The Tom Dougherty Blog



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The mistakes of JCPenney

It wasn’t long ago that JCPenney CEO Ron Johnson, the former head of Apple’s retail stores, was rumored to be on the verge of being sacked after just a few months on the job. It was too soon to make such a drastic move. Johnson’s strategy needed time to play out.

Well, it’s played out.

Johnson’s concept of “fair and square” pricing, meaning JCPenney would not discount, led to a new logo. More importantly, it was positioned against a retail market that constantly discounts. The CEO was was banking on consumers who believed that a discounted price was the real price, and that they were being gouged when merchandise was not discounted.

It hasn’t worked. The retailer just announced a $427 million quarterly loss and same-store sales drop of a whopping 32 percent from last year.

Johnson obviously miscalculated when he pinpointed what he thought was an emotional trigger for shoppers. Turns out it wasn’t emotional at all. In fact, a trip to a JCPenney store, as documented by Matthew Yglesias from Slate, demonstrated that the store hasn’t changed much either.

Johnson failed. His emotional trigger – that other retailers are not honest – was a pricing story, which is rarely emotional. In fact, even an advertising campaign that showed an item being sold for less at JCPenney than in a competing retailer didn’t arouse anger in shoppers. The ad was positively cheery.

The JCPenney brand, therefore, became unimportant and flat.

To his credit, Johnson had a coherent strategy in a market where few retailers even try. I mean, what exactly is Sears’ strategic plan?

Unfortunately for the new CEO, this was the wrong strategy. On top of that, it was poorly executed.




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