An overdose of the right medicine will always damage the patient. And this is precisely what has happened to JCPenney.
Ron Johnson has been sacked from his 18 month tenure as boss of the iconic American department store group JCPenney. He knew what had to be done to transform the business from a weary discounter into a vibrant retailer - all he did wrong, was do it all at once.
How many times have I heard a business wanting to look after its loyal, core customers but attract new ones? I call it the retail conundrum - typically retail leaders ask how they can move forward without changing too much? How they can attract new and dynamic merchandise and still be on sale 52 weeks a year. Or how they can attract younger customers who'll seamlessly take over from ageing customers.
The answer is simple - you can't be all things to all people.
Fundamentally at the heart of JCPenny's current problems lay EDLP. When I interviewed the legendary President of Wal-Mart, Jack Shewmaker, he confided in me that he was almost sacked 40 years ago during the early years of Every Day Low Pricing (EDLP) transformation. The business suffered hugely before gaining traction...but Sam Walton saw in the young Shewmaker a lateral thinker and creative retailer. Even after Jack's celebrated retirement from Wal-Mart 35 years later, he travelled the world counselling organisations from health-care to footwear that ditching discounts for EDLP takes 10 years and an intolerable injection of pain. Imploring strategists not to start down that track until the investors were truly on board and aware of the time scale - he also counselled it was worth the ‘pain’ because eventually it implicated cost savings into the equation of business - big time.
Some may even argue the phenomenally successful John Lewis Partnership led the way with EDLP with their quaintly titled 'never knowingly undersold'.....not sure I understand the words but I understand the sentiment of building trust into the business of being chosen by customers! And trust was what Ron Johnson was interested in, not tearing up coupons or cancelling discounts but the integrity generated from EDLP. For too long, JCPenney was convinced bargain hunting, everyday, was the shopping experience of the future. It isn’t. It’s the backward looking, thin end of the wedge and a sticking plaster in the absence of differentiation – to completely mix all my metaphors.
Ron Johnson knew he had to re-establish trust and integrity if JCPenney was going to future-proof itself. He also knew the only way to attract new customers was to do lots of new things. He knew he couldn't do that without new and exciting product in a new and exciting environment and he also knew that 'hot' merchandise manufacturers don't want to be associated with cut and slash prices (simply put, this damages their brand).
Knowing all these things - he was in the process of doing all these things - all at the same time. And guess what, some things got done sooner than others. The new pricing policy hit before the new merchandice and stores did! So the old established customers didn't like it and the newer customers hadn't had a chance to grow to like it. And most importantly and not wrongly, the trustees of the public investment in JCPenney got spooked.
Returning to medical parlance, I would have prescribed some localised testing. Maybe a 'patch' test in a discreet and defined region to highlight any side-effects and quantify how long the patient might be in trauma - Jack Shewmaker would have advised 10 years. But I’m not so sure these days. Financed by the rest of the company, regional testing could have been aimed at giving local people a reason to trust JCPenney's pricing integrity again, giving them permission to believe in EDLP when it’s combined with a totally different kind of retail offering….allowing customers to luxuriate in ‘difference’…almost difference for the sake of difference dare I say. Difference that challenges and enlivens their normal shopping expeditions....you should have heard some of Ron Johnson's customer experience ideas - mind blowing! And all importantly, a different shopping experience that attracts different and exciting merchandise offerings. That’s how I read Ron Johnson’s dream.
For me the world of retail needs more of Ron Johnson’s dreams and less of his financial acumen – the modern customer is delighted to be weaned off discounts by exciting merchandise, revolutionary experiences and ‘difference’. But it all comes down to the bottom line….you’ve got to keep the patient alive long enough to benefit from the medicine.
And that’s the conundrum.
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