Taking stock of JCP

I was one of many smitten with the “new” JC Penney commercials that aired last month during the Oscars, the ones featuring the likeable Ellen DeGeneres. It was refreshing to see spots that relied heavily on good old-fashioned storytelling to deliver a solid message, and with no blatant ploy to get a quick rise out of a social media marker. Advertising Age reports that the “Roman Returns” spot in particular—in which Ms. DeGeneres is transported back to ancient Rome and tries to return a toga to a Roman clerk, without a sales receipt, claiming “It’s just not me”—won high marks for its effectiveness with the 21- to 35-year-old female audience. Now, having said that, Ellen DeGeneres, even on an off day, is a household name who would garner great attention for almost any brand she represents. And I would also argue: so does Ron Johnson. Even if you’ve never heard of him. (That would be Ron Johnson, former Senior Vice President of Apple Retail.)

I was not among those surprised by Johnson’s decision to take the helm of JC Penney’s last fall. I mean, what would you do next if your résumé’s highlights included pioneering a retail concept for Apple that exceeded $1 billion in annual sales within its first two years of operation? After mapping out a retail footprint that sprouted some 300 stores and extended into 13 countries, what’s next? Oh, and let’s not forget the $400 million Johnson allegedly earned while at Apple Inc. Holy Toledo! And that’s not all. Prior to his Apple coup, Johnson did a 15-year stint as VP of Merchandising at Target—the period during which Target went from a run-of-the-mill discount department store to a designer-filled destination that managed to be hip and cheap, A.K.A Tar-zhé.  If you were retail genius Ron Johnson, you too would probably consider revisiting your roots for fun, give the fledging department store industry a much-needed transfusion: TCB at JCP, baby.

If you’re interested, this 90-minute JCP launch presentation offers some elegant answers to some of the questions surrounding Ron Johnson’s strategy and new role. Including: Why JCP?

For those of you who want to cut to the chase: In short, Ron claims spearheading JC Penney’s is no bigger a challenge than the one he took on when he agreed to help Apple enter the retail marketplace. He points out that both companies only had 3% market share when he accepted. In fact, Ron estimates the odds for success are much better with JCP, which is why he put up some chump change of his own to take a personal stake—a mere $50 million.

Ron says the major problem with JCP has been the pricing—and pricing methods. To this point, Johnson offers that when he reviewed the almighty numbers, he saw that JCP spent $1 billion in one year on promotions alone, launching some 590 unique campaigns. The data showed, however, that the JCP customer ignored those promotions 99% of the time, each campaign pulling in only 4 customers on average. Think about that. One billion to pull in approximately 2,360 sales. The cost per head is off the charts. Johnson suspects the promotions were largely ignored because the data he analyzed also revealed that the JCP customer, time after time, only paid a fair price for the merchandise needed. Ron says he nearly fell off his rocker when he recognized that “she [the customer] knows the right price.” Yes, Ron, we, the customer, whether shopping at Best Buy or Bergdorf, can smell a scam.

All of this research led Ron and JCP team to its “Fair and square, everyday prices” and a “no-more-clearance” strategy as a fix. The product hasn’t changed, but by offering fair pricing from the get-go, they are no longer discounting the brand to clearance-aisle status. With the pricing issue addressed, JCP can get back to fixing its promotions and its personality. Blah, blah, blah…

Ron makes it sound so easy, doesn’t he? Well, he’s got a valid point about the pricing. The pricing-and-discount game has been long played by many of the retail kings. But the department store quickly lost its allure when “brand” boutiques sprouted and the Internet came on the scene. Department store retailers were forced to spend dollars scrubbing up online shops to compete with Amazon and “niche” specialty shops. Unfortunately, the brick and mortar of their retail businesses were mostly ignored. So much effort was spent on promoting discounts to drive sales into stores, no one was minding the store brands themselves. We see this clearly with the demise of numerous JCP, Sears, and Kmart stores, often referred to as “tired,” “dated,” even “depressing.” Ron Johnson has been famously quoted as saying, “Retail isn’t broken—just the stores are.”

He’s not entirely wrong. Yes, a large percentage of the population shops online, but stores can offer more functionality and value for the customer and ultimately can facilitate more sales—both online and off. Ironically, I recently read that Amazon and Google were looking to open “stores,” recognizing the need for their own growth. In keeping with that strategy, Ron Johnson has already announced plans for more “store within store” brands, like the Sephora’s already in JCP that have been performing tremendously.  It will be interesting to see how much more Target- and Apple-flavored retail will show up in JCP. In what new ways will Johnson help to shape the next evolution of the shopping experience?

Despite some of the unsurprising social heckling, bashing, and pooh-poohing of the new JCP ads, strategy, and logo, I marvel at the simple brilliance of it all. In my opinion, JCP ultimately stole what should have been the next generation of the GAP brand redesign. (You remember. The GAP redesign that failed miserably back in the fall of 2010?) It was smart of JCP to embrace its 110-year-history firmly planted on American soil and retool its look to include patriotic tones. The logo, not coincidentally, looks like a loose graphic interpretation of the American flag, which is a great subliminal message about being American and proud of it. (Too bad the majority of what they sell is made in China…)

The logo works beautifully with the Norman Rockwell-like feeling JCP has adopted with all the advertising and branding. All that nostalgia, looking back to times that represented directness, strength, and structure, all of which supports the simplicity of JCP’s new approach. Let’s not forget that during the heyday of the 60s, department stores were status symbols—pillars of the communities—not bargain basements featuring this week’s Recession Special. Ron hopes to recreate that old strength and status with his new JCP. Technology is no doubt affecting the way we market to customers and the way customers shop, but some of us still prefer our brick and mortar. Barney’s, anyone? I mean, how else can you visit and try on the shoes—before you commit to buying? Zappos may be easy, but let’s be honest: It’s nowhere near as much fun.

And at the same time, by making fun of that nostalgia in the ad spots—officious clerks have always been officious clerks, even in Rome—the JCP company is giving its own wink to the present day and the future, too. Talk about having your cake and eating it, too.

We’ll see if the honeymoon lasts. The proof will be when those 2,360 sales, become 23,000, and then 230,000. The company will have to continue to show us that it’s truly reinventing itself. The new JCP will have to make us forget everything we think we know about what JCPenney—and shopping there—is like. Take me: The last memory I have of being anywhere near a JC Penney was about six years ago when I went Christmas shopping with my dad. They were selling Christmas trees in the parking lot for 20 bucks, and my dad can’t forego a bargain.  The real question is will Ron Johnson, who got me to a Target, and didn’t disappoint me with the experience of shopping in an Apple store, actually get me into a JC Penney’s? Just as important, once I’m there, will I buy anything?

Word to the wise, Ron. Who ever said that a spendthrift doesn’t care about sophistication and style? Who ever said those of us who will drop a paycheck on luxury shoes don’t also jump for the moderate bargain? Why must it be elegance or prudence? Why can’t we have both in the same shopping experience? Ron, if you can convert me—not your average discount shopper—you’ll be getting at a whole new demographic for JCP. Because there are a lot of others like me. That will do wonders for the JCP market share, now at a pithy 3%. Which makes me think: Perhaps I should just only be buying in JCP, but buying stock in JCP…

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