Penney for my thoughts

The Wall Street Journal published an excellent article on Monday covering the continuing woes at retailer J.C. Penney. I thought the article was pretty balanced in its coverage, neither calling recently installed CEO Ron Johnson an utter failure nor evading the facts on the ground that clearly show Penney’s condition has worsened since Johnson’s arrival.

The most interesting part of the article was how the reporter, WSJ’s Dana Mattioli, incorporated Johnson’s own quotations into the text. The sum result of these quotations was to portray Johnson as somewhat self-deluded, employing jargon, cliché, and rather Orwellian turns of phrase to explain away the initial failure of his turnaround strategy for Penney. For instance, when confronted with the notion that Penney has reinstated certain marketing tactics that Johnson had recently banished (like discount racks and coupons), Johnson replied that the chain was “executing very closely to [his] strategy” and “It’s more like the old J.C. Penney, but it’s not.” Or, similarly, Johnson has sought to refine the vocabulary at Penney, refusing to call a sale a sale, calling it instead “best prices” or a “price slash,” in order to hew more closely to his vision of “everyday low prices.”

These awkward locutions could be dismissed as the ramblings of a tired and overworked executive were it not for Johnson’s ambitious turnaround plan for Penney (some might even call it hubris). Johnson, the former retail marketing whiz at Apple who was a chief force in creating the unique Apple Store environment, tried to transplant something of the Apple in-store experience to Penney. He eliminated discounting and coupons, the primary reason customers came to Penney. He sought to move the merchandise upmarket, creating new in-store boutiques and forging partnerships with celebrity designers. He wanted to transform the center of Penney stores into a little interactive community, with free kids haircuts and product demonstrations. Also, he made nearly all of these major shifts in strategy across the board, rather than testing them out in select locations. In short, Johnson wanted to reinvent Penney as a hipper, more fun version of Macys, and he wanted to do it quickly. As the article makes painfully clear, however, the only thing accomplished to date is the deterioration of Penney’s financial condition and market capitalization and no guarantee that the strategy can be executed.

Johnson still has time to get things right, but it can’t be a good sign that he has backtracked on several of his early, trademark ideas. Discount racks and coupons have reappeared. Even the sales pitch of Penney’s national TV advertising campaign has changed recently, stressing low prices over an earlier focus on being culturally and fashionably hip and with-it. For instance, Penney’s summertime “back-to-school” ad was an attempt to purvey a sense of fresh everyday fashion and hipness. It was also an incredibly important ad for the chain for several reasons. First, the ad was targeted at the under-21 crowd, a vital segment in Johnson’s overall strategy. Second, it was a major component of the company’s billion-dollar-plus ad budget and was one of the first major campaigns after Penney fired long-time ad partner Saatchi & Saatchi. Last, the ad needed to connect on all levels and really pound home the notion that this is a different J.C. Penney.

The result was somewhat spotty. The ad was trying to be everything to everybody – there were tweens in bright and summery clothing; there was a mother helping her kid pack a sub-compact car for college; there was a budding interracial romance in a Laundromat. All of this was layered over with the names of strong brands like Levi Strauss and Nike and scored to The Temptations’ “Get Ready,” which seemed a bone thrown out to the kids’ parents or grandparents (and who actually do a lot of the buying). It was utterly forgettable, and I would have forgotten it had it not been for the rebranded logo and the fact that you had to suffer through it at least 10 times per football game.

 

The more recent ads have become much more price-conscious and less interested in pandering this really bland vision of remaking the company. For instance, one recent commercial had direct price comparisons with other leading retailers right on screen. What they lack in ambition, the new ads make up for in touching upon the core motivation for most of Penney’s customers – price.

 

This seems more in keeping with reality, both from a marketing perspective and a macroeconomic perspective. As big as it is, Penney simply isn’t nimble enough to transform itself the way Johnson wanted to do it, especially during an era of stagnating disposable income and another jobless recovery. While at Apple, Johnson had the luxury of starting the Apple retail experience virtually from scratch. He also benefited from what can only be described as a whacky, fanatic consumer following for Apple’s devices. And let’s not forget that over the past decade Apple’s products were head and shoulders better than their competitors. Put it all together, and Johnson crafted a really unique retail platform in which form and content were perfectly paired. Turning around a century-old department store that sells the same shit you can get elsewhere…well, that’s a tougher challenge, requiring a little more humility and maybe a little more regard for the competitive landscape, something Johnson didn’t really have to worry about at Apple. In the WSJ article, even a Penney director admitted that dispensing with small test roll-outs of the Johnson strategy was misguided.

As I said earlier, there is still a little time to sort things out at Penney, and Johnson’s strategy might yet succeed, but if I were a betting man, I would say that the likely outcome here is another massive restructuring where the Penney footprint will have to get much smaller. When that happens, there might be a fighting chance to reconfigure the chain into something more profitable, whether that be a more upscale version of Target or a more downscale version of Macys. It’s just too difficult to remake a large retailer that lacks truly significant differentiation like J.C. Penney.