Why is Ron Johnson’s retail strategy for J.C. Penney failing?

“First of all, Ron Johnson did a great job at Apple as VP Retail,” Paul Denlinger writes for Forbes. “Perhaps unconsciously though, it gave rise to blind spots, which have hit him hard after he became JCPenney’s CEO.”

“At Apple, Ron Johnson could do whatever he liked, and he never had to worry about the share price. Basically, he had to convince one person that he was on the right track: Steve Jobs. This is not the case at JCPenney’s; his critics are mainly Wall St. analysts and hedge fund managers. These are people who are not interested in operations and marketing; they just want the share price to hold. When it doesn’t, they call for his head,” Denlinger writes. “Selling Apple products was easy compared to selling JCPenney’s merchandise, which is not designed or made by JCPenney’s. Apple is a vertically integrated company; JCPenney’s is not.”

Denlinger writes, “Because of his long service at Apple, Ron may have overlooked these very basic differences and was overly optimistic about how fast he could turn things around. Before Apple, he was at Target, where he built up a good reputation in retail. It would serve him well to think about what he learned at Target, which is now considered a retail success.”

Read more in the full article here.

Related articles:
J.C Penney’s stock tumbles after key exec’s abrupt exit – June 19, 2012
J.C. Penney reports loss and plummeting sales in 1Q – May 15, 2012
Why Ron Johnson left Apple to head JC Penney – April 30, 2012
J.C. Penney lures another executive from Apple – April 26, 2012
Steve Jobs’ ex-lieutenant Ron Johnson adds $1.5 billion to J.C. Penney in two days – January 30, 2012
J.C. Penney CEO Ron Johnson: What I learned building the Apple Store – November 21, 2011
New J.C. Penney CEO Johnson hiring former Apple co-workers – November 9, 2011
Why Apple’s retail genius Ron Johnson is paying for the privilege of running J.C. Penney – June 15, 2011
Apple’s retail store chief Johnson off to J.C. Penney; expected to become CEO within months – June 14, 2011

52 Comments

  1. “It would serve him well to think about what he learned at Target, which is now considered a retail success.”

    Thank God that Ron has you to remind him to think about his days at Target. I’ll bet that never entered his mind.

    1. Exactly. It would do INVESTORS good to remember that he worked at Target as well as Apple.

      If investors were thinking this turnaround was going to happen in a quarter or two, they were smoking something.

      Maybe Ron Johnson should have been more clear in his investor presentation — this will not happen overnight. This will take a long time.

      AAPL was around $10-20 from 1996 – 2003 if I remember. Who wouldn’t give half their portfolio to go back in time to get in on that?

  2. Denlinger actually got paid to write that?!?

    I seriously doubt Ron Johnson “forgot” everything he learned at Target.

    What he has run into at JCPenny is the backlash of radically changing an old formula: Existing customers may not like or quite understand the change yet, and new customers have not been attracted yet.

    Rather than compare current JCPenny with current Apple, I would make the comparison of current JCPenny to 1990s Apple when Steve Jobs had just returned. Upheaval was the name of the game, and analysts and Wall Street screamed from the rooftops about how wrong the strategy was (No floppy drive?!? What is this USB of which you speak?!? There aren’t any USB peripherals!).

    JCPenny has been dying a slow, long death. Johnson has to change the Titanic’s course or we all know what will happen. Updating the logo and laying off a few thousand people or closing a couple of non-performing stores won’t change the end game. Only radically changing the old department store concept and experience will have a hope of success, and that seems to be what Johnson is trying to do.

      1. I went into the local JCP back in April. Other than a big 3D logo near the door, I didn’t notice one thing that had changed. If there were changes, they weren’t evident.

        ——RM

  3. “Because of his long service at Apple, Ron may have overlooked these very basic differences and was overly optimistic about how fast he could turn things around.”

    What an ignorant statement.

    Ron said from very beginning that the new system will take two years to unfold.

    Whether he will be given time to try it out or will be ousted much sooner is to be seen.

    1. It is no more shortsighted and ignorant than people ripping Cook and claiming that Apple is in decline because the company hasn’t crapped out a new revolutionary product in the past year.

      The people that can’t are always ready to dump on the people that can and do. It is easy to speculate and blindly criticize. That is why so many people do it.

    1. You beat me to it 🙂
      I also suspect that Steve had more to do with the look of Apple Stores than Ron Johnson would care to admit. Left to his own or worse, someone with no taste or vision in charge, he’s stepped out of the comfort zone that was Steve’s Apple.
      Just what sort of store ‘is’ Penny’s? To a Brit it sounds like a pound shop..?

      1. Penny’s is a middle of the road department store. Mostly clothing for men, women and children, plus housewares like dishes, accessories, bedding, the basic home furnishings etc. Penny’s isn’t focused on tools, lawnmowers, and big appliances like Sears is.

  4. The female impulse shopper is a different identity than an Apple customer. They DO think $3.99 is $3.00, not 4. They WANT to be fooled by confusing promotions so they have an excuse to buy stuff they don’t need. Penny’s has nothing unique. Ron is doomed. He should have known better than to try to change the mentality and behavior of his primary customers.

      1. Ask (most) any woman if a dress size with a smaller size number is more appealing, even if two are otherwise the same. Why do you think size “0” came out?

    1. Bingo. I hate to be cynical, but I have a feeling you’re right. Maybe the customers will come eventually though, I’m planning to go there next time I need clothes.

  5. Ron Johnson is not failing at JCPenny. His pricing strategy is simple and honest, which I respect immensely. The problem is consumers have been trained for so long to rely on coupons and flashy ads that tout mega discounts on highly inflated “regular” prices. No one ever paid regular prices… they waited until the coupon. Now you don’t have to wait – just go in any day you want and pay a fair, low price. But people don’t know what to do without those precious coupons that make them feel like they’re getting a deal.

    The problem is Wall Street hacks don’t care about the long-term health of a company. They want results that benefit them NOW. Ron’s strategy will take time to find widespread success. Steve Jobs spent YEARS getting Apple back on the right track upon his return. JCPenny will not get turned around overnight.

  6. Why is this article being posted here?
    I thought this was a Apple technology site? Why do I have to wade through all this retail nonsense?

    Just making a point. Have a nice day. Romney 2012.

    1. 1) If you can’t figure out why this article is here, go upstairs and ask your mother.

      2) I long ago grew tired of your use of this forum to advance a political agenda. In fact, I have no memory of you EVER making a comment of a technical or business nature – it is ALWAYS political. Do you even use Apple products?

      In short, why is YOUR post here?

        1. Errrr… I am not complaining about MDN’s choice of articles here. I am simply noting that I have NEVER seen a post from you that wasn’t devisively political. I have no memory of you making a technical comment, or even referencing an Apple product.

  7. I sat to a JCP exec on a plane last year who initiated a conversation because I was reading Steve Jobs. He said Ron said from day 1 that the numbers in 2012 will be terrible as they work to implement their new strategy. Basically they are doing away with their smaller stores in less profitable markets to focus attention on their larger stores. This takes time to implement. You can’t reengineer the large stores as quickly as you can shut down the smaller ones. According to this guy 2013 and beyond is when you will notice the JCP rebound.

    1. and JCP should have closed years ago. They are a dinosaur and they’re not really changing. The product is crap , people know it. And their customer is a middle aged woman or older. Young people won’t step foot in there and they never will. Best thing he can do is close the doors and move on

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