Several years ago, my first visit to an Apple store was to buy an iPod for my son. Amazing experience. The store had a clean and open design, and the staff was really helpful. When I was ready to buy, I realized something was missing. The checkout line!
Instead of a row of registers at the front, the staffer just pulled out a scanner from underneath a table, charged my credit card, printed a receipt and we were on our way.
Much of the credit for that store design goes to Ron Johnson, Apple’s former Senior VP of Retail Operations. Ron joined Apple in 2000 after earning his retail stripes at Target and Mervyns. The Apple store design eventually became the biggest success story in retail: twice as productive as Tiffany and 7 times the median of the top 20 retailers.
Of course, Apple’s stores wouldn’t have been such a huge hit without massively popular products such as the iPod, iPhone and iPad.
Well, now Johnson is trying to reprise his Apple success at a more conventional retailer — J.C. Penney. JCP’s prior strategy could be summed up like this: “If you didn’t buy this on sale, you’re stupid!” That’s because the retailer was known for continuous promotions of one kind or another.
Hired as the CEO last November, Johnson has set a new course for the struggling retailer, including fresh store designs and (mostly) everyday low prices. He’s hired new executives and told Wall Street the transformation could take 4 years.
Then Q1 results came in, and it was ugly. Analysts started questioning the strategy, and JCP made some adjustments to its pricing strategy. While everyday low prices would still be the core, JCP added selected specials on seasonal items.
Now the Q2 results are in, and they are still dismal. The company lost $147M and said it wouldn’t meet its yearly profit forecast. Johnson is vowing to stay the course.
I applaud him (and his board) for not giving in to the short term interests of Wall Street. You see, Amazon.com went through a similar rough patch in its early days. So did Apple when it launched the innovative retail store design, including the now famous Genius Bar.
Most people forget that the Genius Bar wasn’t an instant success. In a recent interview, Johnson said, “it takes courage to go the full distance.”
You know, when we launched the genius bar years ago, nobody came. I mean literally after a year and a half, a lot of people at Apple said why don’t you close that down? We had to put in Evian bottles of water in refrigerators to get people to spend time at the bar. But we stuck with it, and today, you look at that genius bar. Could you imagine an Apple store without a genius bar? Could you imagine owning an iPhone without having a place to stop by and get that repaired or restored or fixed? You couldn’t.
I’m rooting for Johnson because this sort of courage is all too rare. JCP’s challenge, though, is quite a bit different from Apple. First, Apple had killer products. Second, it had a blank sheet to design a new technology retail experience, focused on Apple’s products.
JCP, on the other hand, sells a multitude of products that can be bought elsewhere — like Macy’s, Kohl’s and more. And over the years, JCP has trained its customers to expect price promotions. The fact is that some people love getting things on sale, even though often times it’s just an illusion. The list price is a fiction that exists only in the marketer’s mind.
Here’s an example from a happy JCP shopper in 2010, who loves getting deals: “So I think you now see why I love shopping at JCP. Designer brands, sales, coupons, and free gift certificates. All the elements a bargainista loves…”
It’s going to take a lot of time for Johnson and team to reset customer expectations. I’m not optimistic that existing customers will embrace everyday low prices. Habits are hard to break. “Bargainistas” are going to shop elsewhere, and JCP will need to win customers away from other retailers with a superior experience, not promotions.
I like Macy’s and Kohl’s, but can’t remember the last time I visited a J.C. Penney’s store. Today in our local paper were promotional inserts from all 3 retailers. Macy’s front page screamed “20%-60% OFF STOREWIDE.” Kohl’s promoted 35-50% off early bird specials on Saturday, plus additional discounts for using a Kohl’s credit card. Both had the usual clutter of ads and product promotions inside.
By contrast, JCP’s insert was like a catalog. Simple, clean and consistent with Johnson’s new direction. The front page says simply “back to school favorites” and inside you’ll find a selection of featured products with their everyday low prices, one product per page. Out of 24 pages total, only the last page promoted clearance items, but without discount percentages.
You know what, I think I’ll make a trip to JCP to check out the new in-store customer experience. I’m betting more customers will do the same. Here’s hoping his board and investors keep the faith, because the road ahead will be difficult.