Ron Johnson Ousted As JCPenney CEO

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In 2000 the average tenure of a CEO was 10 years. In 2008 it was down to 8 ½, signaling a slightly higher degree of corporate and brand accountability by boards and shareholders. Bet you Ron Johnson, the now former-CEO of JCPenney wishes the retailer had a Time Machine Department about now. He only lasted 17 months.

We can’t imagine that anyone is surprised. The results of his efforts were dismal. Grim. jcp (Mr. Johnson “modernized” the name and logo) lost $552 million in the 4th Quarter, narly a billion dollars for the year, and sales fell nearly 29% versus a year ago. Oh, and JCPenney share lost half their value during Mr. Johnson’s tenure. So really, really grim.

Mr. Johnson, got rid of sales, instituted low-price guarantees, got rid of brands, got rid of “fake prices,” negotiated for new brands, brought back sales and coupons, planned to re-design stores, and then brought back “fake prices.” None of which worked. To paraphrase Yogi Berra, who apparently knew as much about Department Store retailing as Mr. Johnson, “if the customers don’t want to come to the store, you can’t stop ’em.”

Nobody would deny that retailing has gotten tougher in the past few years, but equally so, brands have learned that if they can create some degree of emotional engagement (in additional to the rational stuff like Merchandise Range, Fair Pricing Strategies, and Customer Service), they are bound to see positive behavior toward the brand. And yes, it’s gotten harder for retailers to provide meaningful and engaging differentiation as regards their brands.

But equally so, it’s axiomatic that if customers behave more positively towards you, you ought to see positive results to your bottom line. But to do that you need to have something that customers can engage with. We won’t go into all the reasons consumers engage with Apple. That would be preaching to the choir. Mr. Johnson apparently thought JCPenney and Apple were on equal planes when it came to emotional engagement, and boy, was he wrong!

According to our 2013 Customer Loyalty Engagement Index, when it came to Department Stores, overall engagement levels (versus a category Ideal, calculated to be 100%) were pretty close:

Kohl’s: 84%
Macy’s: 82%
Marshall’s: 81%
T.J. Maxx: 80%
Dillard’s/Sears: 79%

But not for JCPenney. Their engagement rating – according to their own customers – was 70%, which is low in any category, but very low in Department Store Retailing.

Anyway, JCPenny announced that Myron Ullman, who had been CEO until Mr. Johnson was brought in will be coming back. In a seven year period when Mr. Ullman was in charge shares were down 15%, so about 2% a year, which is a lot better than 50%.

Talk about cutting your losses!

2 COMMENTS

  1. I am perpetually amazed at how little CEOs actually know about their customers. A few episodes of the fake experiences in UNDERCOVER BOSS (which I call UNDERCOVER CHARITY) is proof enough. But Mr Johnson will now become another case study.

    For over 14 years I worked with Stage stores, one of Penny’s major competitors and not even listed in Mr Passikofs engagement list. We knew Penney’s needed a fresh make over.

    There was no queston Penney’s had lost its way BUT Mr Johnson was deluded to think his customer thought and acted like a man. She doesn’t.

    Every Day Low Price is what she ALWAYS says she wants but what she means is “Give me a 20% off SALE everyday.” She wants to shop. It is therapy and she wants to uncover a bargain.

    She wants to be fooled – it gives her justification to make a purchase .. “Look what I saved!”. She just doesn’t want to be told she has been a fool!

    For more than 30 years I have tried to talk retailers out of EDLP. It doesn’t work! Ask the people in Bentonville!

    Or ask me!

  2. Modernizing the JCP name and logo was of little import, but cannibalizing the time-tested design of the company over the outcry of economically challenged customers was a mistake from day one.

    Too many smaller scale stores were re-vamped, first removing home, kitchen, cosmetic & giftwares from available merchandise, closely followed by ramping up credit card interest rates and discontinuing seasonal & on-going sale catalogues and coupons. A creep of lower quality clothing started to appear, followed by a conversion of most of the clothing lines to “teen casual,” largely ignoring a reliable base of over-30 professionals who demand quality choices (in proportional sizes) of more than Dockers, tees, golf shirts & sleeveless tanks. Even the larger stores now resemble under-inventoried boutiques. EDLP was an excruciating final dagger to the heart of a loyal base.

    Johnson was positively on the wrong track, no doubt. But the board of directors cast one final blow by supporting a political agenda. Anyone who has ever run a business knows that is never wise.

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