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Who's Minding the Store?

By: Jeff Falk
Posted: April 26, 2013, from the May 2013 issue of GCI Magazine.

Steve Jobs was neither a man who veered off course from a decision once he believed it was right nor a man who ceded control to anyone. And in 2000, after months of prototyping, Jobs was sure that the design and layout for the Apple store were finally right, but the man whom Jobs chose to develop the stores realized they’d gotten something fundamentally wrong. Jobs, according to Walter Isaacson in the eponymous biography Steve Jobs, erupted when told. He was also not a man to keep emotion in check, but he realized that Ron Johnson was right. They went back to work and launched the first store in May 2001, and with it, introduced Johnson’s Genius Bar brainchild. In 2004, Apple stores set a retail landmark by achieving $1.2 billion in revenue.

The number is mind-boggling and extraordinary, and it was not Johnson’s first success in retail, having launched many of Target’s designer initiatives, which solidified the retailer’s reputation—both as a brand and in merchandise offered—of affordable chic. So what happened at Johnson’s most recent gig at J.C. Penney, a gig he was fired from just short of two years as CEO and midway through a major overhaul of stores? According to the Wall Street Journal, that overhaul produced a disastrous drop in sales.

It’s fair to note that J.C. Penney was not in great shape before Johnson took over, but sales fell 25% in the year ended Feb. 2, 2013, costing the retailer $4.3 billion in revenue and leading to a net loss of $552 million—spurring a substantial loss in share value.

The J.C. Penney board’s decision to replace Johnson with the man he had replaced, Myron Ullman, and Ullman’s subsequent comment confirm what’s at the well-reported heart of the losses: “There’s no reason to try and alienate customers who want to try and shop at J.C. Penney,” Ullman said.

Johnson had embarked on a reinvention of Penney’s stores. Redesigned stores and new lines of merchandise were one thing, and were counted on to rebrand J.C. Penney as a “destination for a younger, hipper crowd,” according to NPR in a March 1, 2013, report. Winning new, younger customers didn’t happen. At least it didn’t win enough to replace the core customers it confused, alienated and subsequently lost with the implementation of its “no coupons” and “no sales” strategy. These customers loved clipping coupons and waiting for sales. “I come home and I cry over it, and my husband’s looking at me, like, ‘What’s wrong?’ ” Florida shopper Carol Vickery told NPR. “I said, ‘Penney’s doesn’t have sales anymore. I need my store back!’ ”

My point is simply that miscalculating a brand position, disregarding or not knowing core customers, and misreading or forsaking the trends and drivers influencing other desired customer groups has serious consequences—for J.C. Penney, 4.3 billion consequences. It didn’t matter that, on paper, the store experience had been improved and that the marketing message had been updated—or how successful Johnson had been at previous endeavors. The real message J.C. Penney sent to its core customer was “this store is no longer yours” while trying to send the opposite message to a potential customer group that wasn’t interested and didn’t heed.