The new old JCPenney
When Ron Johnson took over as CEO of JCPenney, he laid off thousands. And then Johnson fired his customers.
Original Article posted 4/9 By Fred Rosenfeld on MRketplace
To be successful in our business one must have passion and emotion. From a business level it is important to control that emotion. How many times have we said, “it is only business.” So I am surprised that when I review JCPenney I get incredibly pissed. Make no mistake: Penny’s was clearly on a very slow path to extinction. A slumbering giant dinosaur that was losing gradually to the competition and had few new initiatives with an aging consumer. In fact there were different office politics at play and sides formed on what would be the solutions. So the board brought in a rock star.
Unfortunately the result is almost as predicted 18 months ago when we only speculated about the rumors of Ron Johnson. The board gave Johnson a blank check, no system of checks and balances and in his vision he created a blank sheet of paper. He declared a company 110 years old with 1,100 doors a “start up.” He did this at Apple but the vision was Steve Jobs and every single item in the store was best of breed. Nothing at Penney’s was best of breed. Then he made these delusionary plans for 700 of these doors with absolutely no plans for what I told my clients were the “missing 400.” As I sat in the dramatic Applesque initial analyst meeting and heard about the three-tier “Fair and Square” pricing I shook my head in confusion.
The advertising was cutting edge and it cut right through everyone except the consumer who also shook their heads. So he fired his genius marketing hire after paying him huge millions to sign on. Then he went back to some sales, some coupons which he called gifts, some promotions he called buttons, some early birds we swore would never happen again and finally in an 180 degree, back to high-low pricing. He tried to build a new Home Store based on getting Martha Stewart to violate her contract with Macy’s.
While JCPenney might not have been in good shape long term they were a solid company. Now they are in a tight cash squeeze with many in the financial community questioning their short term existence. The company is now valued at half of what it was when Johnson started. Private equity firms are lining up.
The first thing Johnson did was fire his customer. He didn’t want this moderate, older consumer. He made it very clear that they were not welcome. In fact he even changed the name of the company. JCPenney became JCP. Then he fired the management. Anyone who knew about the business was gone. They were replaced by backgrounds of Bergdorf’s, Nordstrom’s and Abercrombie. Along this way thousands lost their jobs and loyal, long term vendors lost the business and in some cases their own businesses. Asia was thrown into turmoil.
Because he had this vision of a modern company, he threw people’s lives down the stairs. The new people he hired didn’t even have the commitment to move to Plano. They chose to pretend to work electronically and burn up the executive jet fuel. In fact Johnson himself did not even move, citing the disruption to his family. Think about the disruption to thousands of families. Apparently Johnson believed that if he kept repeating the same dream and say it with a smile it would be true. It really struck home when Johnson dramatically stated just a few weeks ago that they had learned a lot in the last year. They actually learned that the consumer likes a sale. WOW!
So now we’re back to Mike Ullman. Ullman had gotten the credit for this march to extinction so he was thrown out. Worse he was vilified by all of new Johnson people. Almost everyone from Ullman’s team was fired. The few executives that remained from the Ullman team were re-baptized. Now who does Ullman have to work with? I would think that either by being fired or leaving, all of the Johnson management will soon be gone. Who is going to run the company?
So what should the company do now? All of what Johnson did was not bad. The stores look great. The new shops look great. The shopping environment is greatly improved. No new shops should be built but keep the ones that exist. Work will have to be done to keep the new shops where the vendors were promised a non-promotional environment. Re-emphasize the core brands that catered to the older more promotional consumer. Go back in a big way to St. John’s Bay, ANA, Stratford, Worthington, etc. Then promote, promote, promote. Then promote some more. There is a theory that if you give away a toaster the customer will return. Not so easy but go back to sales, coupons, F&F, and merchandise that the old JCPenney customer understands, then they might have a chance. But do not give back the younger consumer that Johnson was after. The prices are right, if the product is right both profiles can live together.
Good luck…the industry needs you.
http://www.mrketplace.com/50320/guest-editorial-the-new-old-jcpenney/
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