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The Whiteboard: Shop flop: Stop or not? Rebranded JCPenney struggles to take off

By - Last modified: July 6, 2012 at 10:47 AM

When Meatloaf sang his classic line, “’cuz two out of three ain’t bad,” he could hardly have been thinking of the hardball world of big retail marketing.

JCPenney CEO Ron Johnson could be humming that tune right about now, if he weren’t too busy trying to figure out why his previous success at Target and Apple’s retail stores has failed to seamlessly translate to his new gig at the 110-year-old retailer.

Hired in October 2011, Johnson led a branding team that introduced a bold new concept for the aging department store that had been stuck in the addictive cycle of sales and coupons. Johnson’s new team came out of the gates at warp speed, introducing sweeping changes in January that included everyday low prices with few sales or specials and heralding a concept of boutique departments within the store itself.

They likened the new stores-within-a-store concept to a town square where various shops cluster together and offer shoppers an eclectic array of goods. And they called this new concept “Fair and Square,” see, because it was supposed to be “fair” pricing in a town “square” retail format.

Holy literal strategy, Batman!

OK, let’s see. Sales were down 20 percent in the first quarter, worse than during the depths of the recession. More telling, though, was that customer traffic was down only

10 percent, meaning the ones who did show up bought less than before. A financial analyst, Paul Lejuez, put it this way on MSNBC.com, “The turnaround envisioned in January has not gained traction, and the company has made basic mistakes such as introducing ‘branding’ marketing before the product (or) stores had changed.”

Mr. Lejuez makes a great point: Customers who showed up in the first quarter found a new pricing structure but did not see the new boutique concept, which is still being developed. So half the promise of the new brand is missing. The half that was delivered — everyday low prices — took away the key element of shopping, which is catnip to many people: finding the very best deal at the mall.

To be fair, Johnson’s vision of in-house boutiques carrying major-brand items made especially for JCPenney has not had time to be developed. He presented it as a four-year plan to investors and suppliers in January. To be realistic, however, is to question this halfway approach and ask what went wrong. Here are a few possibilities:

 

If one strategy is good, two are even better

Is it possible that Mr. Johnson fell into the trap of combining his two great successes into one new concept? Target jumped into a market dominated by Wal-Mart and came out with great market share and brand equity by offering “cheap chic” — good quality, branded merchandise and lower-than-expected prices.

That’s a perfect formula for creating value. His work with Apple retail stores was far more like the boutique concept, with mostly one brand of products and high interaction with the customer. Two mints in one worked for Certs, but two strategies in one may well fail for JCPenney.

 

Taking focus group comments literally

Henry Ford famously quipped, “If I had given my customers what they asked for, I’d be making faster horses.” Shoppers will often complain that prices move around too much. “Just put a low price on something and be done with it” is a common refrain. That might work more effectively if every retailer did it at the same time, which would last about 10 minutes, maybe less.

For many shoppers, the retail experience depends on the thrill of the hunt. JCPenney trained their customers to expect it, then abruptly took it away.

 

Half a new brand is better than no brand at all

The problem, though, is that JCPenney had an existing brand with a good deal of equity. Johnson’s four-year plan undoubtedly seeks to lure new customers to his town square boutique concept (which, by the way, isn’t working that well for very many town squares. But I digress.)

Yet before that was in place, they launched the new pricing strategy and a new graphic look. Mr. Lejuez might be dead-on. JCPenney made a big brand promise but delivered only a piece of it.

I have no doubt that deep in the ivory towers of JCPenney there is a PowerPoint presentation that explains all this far better than I can based on outside observation. There are probably pie charts and price elasticity studies that show this brand strategy can still work.

But so far, it looks like two out of three might work for Meatloaf, but not for a once-mighty retailer whose new brand launch looks like a giant misstep.

David Taylor is president of Lancaster-based Taylor Brand Group, which specializes in brand development and marketing technology. Contact him via www.taylorbrandgroup.com.

Write to the Editorial Department at editorial@cpbj.com

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