Submitted by Katie Hellmuth on | 0 Comments
Googling "JC Penney CEO" produces a lot of good drama to read through and learn from as we watch the Crazy happen at JC Penney, a once seemingly stable brand. When JC Penney snagged Apple's Senior Vice President of Retail Operations Ron Johnson to be their CEO, they did so hoping he would revitalize stores sales like he did at Apple, when he was behind the development of the now famous Apple store design (currently being ripped off in China), the plan seemed like a no brainer. He'd been the Vice President of Merchandising at Target, and Target is pretty hot now. Under his care at Apple, Apple's annual sales exceeded one billion dollars within their two years of opening, which, broke the record set by The Gap.
I was fascinated with Ron Johnson's plan to turn retail sales upside down, where he stated that the retail model was broken. He had a four-part plan, the first of which was to cut sales. The rest of which included building mini-stores within a store, and featuring top designers, like many of the big box stores have successfully done.
But he didn't want to cut sales as in, make them deeper discounts. He removed them, and introduced flat low pricing. I believe in a flat income tax, but not pricing! I shop by sales 70% of the time! I'm a sale rack junkie! If you're a designer and your stuff is on the sale rack, don't think that I don't think your stuff isn't hot. I do, I just flock to the deal sometimes when I'm buying high quality so that I can buy more of it.
Not being a pricing or retail expert, I expected this plan to fail. When I saw the JC Penney commercials starring Ellen being confused about $X.99 pricing, I didn't get why her character was confused. So when the quarterly sales came out recently, it was sad. Really sad for JC Penney, and for a visionary who thought this would work.
I reached out to my branding expert and friend Melissa Wildstein of The Matchstick Group, seeing if she could throw me a quote for this article. I loved her response so much, I'll just repost it here for you:
“In my opinion, JCP doesn't have a pricing problem, they have a positioning and branding problem. Penny's has always been a tried and true discounter. The people who shopped there did so because they wanted a good deal. Solid merchandise at a discounted price. People who didn't shop there likely didn't shop there because they didn't like the stigma or the brands that JCP carried.
“Take two discount shoppers:
“My friend Mandy: Always looking for a deal, combs through the sales rack at Marshall's, hits up the thrift store, never sets foot in the grocery store without a stack of coupons. Isn't seduced by name brands, just wants a new top / pants / furniture / whatever that fits her needs at a cheap price. She would shop at the old Penney's.
“My sister-in-law Michelle: Always looking for a deal, combs through the sales rack at Neiman's, subscribes online to the Nordstrom deal of the day, her Amex card is her best friend and she is the queen of racking up cash back through their dining program. She would never even consider shopping at Penney's.
“By eliminating the sales and moving to 'everyday low prices' means that Mandy has no incentive to shop there. She doesn't care about brands and now without the sales, she's not sure that she's getting a 'deal'.
“With the partnerships and store layout changes and whatever, Ron is likely trying to appeal to a customer more like the Michelle's of the world. But Penney's has such an old, discount brand heritage that despite their best efforts, it's going to take a long time to get the more affluent, more brand conscious customer into the doors.
“Regarding the Ellen ads: I'm not sure what the ads were supposed to mean - and I don't think that anyone else did either. Heck even WalMart's 'every day low prices' go on sale from time to time. Women like to shop. They like to look, they like to browse and they're often impulse buyers. Sales, discounts, coupons trigger impulse shopping. And die-hard discounters don't buy unless they have a deal. So by eliminating the deals at JCP, they turned away their most loyal customers.
“Ron needs to talk to his customers - past and potentially future - to figure out what they want and who they're willing to buy that from. My guess is that unless Penney's were to change their name, they aren't going to get the results that everyone is looking for from the company. I think that there's still so much tied to the old Penney's brand that new customers aren't going to be willing to give it a try unless there's some serious incentive - like a sale (ha!)
“And as for the name change from JC Penney to JCP: It's like Kentucky Fried Chicken rebranding as KFC and pushing more grilled chicken. Everyone still knows what it is...And they didn't substantially change their offering - just tried to promote a little healthier alternative.
“What JCP is doing is like Kentucky Fried Chicken changing their name to KFC and deciding only to sell gluten free organic free-range salads. WHAT?!? You don't go there for free range, organic chicken salads - you go there for a bucket of chicken and biscuits."
And there you have it, folks. Women like sales, and people like chicken and biscuits with gravy.
What are your thoughts on this? If you're a business owner, how to sales impact your business?
