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8 March 2013 - 9:51pm | posted by | 1 comment

How an Apple genius brought chaos to a great US chain store brand

Ron Johnson: under pressureRon Johnson: under pressure
JCP logo: Fair and square

It seemed like a dream idea at the time. Take the genius executive who created the iconic Apple stores around the world and transplant him into the somnolent giant that was JC Penney, a US department store giant with more than 1100 locations - but an undoubted lack of mojo.

Ron Johnson was the genius. But sadly the dream has become a nightmare. And this week it became crystal clear how dramatically wrong everything has gone for Ron.

Just 15 months after he took the helm, 19,000 employees have lost their jobs so far, at least 2200 more are to go. The stores have suffered a haemorrhage of customers, as Ron has done away with "sales" and "specials" (although some of these have been reinstated).

Today there are even doubts if the chain, which employs more than 100,000, has enough cash reserves to keep going and of course there is the question of how long Ron will keep his job.

Steve Tobak , a strategy consultant based in California's Silicon Valley, writing in Fox Business, says today, "When the news came out that Apple’s vaunted retail chief, Ron Johnson, was leaving to take the helm at discount clothing chain JCPenney, I remember saying,

“That can’t be right. Maybe it’s a bizarre sort of reverse middle-age crisis or something. Wonder if he’s going to trade in his Porsche for a pickup truck, too?”    

Tobak has no doubt that the Apple stores are true genius."No two ways about it," he says but adds, "Johnson’s attempt to completely remake JCPenney in Apple’s image is starting to look a lot more maniacal than brilliant."

"Sales have tanked, the losses are piling up, the balance sheet is a mess, and there’s no end in sight. The board is talking about ousting Johnson if he can’t get things straightened out, and pronto."

Tobak thinks it may already be too late. "He’s already done too much damage. He’s more or less gutted this company from top to bottom.

"Instead of the sort of genius that created the marvel of modern retail that is the Apple store, Johnson has transformed JCPenney into a Frankenstein-like monster, a patchwork of strategies and parts that each worked fine in another time and another place but now strike fear and terror into the hearts of the company’s employees, customers, and shareholders."

He sets out what Johnson did:
 
Terminated every C-level executive in the company, replacing them with his own crew.

Fired the company’s long-time PR and ad agencies -- M Booth & Associates and Saatchi & Saatchi -- within weeks of each other.

Put on a huge Apple-like event to launch his vision and demonstrate for the industry how he was going to completely transform JCPenney into an Apple-like clothing store.

Got rid of all the promotions and sales that retail clothing shoppers have come to expect for decades - and replaced them with “fair and square” pricing that nobody understands.

Johnson signed deals with Liz Claiborne, Izod, and other top designers. He signed up Martha Stewart for shops within shops , in conflict with an exclusive deal she already had with archrival Macy’s .That saw Ron in a New York civil court this week, ,giving evidence.

Tobak shakes his head at this one: "In a novel concept, he brought free Wi-Fi to the stores -- even though there’s no seating and it makes no sense. I mean, why would anyone sit in a JCPenney store and surf the web? It’s not Starbucks."

Result of all this : Last quarter the company lost $552 million, revenue declined by 28%, same store sales plummeted 31%.

Former JCPenney CEO Allen Questrom -- who turned the company around a decade ago -- said this :

“The board has got to take some action. They can’t be delusional like Ron . Thousands of people work for this company and this has been going on long enough. It’s absolutely crazy that this has gone on for as long as it has.”

Tobak is far from a lone voice. Bloomberg reports that the retailer’s revenue fell 25 percent to $13 billion in the year ended Feb. 2, the lowest since at least 1987.

"Customers have been alienated by marketing missteps, a failed attempt to transition away from sales and coupons and Johnson’s plan to turn most stores into collections of boutiques."

The share price fell 0.5 percent to $14.75 yesterday , down 25 percent this year through yesterday, after a 44 percent plunge in 2012.

Johnson said in a conference call , “This idea that we’ve got massive headcount reductions on the way is just really rumoured, and we will tactically make changes, but this has been much more rumour than it is fact.”

Former CEO Questrom has the last word , “Penney is an American institution, and people who work there will have their lives affected if they lose their jobs.

"That’s who I worry about.”

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Comments

24 Apr 2013 - 23:08
@mcsorg's picture

Very interesting. Never heard of either Ron Johnson or JC Penney but that's a riveting story of how a top suit with no doubt a bit of an ego is allowed to ruin a great company. Happens once in a while and it's like a slo mo car crash.

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