Making Sense of the J.C. Penney Fiasco


Americans love an underdog, so perhaps there's hope for J.C. Penney yet. Or is that "jcp" -- the cooler, hipper lowercase name former CEO Ron Johnson tried to force down the throats of his skeptical customers?

By any measure, it's been a rough year for the struggling department store chain. J.C. Penney alienated many of its long-term customers with a major overhaul of the traditionally staid stores, complete with dozens of designer collaborations -- ŗ la Target -- and a rotating merchandise component "to keep things interesting."

Oh, and it did away with sales, coupons, and, by and large, special prices.

Johnson, coasting on his success at Apple and Target, announced in early 2012 that he planned to transform J.C. Penney from tired to trendsetting. In short order, he revamped the store layouts and restructured the merchandise mix. Then, just months into the total makeover, he implemented a "complete, open and integrated suite" of retail analytic solutions -- tools that he boasted would help him build Americaís Favorite Store.

In a press release last summer, Johnson announced J.C. Penney had partnered with Oracle to "simplify processes, reduce layers and equip business teams to better shape assortments and respond faster to customer preferences." The retailer also implemented Oracle Retail Merchandising Analytics, a business intelligence application that provides merchants and planners with real-time, mobile insight into item and category performance, including key metrics such as inventory position, sales, stock ledger, cost, forecast, and promotions.

Johnson seemed as excited about the analytics as he was with his innovative pricing strategy, which replaced the clearance racks, special discounts, and limited-time coupons that consumers came to associate with the store having everyday prices, month-long values, and "best prices" on the first and third Fridays of every month.

In the press release, Johnson stated that it was imperative for J.C. Penney to simplify processes and its technology infrastructure so it could "deliver the best possible customer experience." As he put it, "A critical step on this journey is providing our team with better access to the information they need to make strategic business decisions, drive performance and exceed customer expectations."

But neither Johnson nor his team seemed to gain any meaningful insight from all of those retail analytic solutions. Because in early April, Johnson got the boot -- and just this week, Penney's issued a public apology:

Why is the store saying "Sorry?" Because it got so busy trying to reinvent itself that it forgot about the needs of its customers. It dropped brands that its customers loved, such as St. Johnís Bay, it stopped sending out coupons, and it banished the clearance racks.

But the new brands designed to attract younger shoppers were slow to catch on. Customers missed their coupons. And frankly, the whole store redesign made shopping confusing.

Sales declined 25 percent last year, the stock price fell, and J.C. Penney discovered a new look was no substitute for customer loyalty.

On April 8, Myron Ullman replaced Johnson. And now, the whole Johnson rebranding experiment is over.

So what happened? Did the analytics fail? I don't think so. The analytics were just too little, too late. They came after the fact -- after Johnson and his team had already implemented wholesale changes. Don't you think someone should have been analyzing the data before the retailer made all those decisions to change the merchandise and the way it was priced?

In fairness, can you expect state-of-the-art software -- the best analytic solutions -- to overcome the questionable judgment of a guy who had a connection to one of the most annoying ads to ever to run on television? If you don't remember watching the ad, you may remember hearing it: The whole ad features one consumer after another, screaming -- make that screeching -- "Noooooooo!" in the worst voices ever recorded.

Here. Watch it for yourself if you dare:

Johnson, or someone on his team, apparently thought the ad captured the essence of the relaunch of the retail chain -- and actually gave Mother, the New York City ad agency that created it, the thumbs up.

The ad gained a lot of traction on the Internet, largely from people who vowed to never set foot in a J.C. Penney store again and wondered whether the executives who approved it were "sober when they signed the ad contract."

And many, it seemed, kept their promises. They found alternatives to J.C. Penney -- leaving the retailer in far worse shape than it was at the start of Johnson's brief term at the top. Shares of the company stock tumbled 50 percent during Johnson's tenure, and the chain bled $427 million in the fourth quarter of 2012 alone.

So what happens now? The new ad pleads with disgruntled customers to come back: "It's no secret: Recently J.C. Penney changed. Some changes you liked, and some you didn't. But what matters with mistakes is what we learn...

"Come back to J.C. Penney. We heard you. Now we'd love to see you."

Johnson is gone. But the analytical tools remain. Maybe now they'll actually have a chance to provide some useful insight -- and customers and investors alike can only hope the new executive team has the courage to use it.

When was the last time you shopped at J.C. Penney? Do you think analytical insight can help save the struggling retailer? Or is it just too late?

Noreen Seebacher,

Noreen Seebacher, the Community Editor of Investor Uprising, has been a business journalist for more than 20 years. A New York City based writer and editor, she has worked for numerous print and online publications. Her work has appeared in The New York Times, the New York Post, New York’s Daily News, The Detroit News, and the Pittsburgh Press. She co-edited five newsletters for Real Estate Media’s GlobeSt.com and served as the site's technology editor.

She also championed the commercial real estate beat at The Journal News, a Gannett publication in suburban New York City, and co-founded a Website focused on personal finance. Through her own company, Stasa Media, Noreen has produced reports, whitepapers, and internal publications for a number of Fortune 500 clients. When she's not writing, editing, or Web surfing, she relaxes in an 1875 Victorian with her husband and their five kids, four formerly homeless cats, and a dog.

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Re: JC Penny: Call It A Day
  • 5/17/2013 1:13:08 AM
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@Noreen   I agree JCP does need to refocus and refine, yet  there is just too much competition in JCP 's sphere - I think it is just a matter of time before the Board understands this and looks for a suitor.

Re: JC Penny: Call It A Day
  • 5/13/2013 8:42:10 AM
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I wouldn't give up on JCP, but I think it has to refocus, refine and recognize its role in the retail marketplace.

Re: JC Penny: Call It A Day
  • 5/12/2013 10:58:20 PM
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@Louis, I've actually been in a new jpc store a couple times in 2013. The first time not by choice --- my 2 y.o. daughter ran into it and I had to chase her -- but I went back willingly the second time to by clothes for her there. The store was brand-new, so it was clean and well-laid-out. In a crowded mall, however, it was like a ghost town ... at least in the children's clothing section.

JC Penny: Call It A Day
  • 5/12/2013 4:21:37 PM
NO RATINGS

I have not been to a JC Penny in quite sometime ( we are talking decades) , and judging from their desperate act of replacing the experience that loyal customer enjoyed, I would think it really is too late for JC Penny.

Re: Yeah, but we've got to do something!
  • 5/11/2013 11:43:29 AM
NO RATINGS

As for MSFT, it's stock is close to a 52-week high with a PE of only around 12. So in that regard the market appears to think its doing ok and there's plenty of slack for more increase if needed.

Re: Yeah, but we've got to do something!
  • 5/11/2013 11:41:48 AM
NO RATINGS

With tattos, you're supposed to choose a design that means enough to you that you'll be happy to wear it for the rest of your life. So it transcends "last year's fashions" in a way that family heirloom jewelry does.

Re: Yeah, but we've got to do something!
  • 5/9/2013 6:02:44 PM
NO RATINGS

@Brian27 well, there's no ink on me. But I don't follow fashion trends at all. I stick to pretty basic pieces. The tattoo trend is not limited to women, men who might have not been considered the type for tats in the past are also getting inked.

Re: Yeah, but we've got to do something!
  • 5/9/2013 5:44:00 PM
NO RATINGS

I'd think there would usually be more turnover in women's fashions as women do tend to spend more on their wardrobes

Not that I want to get into a discussion about fashions; but I can't help being confused by something: If (some), women are so fashion conscious that they wouldn't be caught dead in last year's style; why have so many locked themselves in to one permanent style with tattoos?  

Re: Not a technical failure
  • 5/9/2013 5:35:40 PM
NO RATINGS

 

 

Re: Microsoft - check the article in the May Redmondmag.com - Xbox 'Durango': Why IT Pros Should Care.  If nothing else, it points up the importance of the consumer products side of MS.  If you follow MS developer community events, it's easy to see there's a push to get more developers creating for Xbox (and 'Metro Style' apps that would be a better fit for those using an Xbox as an appliance).  We (most here), see MS as an IT business: Operating Systems, DBMS, Office apps, cloud services, developer tools...; but do they see their cash coming primarily from another sector going forward?

With a future Xbox as a gaming/home-theater/online-shopping/social-networking appliance, it's hard to imagine a better way to pump consumer data back to MS; is that where they see the real profits? 

Is MS doing a jcp, or are they counting on extensive analysis few others could undertake?

Re: Yeah, but we've got to do something!
  • 5/9/2013 5:10:15 PM
NO RATINGS

@broadway I'd think there would usually be more turnover in women's fashions as women do tend to spend more on their wardrobes than men do. 

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