Former Apple executive Ron Johnson became CEO of US department store JC Penney back in 2011. The company’s demise since then has been characterised by ongoing sluggish sales growth and store closings that have made the company a shadow of its once great self.
JC Penney’s demise began when they changed the company’s pricing strategy and replaced the old format of coupon sales with continually low prices.
The old pricing strategy however, had been popular among customers who were of an older demographic and more receptive to bargains and offers because it hypes shoppers up by making them feel smart whilst encouraging them to talk with other consumers about it.
JC Penney abandoned this strategy after new supremo Johnson assumed control of the company and tried to emulate the retail success of none other than a certain Apple Inc.
It seems a bizarre idea in hindsight, but the company eliminated coupon discounts, changed the floor merchandise and turned its stores into a selection of different boutiques – stores within a store if you like.
Obviously Apple’s marketing machine and more importantly, its unique products already create an enviable amount of hype for its customers – an audience that arguably don’t require conventional sales promotions to be lured into stores.
JC Penney however, doesn’t have a similar marketing machine and its products are in no way unique. The result of this is that JC Penney’s customers have to be lured by traditional sales promotions, something Ron Johnson neglected to take on board when he introduced everyday low prices and eliminated store coupons.
Mr. Johnson assumed that a revamped JC Penney with steady prices and a more attractive layout would attract footfall to its stores in the way that Apple does, but the strategy soon revealed itself to be a dud as disappointing sales figures made themselves apparent.
So where did it ultimately go wrong for the former Apple wunderkind and Steve Jobs protégé?
According to Doug Stevens, a retail analyst and author of the book The Retail Revival, it wasn’t Johnson’s ideas that failed but rather the way those ideas were implemented throughout the JC Penney chain.
“JC Penney had worked itself into a rut where its core shopper was an older, extremely cost conscious, penny-pinching consumer, who was conditioned to only respond to promotions that were mostly fictitious,” said Stephens. “Johnson’s challenge going in was figuring out how to reverse the damage and make JCP contemporary and into the realm of the younger consumer. Quite a daunting challenge.”
Stephens says that Johnson’s past with Apple, a place where the company’s unique products allow it to make bold changes at lightening-fast speed, may have misled him into believing a similar approach was required at JC Penney.
What initially began as an attempt to appeal to a younger, hipper demographic ended up turning into an alienation of its loyal customer base, people who liked to eagerly wait for opportunities to bargain hunt. Once that opportunity was taken away, that shopper was left out in the cold.
In fairness, many things have gone into the mix since 2012 that make it difficult to put the blame for JC Penney’s woes on a single strategy as business blunder folklore would suggest. The ever looming spectre of Amazon and the proliferation of online retailers have continued to chip away at the market share of traditional retailers for example.
Still, with Johnson long gone, the incumbents at JC Penney have failed to bring back the hype and buzz of a good old fashioned JC Penney bargain – a valuable lesson to modern marketers that once the buzz has faded away, it’s very hard to light it up again.
Here at The W1nners’ Club however, we genuinely believe that Ron Johnson was correct because we always avoid dropping our prices in the W1nners’ Club online store if we can ever possibly help it!