Is JC Penney’s Makeover the Future of Retailing? Kim Girard, Harvard Business Week, March 2012 The over a century old retailer JC Penney (JCP) has been losing business and customers for a long time. Though it once had a great reputation for value and loyal customers the competition of high volume, low value stores such as Wal-Mart or the higher end stores such as Macy’s have completely over taken it and threatens to force them out of the market. What can be done to revive the 110 year old retailer, who is the right person for that task and how will they do it?
These questions were addressed in this article. In the article “Is JC Penney’s Makeover the Future of Retailing”, the author (K. Girard) focuses on Ron Johnson, the new CEO of J.C. Penney and his innovations and plans to transform the store. Mr. Johnson comes to JC Penney with an impressive record of success transforming businesses and their retail strategy. He is credited with the transformation of the Target chain and for leading Apple’s retail effort with such innovations as the Genius bar.
The task faced at JCP is a huge one, the company has been experiencing lagging sales and financial losses of $87 million in the final quarter of last year and a 4.9% overall loss of revenue for the year. Mr. Johnson took the helm of the company in November of 2011. His main task in to reinvent the chain and focus on an all new client base that includes everyone as his target market. Of the innovations that he instituted immediately, he focused on pricing and making them what he termed as “fair and square”. To do this, he first eliminated sales (he called them insulting to the customer), he also eliminated coupons; a move a competitor had attempted unsuccessfully about 5 years earlier. Another innovation in pricing was to end all prices in “00” instead of “99” and take away the “suggested retail price” tag.
All of these changes were done to change the perception of the customer, from waiting until an item goes on sale to believing they are paying a fair price all the time. Mr. Johnson also has a vision of overhauling the entire shopping experience by adding new “brand shops” within the store so that the customer can easily find the item they are looking for in what is called a “Main Street” approach. The plan is to reinvent the displays (letting the designer decide how their product is displayed within the store) and have new brands that speak to different clients. Some of the new brands include Martha Stewart and a budget friendly teen line called Nanette Lepore. Johnson has also changed the store logo
and named a new contemporary spokeswoman (Ellen Degeneres) in an effort to create a buzz.
There are also plans to create a “town square’ inside each store that could potentially be used to provide customers with complimentary services. The transition began in February and he states that his plan will be fully implemented by 2015. In the article, Rajiv Lal, the Stanley Roth, Sr. Professor of Retailing at Harvard Business School comments on the probability of Johnson’s new idea succeeding. He calls this a very tough task and says that it will not be easy but that the marketing strategy could work.
He agrees with Johnson’s 3 to 4 year timeline for implementation and feels that should be enough time to decide if the plan is working. After reading this article, I took a completely random poll of 5 women in my office ages 26 – mid 50’s, who all said they had shopped at JCP within the past 6 months. Of the 5 only 1 said she did not like the changes but she also stated that she went to the store for certain brands and type of items that she could no longer find on her last trip but that she would give the store another try based on the opinion of the other 4 women. This article is a perfect example of the type of strategic approach to gaining consumers that this course talks about. It contained examples of concepts like market strategies and targeting particular customers.
Girard, Kim, (2012, 05 March) Is JC Penney’s Makeover the Future of Retailing, Harvard Business Week Retrieved from http://hbswk.hbs.edu/item/6944.html