The Whiteboard: JCPenney brand crash: Right idea in the wrong place? Or vice versa?
In a move that could hardly be described as stunning, JCPenney's board of directors fired CEO Ron Johnson just 16 months into the job of turning the venerable (some would say aging) retailer around. JCP has been on the clock to get results from its new brand concept using the tagline, “Fair and Square,” but the results kept heading in the wrong direction.
The company lost $175 million in 2011 and doubled that in 2012. The final quarter of last year saw sales drop by 32 percent. Now, that's stunning.
Johnson seemed to have the right résumé for the job, having had previous successes with Target and then Apple retail stores. And his new brand concept for JCP seemed bold and fresh, with everyday low pricing, a boutiques-within-a-store concept with famous brands providing unique products and the aforementioned tagline that alluded to the latest cultural trend of transparency. And?
Of course, very little of it worked. Shopper traffic steadily dropped, sales declined even more, and the boutiques were barely getting started. Oh, and somehow Johnson got into a legal tug-of-war with Macy's over Martha Stewart-branded merchandise. For Martha, it's a good thing, maybe. For JCP, not so much.
So what went wrong? Here are a few theories, some or all of which may have contributed to the spectacular nosedive for the brand.
Ron knows retail but not branding. True, you could ask what's the difference between the two for a retailer, but Johnson's stints at Target and Apple were focused on heading merchandising and retail operations, respectively. The jump to CEO put a lot more resources at his disposal, but with no brand police. He built a grand vision of reinventing the brand, but in hindsight (which is more like 50/50 than 20/20), it alienated existing customers and attracted relatively few new ones.
Johnson's brand concept was ambitious but likely too much of a stretch for the marketplace, in general, and clearly for the existing customer base, in particular.
Ron listened to what his customers said and not what they meant. Everyday low-price strategies are common in retail, so much so that they have a well-known acronym, EDLP. But most retailers struggle to maintain the policy for an extended time.
While customers may say in focus groups and surveys that they don't want all the coupons and three-day sales, their actual behavior says otherwise. Coupons, limited-time discounts and bonus buys are a positive part of the retail experience for many shoppers, and certainly for the previously loyal customer base of JCP. For them, it was a vital element of the brand. It maintained the thrill of the hunt for the best bargain.
Ron had very little pricing flexibility at Apple and, so, may have lost his touch, but even his use of flat prices — $25 instead of $24.99 — has a frequent failure rate. The perceived difference is a dollar, Ron, not a penny, ironically enough.
Ron did the best he could with a brand that couldn't be saved. It happens. Pontiac sales dropped for 25 straight years and nobody at GM could figure out how to change it, though many stars gave it a shot. JCPenney spent decades painting itself into a corner and addicting its customers to The Deal. When they took that away, there wasn't a lot of brand left.
There are a dozen places to buy name brands like Dockers, often in the same mall, but retailers need a way to get you to come looking in their store. Johnson came up with a number of ways to do that, but it just wasn't enough to overcome the legacy of a company whose brand experience was locked into "Save now before it's too late!"
When the smoke clears from this fiasco, it will be interesting to see where returning CEO Mike Ullman leads the company. Will he take JCP back to its roots, where it was already struggling? Or will he try to build a hybrid version of Johnson's concept in an attempt to regain lost customers while luring a few new ones?
Either way, JCPenney is likely to remain a cautionary tale about stretching a brand to new dimensions, only to have it snap.
David Taylor is president of Lancaster-based Taylor Brand Group, which specializes in brand development and marketing technology. Contact him via www.taylorbrandgroup.com.