The worst innovation can destroy a brand. JC Penney CEO Ron Johnson has unsuccessfully tried to remake a 110 year old department store discounter in a “chic” everyday low price designer mall. The result of this retail innovation has been is customer confusion and horrendous sales and share decline.
Drawing on his successful experience at Target and Apple stores, Johnson went one step further. He deconstructed a dependable sales promotion discount department store, into an experience mall within a store, with self-contained low price designer brand stalls, eateries and avenues and tablet search within the store gimmicks that bore no relation to the longstanding shopping habits of its committed low mid end shoppers and the changing demographic realities of its old locations. He has tried, in short, to turn a sow’s ear into a silk purse.
JC Penney shoppers went there instead of going to Macy’s for its decent low price merchandise and continuous sales promotions. The financial crisis hit the entire retail industry and each chain struggled to find a new footing through this long term economic decline. Some have turned around like Macy’s and Target; others, like Mervyns, have vanished.
In one fell swoop he replaced sales promotion with an across the board price discount on all goods; thus eliminating the excitement of shopping for sales. He introduced low price designer brands in separate kiosks to shoppers that never went to JC Penney for brands. Johnson introduced tablet search to shoppers, who as a demographic group wither do not have tablets or do not habitually use them for shopping. He created places to rest and snack to a customer class that is too busy to waste time at department stores. What worked at Target and Apple Stores does not work at JC Penny. These retail copy-cat innovations are irrelevant to the locations and demographics of JC Penney’s historic customer base.
The strength of JC Penny has always been its quality merchandise at a discount price, spurred on by vigorous sales promotion. Target has a different customer base than Penney’s, and so does Apple Stores. Johnson has the wrong background for what Penney needs. They were the first department to bring in massive decent quality merchandise from China. Merchandising has always keep Penney alive. They need to replace Johnson with an inventive merchandiser who can source new low price quality lines from new off shore sources. Their brand has always been “the bargain” department store. This vast market has been driven from the department store world to Dollar Value stores, as department stores try to become chic.
Their real competitor has always been Wal-Mart, but their advantage lay in their urban and near suburban locations that Wal-Mart has not been able to enter. They have always had clerks and hominess that Wal-Mart dispensed with. Johnson is competing with the wrong retailers. JC Penny did not need a copy-cat innovation revolution; it needed a better merchandiser.
What do you think?
Milton Kotler