well, everything will be changing for the retailer.On Wednesday, January 25, “Ron Johnson, who oversaw Apple’s retail strategy before starting at Penney this fall, said…that his first steps as chief executive would be to get rid of the nonstop promotions at the store and move to three kinds of prices (everyday, monthly specials and clearance).”
Looking to make JCPenney a sort of “one-stop-shop” for everyone Johnson continued, “We want to be the favourite store for everyone, for all Americans, rich and poor, young and old.” In a campaign starting February 1st that is estimated to cost the retailer $800MM, “JC Penney will embrace ‘fair and square’ pricing: — everyday low prices, month-long specials and twice-monthly sales — and flat pricing that eliminates 50- or 99-cent add-ons.” Furthermore, instead of the open sales floors now found in JCPenney (and most department stores), “there will eventually be 100 individual shops dedicated to each brand,” a move based on the retailer’s success with the Sephora “shop-in-a-shop” model.
As great as that sounds as a retail strategy – a retailer becoming all things to all consumers – JC Penney is making the wrong move.
Here are four reasons why:
1) Management Mix-Up: While many in the press are praising Johnson et.al’s vision for a “brave new Penney’s” world, there are a few things many forget about Johson’s experience: Yes, of course he did wonderful things at Apple and for the brand’s retail and growth strategy. Here’s the thing: when Johnson took on and pioneered the concept of the Apple Retail Stores and the Genius Bar, the brand was non-existent in the brick-and-mortar space and, more importantly, possessed a far younger, “hipper” consumer.
With JC Penney, Johnson’s attempting to reinvent the retail wheel with a brand that already possesses a built-in customer base in a business sector (department stores) that consumers are already fleeing in droves. Making the shopping experience “younger” and filled with more bells-and-whistles isn’t what the traditional Penney’s customer craves. In short, Johnson can’t place the Apple model on top of Penney’s discount model and expect things to magically change for the better.
2) Complicated Sales Strategy: As much as the new “constant discounting” pricing model seems like a breath of fresh retail air, JC Penney’s making things too complicated for the average consumer. While trying to re-train its customer base while appealing to non-traditional customers, the retailer appears to be adding levels of complexity to the shopping experience that may alienate Penney’s core consumer who isn’t looking for a “bright-light” shopping experience.
3) Store-Within-A-Store: This strategy works only for differentiating brands. Based on the sales success of the Sephora brand within JC Penney, this shop-within-a-shop strategy is meant to drive consumers to the specific brands they’re looking for. Yes, this worked for Sephora, but who’s going to JC Penney’s specifically for must-haves in the Arizona section? Without a core set of definable brands, Penney’s may be adding complexity to its retail structure by forcing consumers to shop brands, instead of product.
4) Bad Taste: ‘aka God, I hate the new logo.’ Admittedly, this is a purely personal, gut-reaction observation, but the new JC Penney logo – meant to reinvent and redefine the brand – looks like a cheap Tommy Hilfiger knock-off. This, combined with the slogan “Fair and Square” seems to harken back to JC Penney’s retail roots – a confusing branding strategy for a company seemingly intent on competing with the new “sheen” of retailers such as Target.
So…will Johnson’s strategy work? Maybe. But more likely maybe not. I suppose time – and the retail consumer – will tell.
Margaret Bogenrief is a partner with ACM Partners, a boutique crisis management and distressed investing firm serving companies and municipalities in financial distress. She can be reached at [email protected]om.
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