Former Apple retail chief presides over JC Penney's lowest sales in 20 years

Posted:
in General Discussion edited January 2014
JC Penney Chief Executive Ron Johnson, who formerly ran Apple's retail business, is under fire after overseeing the company's lowest sales in more than two decades.

The department store chain reported this week that its net loss in the quarter ending Feb. 2 was $552 million, up from a loss of $87 million a year ago, according to Bloomberg. JC Penney's annual revenue was $13 billion, its lowest since 1987 and half that of competitor Macy's.

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


Johnson admitted to investors that he had "made some big mistakes" in his tenure as CEO, which began in November of 2011. In particular, Johnson spearheaded a new strategy that replaced coupons and sales with "Every Day" low prices.

In a change of course, customers are now being sent more coupons and discounts to drive traffic, while promotions for holidays and events such as Valentine's Day and back-to-school season have been reimplemented.JC Penney's $13 billion in annual revenue was its lowest since 1987 and half that of competitor Macy's.

StorefrontBacktalk notes that, during the company's quarterly conference call, Johnson said that all JCPenney associates would be getting iPod touches for point-of-sale operations.

"Every employee on the floor of a JCPenney store will carry an iPod and be able to check out customers any time and anywhere in the store," Johnson said. "Last week, 25 percent of all transactions were conducted on a mobile device. And this quarter, we will start to feed product information, training, and all of our employee systems directly to employees through our in-store Wi-Fi networks on these iPods."

Johnson found himself quickly scrutinized once he took over JC Penney, implementing changes such as a new pricing model and store-within-a-store concepts. Johnson's changes were criticized for reducing foot traffic in JC Penney's stores.

Johnson's struggles at JC Penney stand in contrast to his tremendous success at Apple, where he spearheaded the Mac maker's retail initiative. Apple Chief Executive Tim Cook currently views the company's heavily trafficked retail stores as the "face" of the company.

"There's no better place to discover, explore and learn about our products than in retail," Cook said earlier this month at the Goldman Sachs Technology and Internet Conference. "Our team members there are the most amazing, awesome, incredible people on Earth. It's the best retail experience, it's an experience where you walk in and instantly realize it's for the purpose of serving, not selling."
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Comments

  • Reply 1 of 51

    Quote:

    Originally Posted by AppleInsider View Post





    "Every employee on the floor of a JCPenney store will carry an iPod and be able to check out customers any time and anywhere in the store," Johnson said. 


     


     


    I think it might have been the double-entendres that did him in. 

  • Reply 2 of 51
    Good thing he left Apple, otherwise all of those smart stock analysts would be blaming him for the decline in stock price and that Apple is doomed. The JCP thing doesn't appear to have been a smart career move in hindsight. Apple is still looking for his replacement, maybe he can come back home?
  • Reply 3 of 51


    It's a real shame that Johnson's vision isn't catching on. It says a lot about the rationality, or lack thereof, of consumers. He took all the guesswork out of shopping: no coupons, no worrying that something will go on sale tomorrow, no excessive markups followed by extreme markdowns to give the appearance of "a good deal"... just honest, everyday low prices. I love it.


     


    You can get a nice dress shirt from JCP for $20. You go into Kohl's and can find the same shirt marked at $80.... plus 50% markdown... plus an additional 25% markdown... plus $10 in Kohl's cash and you walk out of Kohl's paying $20 for the shirt. It's sad that consumers enjoy this game mark-ups and mark-downs and honestly feel that the shirt from Kohl's is a better bargain than the one from JCP.


     


    I refuse to shop at stores like Kohl's and Boston Store where I have hunt down the sales and the coupons and the e-mail clubs. I support stores like JCP because they have no-hassle low prices and EVERY customer enjoys the same prices. But, if consumers would rather cut coupons, browse the weekly ads, and open store credit cards to pay the same price that they would at stores like JCP, what can you do?

  • Reply 4 of 51

    Quote:

    Originally Posted by AZREOSpecialist View Post



    Good thing he left Apple, otherwise all of those smart stock analysts would be blaming him for the decline in stock price and that Apple is doomed. The JCP thing doesn't appear to have been a smart career move in hindsight. Apple is still looking for his replacement, maybe he can come back home?




    Apple doesn't hire losers.  image

  • Reply 5 of 51
    Johnson's mistakes have been fascinating, especially the failure of pricing simplification. Apparently customers want to be manipulated by "sales" instead of knowing the price will be a fair deal no matter when they go.
  • Reply 6 of 51
    The problem is customers expect JCP to be a "always on-sale" discount type of store, but he's applying the Apple store premium retail mentality to it. That's going to be tough, if not impossible.
  • Reply 7 of 51
    nagrommenagromme Posts: 2,834member
    It's an interesting case study for sure.

    We may never know, but is it really a failure? Or did he pull JCP out of an even worse nose dive and nobody else could have done better? Maybe the changes will catch on in time? I for one like his simple pricing plan, but at best, it hasn't been successfully marketed. It never hit you in the face in their ads or in their stores, and maybe it needed to. At worst, the market will just never accept that system!

    All I can say is that my local JCP is awful. Clueless staff, nowhere to be found. Sometimes I've been unable to find an attended cash register! Reminds me of like Circuit City.
  • Reply 8 of 51
    I used to always buy all of my underwear at JCPenney. However, after his changes the price was more than it used to be under their "sales", which in fact were going on 98% of the time.

    Then they went ahead and discontinued all of the store brand styles that I used to buy, replacing them with Fruit of the Loom. If I want to buy Fruit of the Loom, I can just buy it online and find the cheapest price. I don't need to go to JCPenney. So, Ron Johnson has lost my purchases and I no longer go to his stores, where I would often make other impulse purchases while I happened to be there.
  • Reply 9 of 51


    Apple didn't like John Browett. 


     


    JCP isn't a good fit for Ron Johnson.


     


    Apple needs a retail SVP.


     


    Everybody swallow their pride and restore balance to the Force! 

  • Reply 10 of 51
    mstonemstone Posts: 11,510member


    JC Penny is just a bad name. Tough rebuilding a brand when the name sounds like it is stuck in the 1900s. The new modern minimalist approach is completely lost on the typical low budget bargain hunter. Even though the logo looks better now, the brand just doesn't have the panache of Macy's or Nordstrom.

  • Reply 11 of 51
    rogifanrogifan Posts: 10,669member

    Quote:

    Originally Posted by BrianCPA View Post


    It's a real shame that Johnson's vision isn't catching on. It says a lot about the rationality, or lack thereof, of consumers. He took all the guesswork out of shopping: no coupons, no worrying that something will go on sale tomorrow, no excessive markups followed by extreme markdowns to give the appearance of "a good deal"... just honest, everyday low prices. I love it.


     


    You can get a nice dress shirt from JCP for $20. You go into Kohl's and can find the same shirt marked at $80.... plus 50% markdown... plus an additional 25% markdown... plus $10 in Kohl's cash and you walk out of Kohl's paying $20 for the shirt. It's sad that consumers enjoy this game mark-ups and mark-downs and honestly feel that the shirt from Kohl's is a better bargain than the one from JCP.


     


    I refuse to shop at stores like Kohl's and Boston Store where I have hunt down the sales and the coupons and the e-mail clubs. I support stores like JCP because they have no-hassle low prices and EVERY customer enjoys the same prices. But, if consumers would rather cut coupons, browse the weekly ads, and open store credit cards to pay the same price that they would at stores like JCP, what can you do?



    I admire his vision but he's finding out people aren't willing to give up their coupons.  And the store transformation is taking too long.  I was in a JCP a few weeks ago and the store was complete garbage.  Only one shop completed - Levi's.  Everything else was the old JCP - racks and racks of ugly clothes.

  • Reply 12 of 51
    512ke512ke Posts: 782member
    Great article. This is proof positive why Apple is losing to Samsung if Apple's ex employee can't turn JCP around. I can really appreciate how insightful this news is and how relevant it is to Apple rumors. Can we infer that there will be an Apple branded Fruit of the Loom underwear soon made with touchscreen glass?
  • Reply 13 of 51
    Ron Johnson was able to build the retail stores from scratch at Apple. At JCP he's trying to convert hundreds of dilapidated stores all at once while alienating almost his entire customer base.

    He should have started off with a dozen stores in Texas and then built it out several at a time.

  • Reply 14 of 51
    saareksaarek Posts: 1,127member


    I think that the worlds retail system is a complete mess and sadly Mr Johnson cannot fix a broken market with one retail chain.


     


    I work for a well known insurance company, the insurance industry is in many way broken in a similar fashion. Large discounts are given to new customers to entice them in whereas existing customers foot the bill of new customers' low premiums, loyal customers with good low claim history should have preferred rates, but this is not what happens.


     


    No Insurance company can afford to change the way that business is done because all of their competitors will still offer cheap new business.


     


    It's the same as JC Penny, the new pricing model makes sense, it's not confusing and benefits the customer. Sadly all of their competitors are still doing things the wrong way by throwing vouchers and non genuine offers at their customers.


     


    Retail is broken and no one is going to be able to fix it, well unless the governments step in around the world which is not going to happen.

  • Reply 15 of 51


    Originally Posted by 512ke View Post

    This is proof positive why Apple is losing to Samsung if Apple's ex employee can't turn JCP around.


     


    I'd ask you to explain how this makes any sense or contains any truth, but I know you can't.

  • Reply 16 of 51

    Quote:

    Originally Posted by island hermit View Post




    Apple doesn't hire losers.  image



     


    BS.

  • Reply 17 of 51
    Ron's vision & transformation isn't complete yet. Check out Ken Segall's blog entry on this at [URL=http://kensegall.com/2013/02/meanwhile-over-at-ron-johnsons-place/]http://kensegall.com/2013/02/meanwhile-over-at-ron-johnsons-place/[/URL]

    However, having said that, Ron has a VERY TOUGH ROAD ahead of him, because JCP customers are a combination of both the cheapest people & the poorest citizens in America. This is completely the opposite of the demographic for Apple.

    I'm not sure if applying the mindset of "high quality products & high quality experience" will ever resonate with people who can't afford -- or won't pay for -- such quality.
  • Reply 18 of 51

    Quote:

    Originally Posted by Rogifan View Post


    I admire his vision but he's finding out people aren't willing to give up their coupons.  And the store transformation is taking too long.  I was in a JCP a few weeks ago and the store was complete garbage.  Only one shop completed - Levi's.  Everything else was the old JCP - racks and racks of ugly clothes.



     


    I can partially agree with you here. There are some real dumps out there. The store in my college town was disgusting. 


     


    The store by me now is a new build and I really like it. I feel like I'm walking into a top-notch store and then I see $10-$20 articles of clothing. Maybe that's the problem here: too many old, out-dated stores.

  • Reply 19 of 51

    Quote:

    Originally Posted by scotty321 View Post



    Ron's vision & transformation isn't complete yet. Check out Ken Segall's blog entry on this at http://kensegall.com/2013/02/meanwhile-over-at-ron-johnsons-place/



    However, having said that, Ron has a VERY TOUGH ROAD ahead of him, because JCP customers are a combination of both the cheapest people & the poorest citizens in America. This is completely the opposite of the demographic for Apple.



    I'm not sure if applying the mindset of "high quality products & high quality experience" will ever resonate with people who can't afford -- or won't pay for -- such quality.


     


     


    That's for sure, he took on an incredible task. He's staring in the opposite direction than he was at Apple. At Apple it was top looking down, at JCP it's from down below looking up. The guy doesn't shirk from a challenge. People forget that creating a revolutionary store for Apple was not a slam dunk but any means and he often had to fight Steve Jobs to get his way. Being saddled with a lot of large, tired store spaces with cheap, non-distinctive merchandise sounds like a job from hell to me.


     


    I recall when I heard of Rons move to Pennys - I didn't know that they were still in business!

  • Reply 20 of 51

    Quote:

    Originally Posted by godrifle View Post


     


    BS.





    Is that code for Sergey Brin...

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