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Why Ron Johnson failed at JCPenney

Posted by: under Retail, Target Updated: April 9, 2013 - 6:04 PM

 

 

Ron Johnson can be rightly credited with reinventing retail twice: first as the Target executive who helped create its “cheap chic” persona and second as the Steve Jobs’ co-partner behind Apple’s famed retail stores.
 

So why couldn’t Johnson work his old magic on JCPenney? The answer is relatively simple: JCP needed a turnaround guy, not a reinvention guy.
 

“Mr. Johnson apparently thought JCPenney and Apple were on equal planes…and boy, was he wrong,” said Robert Pasikoff, president of Brand Keys in New York.
 

Turnaround and reinvention are not necessarily the same things. For one thing, reinvention is best done from a position of strength. If you are going to take big risks, best you have deep reservoirs of cash and good will to draw upon.
 

Apple and Target were already successful companies when Johnson worked there. His ideas helped keep them on top.
 

JCP was entirely a different matter. Growth was stagnant. Shelves were messy. Identity non-existent. But all for its problems, JCP was a a financially stable company with a core group of loyal customers.
 

That may not exactly fire up the Wall Street bulls but at least it’s something. Problem is, Johnson didn’t see much in the old JCP worth preserving.
 

 

 

Johnson’s biggest move was to immediately scrap the coupons and weekly clearance sales that its customers had grown accustomed to.
 

The reasoning was sound. To constantly discount your merchandise means to constantly cheapen your brands and your stores.
 

But to quickly eliminate those deals is akin to forcing a drug addict to go cold turkey. The results are messy.
 

“We told him it was silly, that he was trying to do too much too quickly,” said a former top retail executive who advised Johnson and some JCP board directors.
 

He requested anonymity so he could openly discuss private conversations.
 

“Try it out in 30 stores but for God’s sake, don’t roll it out all at once,” he said. “You have to retain the core customers. If you take something away, you have to give them something else.”
 

It’s easy of course to second guess a freshly fired CEO. But retail is a very conservative business. Customers don’t change overnight simply because you want them to.
 

Despite Johnson’s pedigree, he probably needed to rack up a few decent quarters or perhaps a year before making such a bold move.
 

That’s not to say a CEO can’t think big. But that CEO should probably have an equally big cushion should his big idea fails.
 

Jobs, after all, blew it with Apple TV. And Target CEO Gregg Steinhafel misfired with the retailer’s holiday partnership with Neiman Marcus.
 

Both men not only kept their jobs but pundits praised them for taking risks. Because years of stellar performance should count for something.
 

Johnson’s credentials will probably earn him a shot at another retailer.The big question is whether that retailer needs a turnaround specialist or a reinvention guru.

Johnson, at least right now, fits only one of those labels.

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