JC Penney is on a slow recovery after a disastrous 17 months trying to eliminate promotions, introducing upscale merchandise, and making the stores a little fancier.
Consider this quote on a blog from a couple of years ago when the JCP changes were going live. This quote was from Candice J, a shopper at JC Penney. She brought out a simple observation that a lot of pundits have failed to understand:
“I don’t know how I feel about this, being an avid JCPenny shopper. In theory this sounds great, but how it will actually play out is a whole other thing. …Some of their sales were staples to me. The Back to School Sale, MY FAVORITE!… I don’t have the luxury anymore to just go out and wander aimlessly to see if the prices are worthwhile. I need to know before i start packing up my daughter and step foot out my house that its worth my time and money.”
From this, and several other shopper views, its obvious that the strategy failed not because it was wrong, but because it wasn’t backed up by the right supporting processes.
So what are the insights here?
1. It’s simply that customers needed to be given the right external reinforcement. The heavy promotions that were eliminated had always provided the impetus and guidance for folks to come in. Any shopper worth their salt knows benchmark prices, and what constitutes a good deal. But now they just weren’t sure about the right deal both because of the changing merchandise, and lack of direct comparison with what was going on in other stores. A lot of us went on about how why promotions are needed because shoppers are more interested in the hunt etc., and how JCP took that thrill away from us. I think that’s all hogwash. At the end of the day, value matters, and its both tangible and intangible. JCP failed because customers were not given the reinforcement information they needed to come in. JCP should have actively provided that external reinforcement. In fact, that’s the need of the hour today for all retail.
2. Second, customers needed to be engaged both emotionally as well as physically. In fact, my sense is that for a lot of shoppers, the change came as a shock. They couldn’t come to grips with how the new strategy affected them. They didn’t see the familiar and they stopped coming. In fact, many may have come in with skepticism, and the alienation accelerated when they saw the changes. While, the new strategy may have intended to shun some customer segments, by and large what JCP failed to do was to engage the shoppers it wanted to retain. A little handholding, a little transition time, a little demonstration of value and assurance of continuity was all that was needed at the physical level. And then reinforcing that through advertisements and mailers which they definitely did. The problem was that the physical and emotional connections did not integrate. If one of my major shopping events is back to school, would I go to a store that doesn’t talk about it? This error in maintaining continuity opens up the customer to competition, and its difficult to get them back.
A 25% drop ($5B) in overall sales (from $18B)is very significant, that coupled with 200% decrease in operating income (from +$800MM to -$800MM). All because we couldn’t reinforce our value to customers, and couldn’t engage them. A harsh lesson in how we should better try to understand our customers, and test the changes in small increments to learn how to implement them well.
* The referenced blog is http://www.qualitylogoproducts.com/blog/jcpenney-pricing-strategy/ by Amy Swanson. She wrote about the pricing and strategy changes when JC Penney was introducing them.
* Photo credit: PLEASE VISIT – KAMPOLL.COM / Foter /CC BY-NC-ND
* P&L numbers from http://www.fool.com/investing/general/2014/10/21/jc-penneys-turnaround-it-just-doesnt-add-up.aspx