Back in mid-February, Lairig Marketing examined the “extreme J.C. Penney makeover” plans announced by new CEO Ron Johnson, ex-Apple Store genius (get it?!?!). We raised three issues:
- The new everyday-low approach wouldn’t make it past this Fall
- The idea of 100-stores-within-a-store seemed more Dhaka than Dallas
- Was there no end to Ellen Degeneres’ spokesperson dilution?
The J.C. Penney Q1-2012 earnings call transcript is hot off the press. It is a great read. And, sorry to use this line again…but the transcript ensures that we have another Harvard Business case study underway.
JCP’s Q1 results stunk on ice. The big story was traffic, off 10%. This was the main driver for an astounding drop of 18.9% year-over-year in same-store comps.
But here is something no one mentioned, and not a single Wall Street analyst asked during the Q&A. Online sales were down – what’s a bigger word than astounding? – nearly 28%.
Just like that. J.C. Penney dropped out of shoppers’ consideration set.
Johnson and team spoke at length about how his team was on the right track, but investors took JCP to the woodshed yesterday, giving it a 20% beating.
One question future MBAs will deal with: was Johnson right in starting the makeover with his new pricing scheme? No more sales. No more coupons.
The bigger issue we feel is how it was executed. The three tiers – everyday, month long, and best – aren’t exactly self-evident. On the call, Johnson fell not just a little on his sword regarding the confusion:
- “One of the thing we concluded…is that our marketing…is not doing the work it needs to communicate our pricing strategy…”
- “You will also note we started to put the compare [of month long prices] to our everyday.”
- “We now have TV supporting [our best price promotions].”
- “…in June, it will be the third time we have changed our point-of-sale signs [in stores].”
There’s a lot of fixing on the fly to undo the erroneous notion that retail customers will embrace a “simpler” pricing structure. Still, J.C. Penney execs don’t seem to feel they need anything akin to the old “$X off for all purchases over $Y” coupon to replace lost weekend traffic. Expect to see them revisit that misconception soon.
As for Ellen Degeneres? J.C. Penney wasted millions. She was used to explain new “fair and square” concepts like easy returns, full-dollar pricing (none of the $x.99 thing), and coupon-free shopping. None of these attempt to address the biggest problem – the confusing pricing tiers.
Ellen would be the worst person to do it, anyway. Imagine her trying to explain the difference between “everyday” and “best” pricing in her sing-songy A.D.H.D-ish stream-of-consciousness manner. Whose head would explode first – hers or the viewer’s?
As for the 100-stores-within-a-store strategy, Ron Johnson needs shoppers, and investors, to wait four years to see that come to fruition. Which, in the retail world, is equal to two eternities.