Tuesday, November 22, 2011

Ron Johnson and the JC Penney Turnaround

Ron Johnson, new CEO of JC Penney, has an interesting blog post on the HBR site. He draws on his time as head of Apple stores to offer some thoughts on how to be successful in retail. Johnson explains that some skeptics discounted his success at Apple by saying essentially: "The products sold themselves. Let's see what he can do without iPads to sell!". Johnson counters that customers could have chosen to buy the same products on Amazon, while avoiding the sales tax... Yet they often paid a premium to buy at the store. He explains that they came to the store for the experience, Johnson argues that the associates' focus on solving problems for customers, rather than just trying to sell stuff, proves key to creating a good experience.

I agree that brick and mortar retailers must draw customers by creating a special experience. However, some products are more conducive to this type of strategy. For others, the notion of an experience seems to matter less (do we need a physical experience to rent movies?).

The other issue here is the distinctiveness of the retailers' products. Apple stores sell their own products. Yes, they are available elsewhere, but the stores don't stock other firms' items. The products are clearly distinctive. No discounting occurs anywhere on Apple products. JC Penney sells clothes that are often discounted elsewhere. To succeed, it will have to create a more distinctive product mix. It will also have to change that mix in a nimble way to keep up with current fashions. In so doing, it can minimize costly markdowns that plague many department stores. The challenge will be significant. However, Johnson has a tremendous track record at Target and Apple of finding the right combination of products and experience to prosper.

1 comment:

Wanderer said...

Prof Michael, could you provide the link to Ron Johnson's blog post?