Doug, a Wall Street analyst, and Julie, a homemaker in Dayton, have their sights set on Ron Johnson, the CEO of JC Penney’s, and unless the executive can win them over he’s going to have a really tough few years.
Johnson, the visionary who developed Apple’s wildly popular stores, recently announced a suite of strategies that could help Penney move from its undifferentiated place in the market to something more authentic.
The strategies range from the obvious (refreshing the logo) to the revolutionary (moving from 590 yearly promotions to a 3-tiered pricing system). Somewhere in the middle of this strategic continuum are Johnson’s ideas of creating a series of stores-within-stores and of refreshing the often-dated store environments.
Stephanie Clifford, writing in The New York Times, noted however “Mr. Johnson is not creating a retailer from scratch. J. C. Penney has more than 1,100 stores, many in mall locations that have lost other tenants. More than 60 percent of its stores were built in or before the 1980s”. Just step inside any number of the 100 year-old retailer’s stores and you’ll immediately see what Clifford is talking about.
And that’s where Doug and Julie come in. Although they’re fictitious, the ways that these archetypes think will profoundly impact Johnson’s potential for success.
Doug, the analyst, has a fiduciary duty to say what’s what – and in an American economy built on quarterly results, it’s not clear if he would give the thumbs-up to an initiative costing, perhaps, hundreds of millions of dollars and taking years to complete.
Assuming that that 60% of the 1,100 stores need to be revamped at an average of $1.5 million per store, that’s just shy of a billion dollars of capital outlays. It’s not for nothing that it’s only retailers with the deepest pockets (e.g. Wal-Mart) that can (a) spend that kind of cash and (b) keep the timeline between when a retail brand revitalization is announced and when the stores are actually refreshed reasonably short.
So if Doug isn’t going to be particularly impressed with Johnson’s refreshment strategy, what about Julie the homemaker’s take on pricing and product? If she’s shopping at Penney’s for clothing, she probably wants middle-of-the road items at a good price – SKUs that are on par with Kohl’s, nicer than Sears, and, perhaps, a little less trendy than Target. And she sure as heck doesn’t want to sort-through almost 600 promotions a year, as evidenced by the fact that the average Penney’s shopper only visits the store on a quarterly basis. Circling back to Johnson, the pricing strategy could probably come on-line sooner than the stores-within-stores idea because it’s a lot easier to adjust Excel sheets than it is to change physical spaces and product assortments.
So if the store revitalizations represent a long-term opportunity – and that’s assuming, of course, that Doug will go along with it – and the stores-within-stores idea represents a mid-term white space – that leaves the venerable retailer with pricing and promotions in the short-term.
But that’s not necessarily a bad thing.
Less opaque pricing could serve two functions: it could create emotional connectivity with Julie by making her life easier; and it could elevate the brand from the price death spiral it created for itself. Moreover, along the way, it might knock-out Sears, an equally storied company that never figured-out how to fully leverage its iconic store brands.
It’s a start. And it would give Doug and Julie something to chew-on while Johnson renovates a couple hundred dated stores.