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Former Apple retail chief under fire as JC Penney stock plummets

post #1 of 81
Thread Starter 
With a little over six months on the job as JC Penney's chief executive, former Apple senior vice president of retail Ron Johnson is already seeing criticism of the major overhaul he designed for the ailing department store chain as a recent earnings call revealed substantial losses.

After leaving Apple in November 2011 to take the reins of the huge department store, Johnson looked to increase margins with the introduction of a new pricing model and unique retail ideas like the store-within-a-store, but customer response to the efforts fell flat, reports Reuters.

During its first quarter 2012 earnings call on Tuesday, JC Penney reported higher than expected losses with a 20.1 percent sales drop year-to-year causing shares to free fall 19.7 percent, the worst decline since the company began listing shares in 1929. The selloff erased $1.43 billion in market value and was the catalyst for a suspension of the stock's quarterly dividend of 20 cents per share.

JC Penney shares closed down $6.57 on Wednesday to end the day at $26.75, well below the $30.11 closing price seen the day before Johnson was named CEO in June 2011.

The company is in the midst of a multi-year plan to reinvigorate sales, though some analysts see the change as being largely ineffective. Spearheaded by Johnson, the new strategy involves the replacement of coupons and sales with "Every Day" low prices.

On Tuesday, Johnson told analysts that he stands by the changes but admits that JC Penney hasn't been successful in exposing customers to the new plan's benefits.

"It is not doing the hard work we need it to do right now," Johnson said of the company's advertising.

Previous commercials featured Ellen DeGeneres in attempt to contemporize the brand's image, but that effort was confused by a switch to ads dubbed "Do the Math" which illustrate how the chain's low prices outperform coupons and sales.

Johnson JCP
Ron Johnson at JC Penney's 'fresh air' event. | Source: JCPenney


Critics attribute the recent lack of foot traffic to the abrupt change in store policies, and claim that JC Penney customers who have become accustomed to the coupon and sale model are put off by the new "Every Day" pricing strategy.

The second step in Johnson's multi-pronged makeover will happen in August when the company's first store-within-a-store is opened. Upon completion, the transformation will put a number of 100 name brand boutiques in each JC Penney location. Announced designer collaborations include Vivienne Tam, Betsey Johnson and Michael Graves.

During his tenure at Apple, Johnson was responsible for the creation of the Apple Retail Store, which is a main component of the iPad maker's success and generated $4.4 billion in the last quarter alone.
post #2 of 81

Just goes to show that you actually need a good product to sell, and all the marketing in the world, even if its good marketing, is not going to turn shit into gold. Which is why Apple employees/executives don't necessarily excel in future positions with other companies. This isn't Ron Johnson's fault, it just is what it is. 

post #3 of 81

It is pretty self evident that Ron Johnson is the most talented person who could be CEO of JC Penney at this time.   He might fail.  But they should be glad he has come to try to save them and create some sort of relevance for JC Penney.

 

I think it's one of the most exciting stories in business today.  Might buy a few shares just to keep track.

post #4 of 81
The moral of the story boys and girls is that you can't polish shit, you can only spread it around.
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"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #5 of 81
I think it's unfair to expect him to turn around the company in as little as six months. And critics come with the territory - Even Apple with all its success isn't immune to it.
post #6 of 81

Actually a few women I know have noticed the changes in the store, like the changes and the products and plan to shop there a lot from now on.  I told them that the guy who designed the Apple stores was responsible and they said "Ohhhhh!!!!!  Now I get it.  I'm definetely shopping there!"

 

If I were Ron Johnson, I'd stay the course.  The biggest issue now is getting the word out.

post #7 of 81

That's a big ship to change course..  Not going to happen in the short amount of time he has been there.  This is going to take years.

post #8 of 81
Quote:
Originally Posted by dasanman69 View Post

The moral of the story boys and girls is that you can't polish shit, you can only spread it around.
Ridiculous... If Apple has taught me anything, eh, nevermind.
post #9 of 81

Product is the king, not a store that sells it.

post #10 of 81
Quote:
Originally Posted by dasanman69 View Post

The moral of the story boys and girls is that you can't polish shit, you can only spread it around.

 

The Mythbusters did in fact polish shit to a fairly high gloss.  Myth/saying busted.

 

But we know what you really meant.

.
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post #11 of 81

Sorry Ron, you can put lipstick on that pig but you can't sell it like an Apple

post #12 of 81

An Apple a day keep's the PC's away.....but a Penny spent doesn't necessarily mean a penny earned.

post #13 of 81
Quote:
Originally Posted by Slurpy View Post

This isn't Ron Johnson's fault, it just is what it is. 

He changed their pricing strategy from coupons to low pricing. That changes buyers' mentality from getting a bargain on a valuable item to buying a cheap product. It may not have been the strategy alone that led to the losses but CEOs are paid a lot of money to ensure a strategic success. If a major strategy change is implemented and it makes the situation worse, it's going to be the target of scrutiny.

His comment about the advertising not working is probably accurate. You need to get the message across clearly. Just look at Blackberry and Samsung. Their campaigns mark out Apple as the market leader. In the following JC Penney ad, it seems like they make out sales to be a nuisance for customers:

http://www.youtube.com/watch?v=yxEwk_oyUwA

Everyday low prices are good but you don't get rid of sales entirely because you take away the urgency to buy and then customers end up buying somewhere else that gives them that urgency.

It also helps if your website works and has information presented neatly. Don't have 1 giant banner and cram every subcategory into drop-down menus.

At this point, they have an even bigger problem though because now they have negative press and forecasts so they better turn it around quick or people are just going to keep piling it on.
post #14 of 81
Quote:
Originally Posted by Slurpy View Post

Just goes to show that you actually need a good product to sell, and all the marketing in the world, even if its good marketing, is not going to turn shit into gold. Which is why Apple employees/executives don't necessarily excel in future positions with other companies. This isn't Ron Johnson's fault, it just is what it is. 

^ This is pretty much what i was going to say but already to the point. 

post #15 of 81

But… Apple products are nothing but the Ginsu knives of the tech world! The only thing that makes people buy low-end hardware at top-of-the-line prices is the marketing!

 

Quote:

Originally Posted by Hiro View Post
The Mythbusters did in fact polish shit to a fairly high gloss.  Myth/saying busted.

 

I chuckled. I searched it on a lark. It actually happened. My stars. 


Edited by Tallest Skil - 5/16/12 at 6:09pm

Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
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Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
Reply
post #16 of 81

He brought in a lot of fresh ideas. I really thought he was making a difference... at least he made a difference in how I perceived JC Penny's. However, I really thought of his efforts as a multi-year effort... not something to be fixed in a few months or a quarter.

 

If there were one thing I find fault with, it's the reliance upon quarterly reports by most businesses. It makes long term change hard to bring about. Everything is too focused on the short term and an important balance is lost... Strategic planning often takes a year or more to begin to show it's impact. I think if the Apple stores had to show an impact within three months, they would have been closed overnight by the average company management... or they would have been stuffed with eyeball-bleeding banners and clowns with animal balloons to generate false traffic.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #17 of 81
I was surprised to find that their every day price on Dockers pants was $6 less than other store's sale price.
post #18 of 81

Is there really that little Apple news today? I think this story takes the prize for farthest stretch from actual Apple content this year.

post #19 of 81

1) As someone else pointed out, it takes time to turn an ocean liner.

 

2) This will alienate some of JCP's core customers, and I think that's already clear.  The question is, will these changes bring in new customers?  Actually, that's not true, it's very clear to me that the changes WILL bring in new customers, the question is whether or not they will make up for the lost ones.

 

I went shopping at JCP just a couple weeks ago, and I was very happy with the changes I saw.  I absolutely HATE waiting around for some bullshit "sale" where the prices are marked up 25% and then marked down 40% from the marked-up price.  I do not have patience to waste my time hunting through newspapers or flyers week after week after week to see if there's something "on sale" that I should run out and buy, to MAYBE "save" a few bucks.

 

So for me, this is a fantastic change.  I will actually save money more often than not.  When I'm looking for something that JCP is likely to carry I will be putting them near the top of the list of stores to visit.  In our local mall there is a JCPenney, Macy's and Nordstrom.  For the kind of items I would normally look for in Nordstrom, I don't think this will change anything, however, I will be much more likely to go to JCP than Macy's now.

 

It's fast to lose existing customers, it will take time to bring in new ones, but I think the customers that will prefer the new system are likely to be better customers for JCP in the long run.  Not the ones who will only shop when they have a coupon in hand.

 

This will take some time to sort out.  I think Johnson has probably rushed some of his plan too quickly, as he still has to get some of the other things in place.  And I think the marketing message has been unclear, but that can be fixed quickly.  Once those things take hold it will just be a matter of time until we know if the new customers are coming in quantities that justify the changes.  I really, really hope they do, and I really hope that Johnson is given enough time to see this mission through.

No Matte == No Sale :-(
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No Matte == No Sale :-(
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post #20 of 81

I've said it before...Americans equate "good value" with "cheap!" as in cheap s**t. Apple is the exception to the rule. Except for Apple, American retail is dominated by Walmart and maybe Amazon. Cheap Chinese crap (Walmart), cheap crappy cars, (GM), cheap crappy software, (MS), cheap crappy drinks, (Cocoa Cola) cheap crappy food, (MacDonalds) cheap crappy PC's (HP & Dell), cheap crappy phones, (Moto, Nokia, etc.) cheap crappy beer, (Budwieser/inBev), cheap crappy Congress, (Congress).

 

:)

 

P.S. Is it just me or is AI just about unusable on the iPhone? Helloooooooooooooo :( come on Ai get an iPhone App already. If there is one already, "My bad! :(

post #21 of 81

How long did it take to turn Apple around again?

 

If I recall correctly, at every turn that Apple made after 1996, it was going to be doomed: see-through legacy-free iMacs, toilet-seat iBooks, a new operating system that was - UNIX?! -, a CD toaster (the infamous cube, and an actual flop), an MP3 player, retail stores - All "laughable" attempts that for sure were going to fail in the eyes of the pundits, and it took a long time for the market to realize that Apple's changed strategy wasn't suicide: after the dotcom crash, its stock price was around $6.60 - in 2003! That was almost 7 years after the Next acquisition, and 2 years after opening the first Apple Store. And all this when Apple was actually producing mostly hit products. Johnson will have to hang in there for a while... . For my part, I welcome the changed direction for JC Penney, now if there were only a store closer to where I live...

 

Oh, and fsck them pundits. The only thing they are good at is stock ejection due to premature evaluation.

42 = 54 base 13
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42 = 54 base 13
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post #22 of 81
Ok mr. Ron Johnson are u listening??? I am one of those customers who will ONLY ENTER JCP with a coupon in hand or coupon discounted sales - since the last time I entered your JCP store at 34th st NYC and was told they dont accept coupons ANYMORE I never returned but instead walked up a 2 blocks to MACY'S where there was a plethora of sales with coupon discounts- so unless you return to this model JCP will continue to report losses... Oh well ...
post #23 of 81

Man oh man...he should just copy H&M....up to date style and great, great prices. As long as you are slim...

 

...which excludes 66% of Americans. Crap, forget I mentioned it.

 

P.S. The tag on the JCP dresses says, "One Size Fits....Japan."

post #24 of 81

I myself am in entertainment marketing here in Los Angeles..

 

Am familiar with JCP as it's now called.

 

Johnson's changes are "shedding" their old customers in hopes of attracting new "core" customers that assimilate with the "rebranding" of JCP.  No surprise here whatsoever.

 

What happens when you shed your old core customer?  Sales and profits tank, decline, what have you.  What happens when clever marketing and remodeled and upgraded branding hits the actual brick and mortar?  New core will equal new profits.  Bumps for a while into their fiscal year and beyond but if his plan works -- it will eventually turn the corner and force tacky deal driven stores like Macys into it's own re-branding. Mark my words.  Macy's is next.

 

Personally Macy's has become what was wrong with JCP...

 

'Member folks -- Johnson helped morph TARGET into what it is today... So be careful....

post #25 of 81
Quote:
Originally Posted by markbyrn View Post

Sorry Ron, you can put lipstick on that pig but you can't sell it like an Apple

 

But you can put an Apple in the pig's mouth and roast it.

post #26 of 81
Quote:
Originally Posted by Postulant View Post

I think it's unfair to expect him to turn around the company in as little as six months. And critics come with the territory - Even Apple with all its success isn't immune to it.

Indeed. Not even Apple has had everything go gold right off. And some stuff like MobileMe was ultimately so bad they did a total revamp and even changed the name to try to avoid the bad taste left behind.

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #27 of 81
Quote:
Originally Posted by bitzandbitez View Post

Ok mr. Ron Johnson are u listening??? I am one of those customers who will ONLY ENTER JCP with a coupon in hand or coupon discounted sales - since the last time I entered your JCP store at 34th st NYC and was told they dont accept coupons ANYMORE I never returned but instead walked up a 2 blocks to MACY'S where there was a plethora of sales with coupon discounts- so unless you return to this model JCP will continue to report losses... Oh well ...

And if it turns out at for every you that insists on a coupon or special sale there are 10 folks who hate dealing with at nonsense do you think Mr Johnson will care that he lost you. Nope, he wont

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #28 of 81

I don’t know much about Penney, but two people recently have said the store "doesn’t carry good clothes anymore." Whatever that means.... but possibly there’s a product-selection problem. Or a mismatch between product selection and the people who are showing up to buy.

post #29 of 81
Quote:
Originally Posted by bwik View Post

It is pretty self evident that Ron Johnson is the most talented person who could be CEO of JC Penney at this time.   He might fail.  But they should be glad he has come to try to save them and create some sort of relevance for JC Penney.

 

I think it's one of the most exciting stories in business today.  Might buy a few shares just to keep track.

+1.....

post #30 of 81
Quote:
Originally Posted by Hiro View Post

The Mythbusters did in fact polish shit to a fairly high gloss.  Myth/saying busted.

But we know what you really meant.

They did indeed, I stand corrected lol
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
Reply
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
Reply
post #31 of 81
Ron needs more time. Once his plans are fulfilled for JCP that's when the market will have a clearer picture of how successful his efforts will be.
post #32 of 81

Harder to sell crap clothes and housewares than stuff that people are beating down your door for, then?

post #33 of 81
So true
post #34 of 81
Quote:
Originally Posted by Blah64 View Post

This will take some time to sort out.  I think Johnson has probably rushed some of his plan too quickly, as he still has to get some of the other things in place.  And I think the marketing message has been unclear, but that can be fixed quickly.  Once those things take hold it will just be a matter of time until we know if the new customers are coming in quantities that justify the changes.  I really, really hope they do, and I really hope that Johnson is given enough time to see this mission through.

 

I'm not so sure that Johnson was moving too quickly, however, from what he said, the advertising company jcp is using was ineffectual in communicating the change. Now, I don't know if he was just scape goating the ad agency, or this was the opening shot to replace the existing as agency for one that is going to more effectively carry the message. The latter is more likely. 

 

The new ads that I saw around the end of 2011 were much more captivating than the usual jcp ads, which never left an impression in my memory. Also the catalog sent out via the mail was much more memorable. So much so, that I saved it for reference.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #35 of 81

Penny's (nee JCP, how creative of them) lost me several years ago, when I tried to return some gifted merchandise that I didn't have the receipt for.  Even Wal-Mart doesn't try to screw you the way they did (maintaining a record of the lowest price in the last 60 days, even if it was only for  a single day, and forcing that value on you, rather than current value).

 

Maybe their policies have changed since then, but odds are I will never waste my time to find out.

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Booga: "Elon Musk goes for the stars, [Ballmer] installs Windows on a basketball team's computers.  Sounds about right."
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post #36 of 81
Quote:
Originally Posted by gijoeinla View Post

I myself am in entertainment marketing here in Los Angeles..

 

Am familiar with JCP as it's now called.

 

Johnson's changes are "shedding" their old customers in hopes of attracting new "core" customers that assimilate with the "rebranding" of JCP.  No surprise here whatsoever.

 

What happens when you shed your old core customer?  Sales and profits tank, decline, what have you.  What happens when clever marketing and remodeled and upgraded branding hits the actual brick and mortar?  New core will equal new profits.  Bumps for a while into their fiscal year and beyond but if his plan works -- it will eventually turn the corner and force tacky deal driven stores like Macys into it's own re-branding. Mark my words.  Macy's is next.

 

Personally Macy's has become what was wrong with JCP...

 

'Member folks -- Johnson helped morph TARGET into what it is today... So be careful....

Yes, I agree.

 

This won't happen overnight. And if it never happens (the re-educating of American consumers about what 'value' really means), it won't be his fault, but the fault of people who expect "FREE" and "CHEAP" and "COUPONS" to be the answer to their prayers. What will be his fault is his expectation that he, alone, could change the consumer mindset.

 

I have to say, though, that their web site and iPhone/iPad "app" (if you can call it that) are complete crap.

post #37 of 81
Quote:
Originally Posted by Tallest Skil View Post

But… Apple products are nothing but the Ginsu knives of the tech world! The only thing that makes people buy low-end hardware at top-of-the-line prices is the marketing!

 

 

Are you saying that Apple products are cheap, low-end hardware wrapped in fancy marketing? Just asking.

 

I spent the last two days fixing a computer for my employer that has crapped out for the countless time because she doesn't understanding that buying cheap results in cheap. And she bought the cheapest ink cartridges and then failed to install one of them properly. It leaked and ruined the printer. *shakes his head*

 

Moral of the story - don't buy cheap if you want reliability. Now, back to the JCP story where "every day is cheap".

post #38 of 81

Really? Betsey Johnson? 

 

 

Betsey Johnson Files for Chapter 11 http://online.wsj.com/article/SB10001424052702303990604577368491252250420.html

post #39 of 81

 When a store starts offering sales all the time customers learn that the listed price is a joke. If you ever pay full price on anything, you are a fool because the next sale will only be a week or two away. The problem JC Penny's is facing right now is customers are still in the old mindset. They go in. Find something they like. The price is good, but it's not on sale, so they decide to wait. It won't take long for the customers to learn that that sale is never going to come, so I'd expect sales to return to normal before long.

post #40 of 81
Quote:
Originally Posted by charlituna View Post


Indeed. Not even Apple has had everything go gold right off. And some stuff like MobileMe was ultimately so bad they did a total revamp and even changed the name to try to avoid the bad taste left behind.

 

But would iCloud be what it is today without them having done MobileMe? I think people need to remember that work builds on itself to build better works.

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