Can Small Experiments Turn Around J.C. Penney?

The failures of J.C. Penney have been well-documented, particularly with regard to Ron Johnson's rocky tenure at the retailer.  Johnson embarked on a sweeping change initiative that failed miserably. He tried to hit a grand slam, making substantial changes in strategy, marketing, and merchandising all during his first few months on the job.  He did not take the time to test many of his new ideas before rolling them out nationwide.  The failures led to his ouster less than two years after taking the helm.

Now Marvin Ellison, a former Home Depot executive, is trying to turn things around.  While sales are moving in the right direction, the profit picture is still not sound.  Still, I think it's interesting to note that Ellison is focusing on small experiments as a means of innovating and changing the retailer. Here's an excerpt from a lengthy story in Fortune on the Ellison approach:

Question: If you wanted to buy a pair of men’s shoes at a department store, would you look for them next to (a) Men’s Clothing, or (b) Women’s Footwear?  Most shoppers would probably answer “a.” But at J.C. Penney, the 114-year-old retailing mainstay, the answer until very recently was “b.” Women make up about 80% of Penney’s clientele, and Penney managers believed that, generally speaking, those women were likely to buy shoes for their spouses and beaus, just as they did during the Kennedy administration.  “It was a terrible idea,” says Marvin Ellison, shaking his head as he walks a reporter through a Penney store in Frisco, Texas. “It took space away from women’s shoes, and it made it very difficult for men to want to buy shoes.”  

Ellison, Penney’s newly minted 51-year-old CEO, had a better idea. He ran a test to see whether men’s shoes would sell faster when showcased next to, say, men’s suits; once the data showed that they did, he instituted that change last summer across the company’s 1,000-plus stores. Since entrusting guys to buy their own brogues and boots, Penney has seen double-digit sales gains in footwear. “That reset has been one of the smartest things we’ve done,” says Ellison.  This Frisco store, not far from company headquarters in Plano, north of Dallas, serves as Penney’s retail living lab, and as he continues the tour, Ellison proudly points out similar changes. Fashion jewelry now sits closer to its Liz Claiborne apparel brand, so women can try on accessories to go with a dress they might buy. The decor has been gussied up at the store’s traffic-driving in-house salons....As the adage goes, “Retail is detail.” And if the details Ellison is addressing seem forehead-slap obvious, signs of how far J.C. Penney had fallen behind its rivals—well, welcome to his world.

J.C. Penney Apologizes. Now What?

J.C. Penney has issued a new advertisement apologizing to its customers for the mistakes that the firm made during the past year or so.   I have to commend the move.  It takes guts to come out with such a commercial, acknowledging serious merchandising/pricing errors.  However, customers needed to hear this message.  Moreover, the message is strong and effective not simply because of the apology, but because it includes an explicit invitation for customers to return.  What else is needed?  J.C. Penney needs to follow up this ad by explaining to customers what has changed.  What did they learn from these mistakes?  How have they rectified past errors?  What will be different when customers return?  The firm has to answer these questions to overcome the hesitation that some customers will have about returning to the stores.  

Ron Johnson: The Heat is On

The pressure continues to escalate on J.C. Penney CEO Ron Johnson.   In this week's New Yorker, James Surowiecki writes about the struggling retailer (thank you, James, for the shout-out).   Meanwhile, on CNBC, former J.C. Penney CEO Allen Questrom speaks out about the situation.

Transformation at J.C. Penney

Laura Heller has written an article about the transformation taking place at J.C. Penney.  Heller's article, which can be found at Forbes.com, describes the firm as "the most interesting retailer of 2012."  As you probably know, the company recently hired Ron Johnson, the former leader of Apple's retail stores.  As CEO, Johnson has set out to remake J.C. Penney, and he's hired some talented folks to help him (including a senior executive from Target, where Johnson worked prior to Apple).   

So far, Johnson's team has redesigned the logo, hired a new spokesperson, invested in Martha Stewart's company and launched a design partnership with Nanette Lepore.  Perhaps most significantly, the company is overhauling its pricing strategy in a dramatic way, and it's redesigning the in-store experience.  The company will be reducing prices significantly on many basics, relying less on weekly sales, and keeping prices at the same level for a month at a time on many items.  It's not quite everyday low pricing (EDLP), but it's a shift away from the usual high-low pricing strategy that many retailers employ.   In terms of the in-store experience, the firm will be introducing many "stores within a store" - with each mini-store associated with a key brand.  Heller rightfully points out that it will be fun to watch these changes unfold, and to see if they succeed.

What's clear to me is that the department store format is crying out for re-invention.  Whether or not these changes all succeed, Johnson is right to try rethinking the department store concept.   In a world of massive discounting, outlet store malls in every state, and rapid e-commerce growth, department stores have to change their approach.  It will take more than a new store experience though.  The firm will have to offer exclusive products as well, so as to avoid pure head-to-head competition with rivals.  Moreover, it will have to define itself clearly vis a vis its rivals.  For years, the company's positioning and target market has been a bit  murky.   That will have to change too.