Ron Johnson is best known for creating Apple’s retail empire. He’s now CEO of retailer JCPenney.This week, he detailed his amazing vision for turning JCPenney into a techno wonderland in Apple’s image. And he’s turning to Oracle for help.
Apple’s store design gets almost all the attention. Not as flashy but just as important is the software that does everything from tracking inventory to letting salespeople ring up purchases with iPhones.
Like a lot of retailers, JCPenney has old, proprietary code. Johnson is yanking out about 500 applications, nearly all of them custom applications created over the years, and having Oracle be its one-stop shop.
This is a big win for Oracle, since its archrival IBM has been entrenched with retailers for decades. (Look at this 1976 article about JCPenney installing IBM cash registers, for example.)
Neither company disclosed the size of this deal for Oracle, but it’s easy to see that it’s big. JCPenney already used quite a bit of Oracle software (its database, some retail and back office apps, an HR app). But they are buying a handful of new Oracle apps.
More importantly, Johnson is trying to create a whole new kind of retail store that’s never been done before.
“We’re going to treat it like a startup,” Johnson said at the Fortune Brainstorm conference in Aspen earlier this week. “We’re going to create an entirely new retail model that’s built for the next 100 years.”
He’s going to eliminate the person at the cash register, going with 100 per cent self-checkout by the end of 2013. But it’s going to be far more sophisticated than the barcode-scanning self-checkout you see at some supermarkets and drugstores.
Johnson’s going to put RFID (radio-frequency identification) tags on every piece of merchandise.
“You’ll be able to check out anywhere anytime,” Johnson said said. “You don’t have to scan an item. You just throw it down and there’s the price.”
Johnson has been trying to eliminate coupons and JCPenney’s famous sales, though he’s had a lot of trouble pushing those changes through.
Eventually, items will simply be priced low, like Walmart, he promises. He also eliminated commissions for 300,000 employees. This makes RFID self-checkout easier, since the same item won’t have multiple prices.
RFID chips are a lot more expensive than barcode labels, though. Right now, they cost 10 cents apiece or more. For a retailer like JCPenney, with millions of pieces of merchandise, that’s a big investment just for a price tag.
“RFID clearly is a technology that’s been waiting for prime time based on the cost of the ticket,” Johnson said. “The increase in the ticket cost versus UPC label is now at a point where the benefits way outweigh the cost of doing it.”
He wasn’t specific on the benefits, but Oracle says that JCPenney will roll out a product called Oracle Retail Merchandising Analytics, which will give the store realtime data about everything including where the merchandise is located. That could give insights into items that customers pick up, try on, and put back on the rack, for example.
Johnson sees all this tech making JCPenney more like an Apple Store, where salespeople roam the store helping customers one on one, with instant mobile check out, instead of spending their time at cash registers or restocking merchandise.