J.C. Penney Apologizes in TV Spot
businessweek.com
businessweek.com
If you watch it, it's like they put the voiceover over random stock video photography. It's rather bizarre.
-- snip --
It's no secret, recently JCPenney changed. Some changes you liked and some you didn't, but what matters from mistakes is what we learn. We learned a very simple thing, to listen to you. To hear what you need, to make your life more beautiful. Come back to JCPenney, we heard you. Now, we'd love to see you.
-- snip --
Johnson was trying to take JCP upmarket (not so much in price/quality as in type of customer) because he knew they were going to be completely squeezed out by the logistics capabilities of stores like Target. Unfortunately, that kind of process takes years and a lot of courage because you will alienate many, if not most, existing customers before new customers come.
But JCP did the worst thing: they stopped right after alienating their existing customers. I think my brother-in-law will be looking for a new job soon. I will have a great deal of respect for the new CEO if they can bring JCP back to their previous level of "glory" and maintain it.
Any idea how Kohls is doing? They're essentially the same as JCP.
Many of their stores also suffered from high rent even in failing malls, exacerbating their losses as suburban malls failed.
If JCP didn't have their retail lease obligations, they may have succeeded in pivoting to higher market consumers and transitioning to smaller stores and tighter, more informed staff. However, they have decade+ long leases on anchor stores in malls with massive financial penalties for early withdrawal, so they are stuck with massive amounts of retail floor. It's one thing to change your business strategy wit 4,000 square foot retail spaces; it's entirely different if you're locked into 40,000 square feet in hundreds of malls!
Due to his success at Apple and Target, Ron Johnson was hired by J. C. Penney in November 2011, succeeding Mike Ullman who had served as CEO for the past 7 years. Ullman then served as chairman of the board of directors but was relieved of his duties in January 2012. Bill Ackman, a J. C. Penney board member and head of hedge fund Pershing Square, had strongly supported bringing in Johnson to shakeup the store’s stodgy image and attract new customers. Johnson was awarded $52.7 million when he joined J. C. Penney, plus he made a $50 million personal investment in the company. After being hired, Johnson tipped Michael Kramer, an Apple Store veteran, as COO while firing many existing J.C. Penney executives.[7][8] [8]
When Johnson announced his transformation vision in late January 2012, J. C. Penney’s stock rose 24 percent to $43.[9] Johnson's actual execution, however, was described "one of the most aggressively unsuccessful tenures in retail history". While his rebranding effort was ambitious, he was said to have "had no idea about allocating and conserving resources and core customers. He made promises neither his stores nor his cash flows would allow him to keep". Similar to what he had done at Apple, Johnson did not consider a staged roll-out, instead he "immediately rejected everything existing customers believed about the chain and stuffed it in their faces" with the first major TV ad campaign under his watch. Johnson defended his strategy saying that "testing would have been impossible because the company needed quick results and that if he hadn’t taken a strong stance against discounting, he would not have been able to get new, stylish brands on board."[10] [11]
Many initiatives that made the Apple Store successful, for instance the "thought that people would show up in stores because they were fun places to hang out, and that they would buy things listed at full-but-fair price" did not work for the J.C. Penney brand and ending up alienated its aging customers who were used to heavy discounting. Johnson himself was said "to have a disdain for JC Penney’s traditional customer base. When shoppers weren’t reacting positively to the disappearance of coupons and sales, Johnson didn’t blame the new policies. Instead, he offered the arrogant assessment that customers needed to be “educated” as to how the new pricing strategy worked. He also likened the coupons beloved by so many core shoppers as drugs that customers needed to be weaned off."[12][13][9]
While head of J. C. Penney, Johnson continued to live in California and commuted to work in Plano, Texas by private jet several days a week.[14]
On April 8, 2013 he was fired as the CEO of J. C. Penney and replaced by his predecessor, Mike Ullman.[15] Johnson was dismissed after his "bold new pricing strategies clearly failed, but before being able to bring his “shop-in-shop” strategy to fruition", as the board of directors was reportedly Johnson's costly ambitious turnaround plan. The “mini-shops” in Penney stores featuring hot brands, that just opened last year, were doing better than the rest of the store.[16]
Turns out, though, that people like sales, and coupons.
I don't actually know if they are apologizing for the increased quality, or the lack of sales/coupons.
[Edit: Doh, I just watched it a couple more times - you're right - what, actually are they apologizing for?]
Now you all know how stubborn some older people can be. They want to hunt for a bargain, and not getting that feeling of accomplishment from the feeling of "fictitiously" getting a good deal deterred them from wanting to shop there. They also have begun rolling out mobile payments on iPads/iPhones and many older people think they're not as safe and that someone is stealing their credit card info.
Now I happen to prefer the new store in a store concept as you can actually find what you're looking for more easily as the highlighted brands are in plain view with their own little section of the store and all the associated products are near by. Much better than the old, everything mushed together layout.
tldr: They tried to cater towards the younger generations, but failed to realize their main customer base is still overwhelmingly the older generation of americans who are set in their ways.
Age (as is so often the case) has nothing to do with it. My brother-in-law is a sales associate there. Even the teens/twenty-somethings he deals with we're mad about the lack of sale prices.
I preferred the 'new', old square pricing. If I actually needed something from JCP, I could just go and get it. I didn't have to worry about having to wait for some stupid coupon sale to bring the price down to what it should have been in the first place. But I guess you could counter that with the fact that if everyone knows they can just pick 'x' up at a later time at the low price, they would have no incentive to buy it in a timely manner.
EDIT: Yes, I realize that if the stores are measuring foot traffic and sales they should still see a pattern however I would be willing to bet that the graph would be flatter with fewer and less drastic highs and lows.