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AP Interview: JC Penney CEO talks about the chain

  • Article by: ANNE D'INNOCENZIO
  • Associated Press
  • January 30, 2012 - 2:27 PM

NEW YORK - Everyone in the retail world wants to see if Ron Johnson can work his magic a third time.

For 15 years, he helped shape Target's cheap chic image. Then, he spent about a decade changing the way Americans shop for electronic gadgets at Apple.

Now, Johnson faces perhaps his biggest challenge yet as CEO of J.C. Penney: dust off one of the dowdiest brands in retailing to make it cool again. To do that, he's borrowing from Apple's uber-successful playbook.

During an hour-long interview in which he talked about how he planned to transform Penney, the 52-year-old mentioned Apple 19 times. Like he did at Apple, the 30-year retail industry veteran says he plans to change the shopping experience, shun heavy discounting and sell services along with products.

In an industry where the bargain is king, what's raising the most eyebrows is his plan to do away with the 590 sales Penney had last year. Johnson says the sales turn off customers who must play a waiting game to get deals. So, instead Penney will offer everyday pricing and much fewer sales.

The retailer also is shaking up its stores, adding areas in the middle of each location that will offer services much like the popular Apple Genius Bars that Johnson created. Penney is tight-lipped about what services will be offered, some industry watchers say food demonstrations or haircuts could be among them. The rest of the store will be divided into 100 specialty shops that will replace endless racks of clothes.

Despite his impressive resume and innovative ideas, overhauling Penney won't be easy. Department stores, as a whole, have lost market share to specialty retailers like H&M and Zara whose stores have "wow" factor. The group's market share in clothing and other areas fell to 31 percent last year from 57 percent in 1992.

And Penney, in particular, has struggled. The retailer's sales have slipped as its core middle-class customers have been among the hardest hit by the economic downturn, it has failed to attract younger customers with its stodgy image and its stores increasingly look uninviting compared to competitors.

Here are some excerpts from the interview at Penney's Plano, Texas, headquarters, in which Johnson talked about everything from the challenges Penney faces to what stores he shops at:

Q. Why Penney?

A. I chose J.C. Penney because I think it's the single biggest opportunity in American retailing. Inherently, department stores have significant advantages compared to all other retailers. Yet, our productivity is at the low end, and that just doesn't make sense.

Q. What was your first impression of Penney?

A. I would describe J.C. Penney as one of a handful of great American brands that seemed like it was dormant, that had been a great part of the fabric of America for almost a century but it just wasn't modern. It wasn't top of mind. Everybody can tell a story about their mom or their grandma or the old catalog days. But they don't have modern stories. Because we haven't been creative enough so we have to rethink everything.

Q. Who are the chain's competitors?

A. Our number one competitor is ourselves and our way of thinking, which is informed by decades of experience. It's not another store; it's not another format like the Internet. Our competition is ourselves and our best friend is our imagination.

Q. How did you come up with the new pricing strategy?

A. Pricing is actually a pretty simple and straight forward thing. Customers will not pay literally a penny more than the true value of the product. And as I have been watching the department stores for the past decade, I have been struck by the extraordinary amount of promotional activity, which to me, didn't feel like it was appropriate for a department store. My instinct was that it wasn't a good thing.

Q. Won't shoppers be turned off because they won't see the big markdowns?

A. I wouldn't assume they like the pricing strategy. I think they're insulted by it.

Q. Who are you targeting?

A. We are going after all Americans. We would like to be the store for everyone.

Q. What are your plans to make the shopping experience more exciting?

A. We are going to make the store a place people love to come_ just to come. Because they can get support before they're ready to buy. They can get great support when they want to buy and they can come in after they buy. We'll transform the buying experience not unlike what we did at Apple.

Q. When will we start to see improvements?

A. You'll start to see the experience change month by month. Everyone thinks it's an overnight success but it never is. I was at Apple from 2000 to 2011, but it wasn't until 2004 that the iPod became an important part of people's lives. It wasn't until 2007 that Apple reinvented the phone. It wasn't until 2009 that Apple launched the iPad. But we look at it today and we feel Apple had always been beloved. It took time and this will take time as well.

Q. What ideals have you embraced from Steve Jobs?

A. The importance of doing everything you do to your very best. And that the journey is the reward. If you do things well one at a time, you end up in a really good place. Don't get ahead of yourself. Control the things you can.

Q. Other than Apple, which stores do you admire?

A. I admire lots of stores. Whole Foods is a great store. I just like their passion for food. It shows up in everything they do. It shows up in their packaging, their presentation and their employees. Starbucks. It truly has created a community. As I travel around the world, I just know that if I go to Starbucks I will have a great experience.

Q. You're dressed casually. Where do you shop?

A. I just dress to be comfortable. I shop at lots of stores. These are Levi 514s. I bought them at a Levi's store. I have a T-shirt. That's from Lacoste. I have a cashmere sweater. It came from Zegna. My socks are from Target. My shoes are from Tod's. We shop multiple places. But we do have a favorite store. That's what we're going to become.

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