New strategy successfully chased away old customers but didn't attract new ones
April 9, 2013
Well, it seemed like a good idea at the time. J.C. Penney was a respected brand with millions of loyal customers but, like every company, it was hoping to find a way to jazz up its image and grow a little bit.
So it looked to one of the world's most successful companies -- Apple -- and poached Ron Johnson, who had built Apple's successful chain of retail stores.
Johnson promptly embarked on a drive to rid Penney of its old customers by getting rid of the sales and coupons they had come to expect. He also jettisoned many of the brands and lines of merchandise Penney's customers were accustomed to. Instead he imposed a new pricing strategy no one quite understood and introduced hip new lines of merchandise.
Partly successful
The strategy was at least partly successful. The old customers went away. Angrily. But the new, hip consumers? Judging from the empty stores, they failed to get the message.
"Today I went to the Mall, straight to Penney's. It's been a while since I've been there. I usuallly buy bagfuls of clothes there. First the store was bare. I'm 58 yrs old and all I see is Junior stuff," said Bonnie of Chesapeake, Va., a few days ago, in a ConsumerAffairs posting. "There is no more Worthington, no more St Johns Bay, and the aisles have mannequins with tiny dresses on.
"All I can say is I will never return. The clothes look small, ugly and cheap. What a shame. I'm so sorry the old J.C. Penney's is gone," Bonnie said.
And so, after a stunning quarterly loss of half a billion dollars, the J.C. Penney board undertook a review of its new CEO's innovative policies, and did not like what it saw.
After 17 months of declining sales and punishing losses, the board ousted Johnson and brought back his predecessor, Myron Ullman.
So everything will be fine now? Don't count on it. A lot of damage has been done and hundreds of millions of dollars thrown away. Whether Ullman or anyone else can get J.C. Penney back on its feet is anyone's guess.
Too little, too late
To his credit, Johnson recognized that his strategy was not taking hold but by then it was too late. "It was clear that withdrawing from our promotional model to a more everyday model has been harder than we anticipated," he admitted a few weeks ago.
Johnson embarked on a desperate attempt to turn things around by laying plans to revert to the old pricing policy, a move that brought harsh condemnation from marketing gurus, including branding consultant Robert Passikoff. Writing recently for ConsumerAffairs, Passikoff put it this way:
"They're going to raise the prices and then -- wait for it -- lower them, figuring that will give them the appearance of having provided consumers with a large discount at a sales event, so it will appear even more special and of greater value to customers. So, all in all, not so fair-and-square and really fake prices. If you are as dumbfounded as we, join the club."
For this part, Ullman said he had not yet worked out what his recovery strategy would be. ""I wouldn't recommend that we go back to the way J.C. Penney was when I left. Things change," he said, according to the Wall Street Journal. But, he added, "There's no reason to try and alienate customers who want to try and shop at J.C. Penney."