Will JC Penney Ever Be Successful Again?

Despite shaking up the department store chain's corporate leadership, the Plano-based retail giant continues to suffer.
Mon July 30, 2012 6:59 pm
Associated Press | Matt Slocum

J.C. Penney, will the consumer ever love your style again?

The retail giant brought on a new CEO in November to invigorate the flailing business, but it remains to be seen if the work of former Apple retail visionary, Ron Johnson, will be enough to turn things around.

It started back in January when Johnson announced he would turn the department store concept on its head. According to the Wall Street Journal 's Dana Mattioli, Johnson planned to "carve stores into a warren of specialty shops, turning the high-traffic center selling space into an entertainment and hang-out area, and eschewing constant 'sales' in favor of lower prices every day."

Reporters got their first glimpse of the new concept last week, and Maria Halkias of the Dallas Morning News described it as "streets lined with shops and a town square in the middle." 

Individual shops have their own fixtures and lighting. Counters with stools — Apple store mainstays that started with the genius bar Johnson created a decade ago in his former job — are a common feature in the street mockup.

Checkout counters with cash registers are replaced by seating areas with sofas or long tables with built-in iPads and stools where shoppers can sit and access the Internet. At the end of the mocked-up street is a snack bar with a seating area and small tables.

The new ambiance is designed “to encourage people to come and stay a while,” Johnson said.

In the new store layout, Penney employees carry mobile checkouts, “right here,” Johnson said while holding up the palm of his hand. The new layout includes multipurpose bars where shoppers can pay with cash, return items, have something gift wrapped or pick up an online order.

The design is supposed to “inspire and engage shoppers and allow them to relax, refresh and gather,” Johnson said. “People shop in twos: a mother and daughter, a husband and wife, girlfriends. One of them can still be close by but get a cup of coffee or sit down and check email.”

Another aspect of the brand's major renovation was an overhaul to its pricing structure. Johnson implemented a "three-tier pricing approach that called for consistently lower daily prices, month-long sales and periodic discounts on merchandise throughout the year," according to the Associated Press.

But the transformation appears to have turned customers off. In May the company posted a first-quarter loss and a twenty percent drop in sales, prompting the stock to plummet twenty percent, the largest decrease since 1980.

"The pricing plan is presenting a challenge for Johnson because it’s turning out to be a tough sale to shoppers who have come to expect deep discounts and investors who are looking for Penney to turnaround its business quickly," the AP's Mae Anderson wrote.

(The retailer is now reversing course. The company said Thursday it will eliminate one of the tiers and go back to using the word “clearance.” "Penney also plans to tweak its advertising to better communicate the pricing plan to customers," according to a July 26 report from the Associated Press.)

Then in July came an  announcement that JC Penney would lay off 350 employees, according to Anne D'Innocenzio of the Associated Press, which brought the total loss of the Plano-based headquarters to nearly thirty percent of its workforce. That announcement caused shares to tumble roughly six percent. 

So as Kathy Gersch of Forbes asked, "The new vision seemed sound, so why has it failed to produce the intended results?"

The answer: incomplete execution of the change.

J.C. Penney attempted a complete transformation of its brand promise yet failed to infuse every customer touch-point — the merchandising, marketing, customer service and store environment — with its new character. And the employees, themselves — the most important agents of change — had not been fully brought on board. As a result, the strategy rolled out in fits and starts, and failed to generate the urgency and excitement required to make it stick with either customers or employees.

For the company to pull through, it will take focused and dedicated change leadership. That starts with asking some big questions: Have we sufficiently rallied the troops? Do they all clearly understand the opportunity ahead? Are they excited by the opportunity and know how they can help the company succeed?

Tags: JC PENNEY, PLANO,

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