How Ron Johnson tried, and failed, to inject a bit of Apple culture into JC Penney
After 17 months on the job, J.C. Penney last week showed CEO Ron Johnson the door after the former Apple executive failed to turn sales around at the nationwide department store.
While much of the discussion surrounding Johnson's unceremonious firing from J.C. Penney has centered on disappointing sales figures and less than stellar stock performance, the New York Times recently delved deeper into Johnson's somewhat turbulent tenure at J.C. Penney.
The Times found that Johnson never quite meshed with the culture at J.C. Penney, and indeed, it appears that Johnson attempted, albeit unsuccessfully, to incorporate a bit of Apple's culture into the iconic department store.
While at Apple, Johnson played an instrumental role in rolling out stores that offered premium products at premium pricing. Equally as important, the stores were inviting, hip, and appealed to a youthful demographic with money to spend.
At J.C. Penney, Johnson attempted to mimic the same type of atmosphere that made Apple retail stores so successful - quality merchandise coupled with an elegant shopping experience.
In doing so, Johnson sought to do away with coupons, clearance racks, and sales events. In their place, Johnson attempted to incorporate designer boutiques into J.C. Penney stores.
But J.C. Penney isn't Apple, and Johnson's efforts to create an Apple-like aura and shopping experience at his new place of employ served to alienate the core group of J.C. Penney customers who flocked to those stores precisely because they were looking for discounts.
The Times reports:
Mr. Johnson liked to tell employees that there were two kinds of people: believers and skeptics, and at Apple, there were only believers. He wanted the same at Penney: when employees pushed back on Mr. Johnson's strategies, they got nowhere, according to several former executives. Even when Mr. Ackman urged him to meet with retail stars like J. Crew's Millard S. Drexler and Topshop's Philip Green, Mr. Johnson seemed to pay little attention to their doubts.
Dreaming big and being a 'believer' certainly works well at a company where technological innovation is paramount, but that mode of operation didn't quite translate in the retail world where dreaming big often takes a back seat to cold hard sales figures.
By early fall 2011, Mr. Johnson was tackling Penney's pricing, which he thought used too many discounts. He ignored a study Penney had just completed on customer preferences, and gave merchants a one-sheet grid explaining what prices they could use. "Ron's response at the time was, just like at Apple, customers don't always know what they want," said an executive who advocated testing. "We're not going to test it - we're going to roll it out."
And roll it out they did, to disappointing results. J.C. Penney's demographic of cost-conscious consumers weren't pleased and they indicated as much with their pocketbooks. Somewhat predictably, sales events at the iconic department store were re-instituted this January.
Another Apple approach Johnson attempted to bring over to J.C. Penney was to spare no expense when setting up in-store boutiques. Much how Apple carefully selects the type of wood and other materials it uses in its retail stores, Johnson wanted J.C. Penney's in-store boutiques to forgo cheaper options and use high quality and more expensive materials for shelving and signage.
Much like Penney's stance on sales, the company has since backtracked and has asked "vendors to cover the costs for those in-store shops as it runs low on cash."
On the flip side of Johnson's failure at J.C. Penney are those who believe that he wasn't given enough time to turn things around. In the tech world, a company can a release a brand new product and quickly become a major player in a market where they previously lagged behind. Things in retail move a lot more slowly, and 17 months may simply not have been enough time to properly gauge the wisdom behind many of Johnson's moves.
At the end of the day, however, the bottom line is what matters and Johnson simply failed to deliver.
Josh Tyrangiel of Bloomberg Businessweek posted a tweet last week which aptly sums things up.
Ultimately, it appears that Johnson failed to sufficiently appreciate the difference in consumer demographics at Apple Stores compared to J.C. Penney. A telling statistic which drives the point home is that nearly 50% of the customers who shop at J.C. Penney are over 55 years of age while only 20% of them are under 35. J.C. Penney customers, on average, also have less disposable income than customers who frequent other department stores.
To that end, Johnson's attempt to turn J.C. Penney into a store akin to Bloomingdales might have been doomed from the start.
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