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J.C. Penney- Don’t Be The Next Retail Train Wreck

train wreckJ.C. Penney, led by CEO Ron Johnson, warned yesterday it may be hurt after it fired employees while others left voluntarily.

“We now operate with significantly fewer individuals who have assumed additional duties and responsibilities and we could have additional workforce reductions in the future,” Bloomberg reported J.C. Penney said in a recent filing. It continued…

“Combined with the company’s newly decentralized management structure, the changes ‘may negatively impact communication, morale, management cohesiveness and effective decision-making, which could have an adverse impact on our operating efficiency.’”

HOLY CRAP!

As you may know, when Ron Johnson outlawed drug-like coupons from J.C. Penney earlier this year, I was thrilled for the message to other retailers.

That said, I had known many older women who looked forward to coming to Penney’s a couple times a month with their coupons and who enjoyed the thrill of the hunt. The brands may not have been cutting edge but for many, the merchandise was quite serviceable. Both the stores and online were doing fine. The company knew their customers and embraced them.

Because J.C. Penney had started as the Golden Rule Store, I wanted the transformation to work. I had written about and counted on them for great service and value.

And I’d read all the Ron Johnson’s “it’s working“ press, seen his famous quote, “Lots of people think we’re crazy. But that’s what it takes to get ahead,” I’d read the blogs saying it’s working and giving assurances. All despite JCP’s jaw-dropping losses.

That’s why, when I began remodeling one of the rooms in my home recently, I thought of Penney’s. I’d just painted over the funky grey-striped wallpaper, the drab grey wainscoting and the water-stained plaster.

This was a temporary fix before a whole-scale strip-to-the-studs next year. I had looked at new window coverings at Pottery Barn and Restoration Hardware but $150 a panel was too much.

Enter J.C. Penney…

Even though they reported their online sales down 37% in the last quarter, I went online, found the panels I liked at a store about an hour north of me, but since I didn’t really want to drive that far to pick them up. I hit the order button. I received an email saying I’d receive them in 4-7 business days.

Hmm, not great but, OK. This was November 24. Sad to say they still haven’t arrived, but I’m supposed to get them today.

So when I met a colleague for dinner last week, we toured the local J.C. Penney which had a few of the new shop-within-a-shops.  Store Christmas decorations looked like something you’d find in a Rite Aid or supermarket.

j.c. penney entrance

The giant paper plate graphics didn’t make the store look merry.

At the front of the store was what appeared to be a purposeless abandoned cart. Try as I might, I couldn’t figure out what it was doing there or what it was related to until I’d gotten past it. Apparently they were trying to provide free blow outs like the popular franchises. And to make things even worse, there was no one manning this very out-of-place cart in the highest traffic area of the store.

No greeter. No salesperson. No stylist. Nada.

White mannequins dressed in unremarkable women’s clothes were unpinned and looked frumpy with huge out-of-line price tags everywhere.

They were noticeably stationed in what were once the main arteries through the store. As obstacles, they took up (potentially) much needed room in the middle of the aisles, which would make moms with strollers have to navigate around them.

Compare that to Macy’s. You notice the look, intrigued with how they put it together, there’s something going on and a certain confidence. Don’t we all aspire to look better? Price is not even shown.

We walked past a dozen employees, who offered not one word of hello or welcome.

And everywhere -even though Ron Johnson had said that Penney’s would be a place without sales and discounts, were signs showing exactly the opposite.

 

 

And still the merchandise sat sadly unsold.

 

 

There was no one manning the new Levi’s shops within a shop or Liz Claiborne shop – maybe that’s why I found few people with JCP shopping bags in their hands showing they’d purchased something.

Update Saturday Dec. 8, 2013 JC Penney emailed a 20% off coupon this morning according to the Dallas Morning News.  See the picture they posted on Facebook below. Notice the bottom, “This is not the actual coupon. Follow link to print coupon.” 

Geez…

And here are the lessons every retailer should be learning from the J.C. Penney train wreck…

This miserable transformation from one of rural America’s bedrock retailers has all been about what Ron wants, not what JC Penney’s customers wanted.

It’s the hubris of having an untested vision that is built on oneself, not on those one serves – the customer. That results in the risks outlined in their recent filing. It’s the people…

You need to find a way to be welcoming in the aisle.

You need to find a way to make your customer want to shop and buy and feel good when they are in your store.

You need to know that you can’t equate bright colors, promotions, cheap decorations, technology and PR with a memorable, positive experience.

That comes from people and atmosphere and proper merchandising.

And that creates the interactive energy that makes customers want to buy and want to return. That makes a store that turns a profit.

What say you? Please enter in the comments section…

Want to learn the secrets of training your employees to interact with customers, sell your merchandise and like their job better?



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Posted by Bob Phibbs, the Retail Doctor on December 6, 2012.

This entry was posted in Retail Sales and tagged , , , , , . Bookmark the permalink.

19 Responses to “J.C. Penney- Don’t Be The Next Retail Train Wreck”

  1. Amy says:

    I lovelovelove the no sale concept. Nothing I hate worse then shopping and have the clerk ask if I got the double bucks coupon in my email or snail mail or what have you. And even worse when i say no charge me full price anyway for my misfortune, forgetfulness or the inability to print the dang coupon at home. Just give me an honest to goodness decent price on quality merchandise with service to match and I will be a forever shopper. It’s a shame that they dropped the ball with this because it could have maybe, just maybe, changed the face of retail.

    • Amy I’m with you – I hated shopping at Macy’s and someone ahead of me got 40% off due to their coupons and I had to lie and tell the clerk I forgot mine and they did it anyways. You are spot-on. Everyone wanted this to work but I think there could have been a middle ground. There were hundreds of promotions a year. Got it. But they could have simply reduced the coupons to 2x a month. No PR. No announcements. Just reduced it and I’ll bet the loyal JCP shoppers would have still come. Now that their loyal customers aren’t coming the stores I’ve seen have been devoid of shoppers and the merchandise is being marked down, just not called that. Plus there is no service component to the juice bar scheme, coffee bar scheme or having yoga in the middle of the store. There’s no there there that customers crave to return to. That falls squarely on the CEO’s plate.

  2. Dena Livingston says:

    As an ex-employee I was concerned when I’d heard and read about the “NEW” direction. While I championed the elimination coupons and the overlap of coupons (anyone with a JCP credit card would get 4 or 5 mailers/week), I also know that the core JCP customer loves coupons and it was clear research had not been done. Plus, the “cold turkey” change was a big uh-oh. It seems the stores would have gone through the transition first and then the marketing.

    I gave it a year to make it work. Doesn’t seem like it will make it that long. It’s sad, because it was a wonderful place to work.

  3. hil77running says:

    Another perfect post – you said it all. Mr. Johnson threw out the best brands and the best employees. It is truly a shame to see how he has destroyed JC Penney, formerly my favorite department store.

    • Again, I’m one of the few out there commenting on what I’ve actually experience both online and in-store. Thanks for commenting.

      • hil77running says:

        The best articles have been from retail experts like yourself. It’s a shame that most CEOs do not listen to this valuable advice.

        From the customer and employee view, one only has to look on social media to get the full picture of the disaster. JC Penney’s Facebook page has been filled with comments from unhappy customers lamenting the lost of so many legacy brands, the lack of customer service, the terrible treatment of long-term employees, and the complete lack of any interest by the company in what their customers (and employees) truly need and want.

        I wrote a 4-page letter to Mr. Johnson in August detailing the problems with his new strategy. I contrasted his strategy with the success results at Macy’s. I sent a copy of my JC Penney letter to Mr. Lundgren at Macy’s, since I had referenced Macy’s as an example of a successful retailer, and also included a short complementary letter. Mr. Johnson responded with a bland form letter thanking me for my feedback and asking me to give the company a second chance. Mr. Lundgren responded with a personalized letter, a follow-up letter from an assistant, and a second follow-up letter from a customer service executive – plus $50 in gift certificates. Macy’s not only knows how to give the customers an excellent in-store and online experience, but they also know how to treat customers right.

  4. Danny says:

    I have a similar positive view of JCPenney, which to me is a good place to buy underwear, shorts, Dockers, St. John Bay, and fake St. John Bay Polo shirts. If they want to come up with some faux fashion forward brands for the hipsters, I’m fine with that but don’t mess with the classic stuff, with decent quality and sharp patterns, that people like me expect when they go to JCPenney.

    I won’t go to Kohl’s because it’s mostly polyester. Keep the cotton fabrics and the classic styles … you can add hipper stuff from there.

    One other comment is that the makeovers are okay in the newer stores, but generally look awful in the legacy JCPenney stores. And light blue-backed walls denoting Arizona jeans look bad in either venue, old or new.

  5. Danny says:

    Since a link to your article was posted on the Remembering Retail Facebook page, I thought I should share some of my comments here as well …

    I think one of the Wall Street analysts (I think it was Howard Davidowitz) said it best: They have two problems with this EDLP thing they want to do.

    The first problem is that it’s too much of a shock too soon. Target didn’t just dump everything all at once and immediately became Target. Target represents an evolution of different things that were done over time to evolve to where they are today. Target tests stuff for five years before rolling it out to the entire chain. This is proving a disaster because it’s too much too soon.

    The second big problem I see and Davidowitz (or maybe someone else) basically said that customers have to believe you are an EDLP store and it’s hard to do with clothing. One of these guys put it well … let’s say they have 5% margin the way they’re doing things now and they want to increase that to 10% Is the customer going to believe that the EDLP price is a better value, or are they getting ripped off to get to that 10%? It’s one thing to actually be an EDLP store and have customers believe that they are paying the rock-bottom lowest price and another thing to provide lip service. My belief is that EDLP is usually a rip off, unless it’s a retailer like Walmart or Big Lots.

    The trouble I see is this: Let’s say they are selling a pair of St. John Bay (did they ditch the brand?) khakis for $40, with the intention of running them on sale for $30, $25 and $20 over time. I get that. If their EDLP price is $25, $27 or $30, I might also be okay with that. But I’m afraid what they do is they’ll either cheapen the product and give me a pair of polyester pants or set the EDLP price at $35. Either way, it’s a rip off.

    That also begs another question: How do you compare store brand goods to name brand items. For example, at Kroger it’s pretty easy to compare the store brand cream cheese and spreadable butter to Philadelphia. Usually I take the store brand, but certain items I pay the extra money for the taste. How do you go about comparing a pair of St. John’s Bay khakis at an EDLP price, to a pair of Dockers at a high-low price? To determine if the store brand is a good value, it sounds like it has to be priced at less than what the Dockers go on sale for and how do you know what that is for such an infrequently purchased item that isn’t on your radar regularly?

    • I think the pricing is the least problem they have. There aren’t shoppers coming in the stores on a regular basis – or walking out with JCP merch. They never had a service component to what they would offer the shoppers. Today they sent out 20% off coupons and posted on Facebook. It is a brand in serious trouble. Ron Johnson was looking to shoot the Apple but missed the Target. I don’t know if they are figuring JCP will just charge vendors rent for their Store Within A Store to make money or not but one thing is certain, they will not make it if analyst projections are right and they are down over 30% Q4. Thanks for commenting.

  6. [...] “Even though [CEO] Ron Johnson had said that Penney’s would be a place without sales and discounts, [there] were signs showing exactly the opposite,” Phibbs wrote. [...]

  7. Carina says:

    Mr. Johnson completely missed the mark when he took away our coupons. Without coupons I have quickly forgotten about Penny’s. Why do I say this? Because no matter what Mr. Johnson thinks, coupons drive business. He can try and try but Penny’s has become a shell of it’s former self. As a marketing person (me), Mr. Johnson has turned off the faithful customer because he is not listening to our wants or needs. Hopefully, someone at the top or the shareholders will demand that he resign or get fired sooner then later.

    • Funny, they put the store on sale last weekend and the stock price shot up. Sounds good but they lowered all of their prices to “everyday values” so when they are taking 20% off they won’t have the higher margins to afford new merchandise. I know they had to do something but now putting merch on sale will only hasten the burn-through rate of their cash. Thanks for commenting Carina!

  8. Great insight, Bob – it’s good to see the perspective of someone who’s actually walked the stores, as opposed to analysts who just look at sales figures and the stock price. Either way, it’s clear there are problems. JCP later disavowed the Facebook post that used the word “coupon” (since they don’t have coupons anymore, right?) and called it an “offer”. Just like the last non-coupon was a “gift”. It’s one thing to stubbornly stick to a strategy – it’s another thing to break from the strategy and pretend like they’re not.

  9. Chase says:

    I went to JCP the other day to pick up some new Stafford T-shirts. (I’ve been wearing them for years) Unfortunately they didn’t have any. The place was a mess and no one was available to help me. So I decided to go to my wifes favorite department store, Nordstrom. Let me just say, I was quite happy to pay the $40 for white T-shirts. The store was inviting, the service was excellent, and the quality is great. Nordstom gets it.

  10. Kevin says:

    Like you I applaud getting rid of the stupid proliferation of sales and coupons at Penneys. However, I suspect that Ron Johnson has been surrounded by sycophants.

    Several years ago I wanted to enact EDLP at our retail furniture store. My designers pushed back. I backed off (they are on the front lines, not me) and we met somewhere in the middle.

    I have even greater qualms about changing Penneys into a store that appeals to hipsters and fashionistas. Brand meaning is a stubborn thing. Penneys has a boatload of meaning attached to the name. I question whether anyone can convince that target audience that Penneys is cool. Unfortunately, I think it is astoundingly easy to convince the old customers that Penneys isn’t for them. To bad.