We’re amused by all of the activity going on surrounding JC Penney (JCP) and its move to an everyday low price offering strategy (EDLP). Their relatively new CEO, Ron Johnson (hired a year ago away from Apple Retail) has been at the helm of some sweeping changes, all designed to get mom back in the store on a regular basis. Media consensus is that the JCP board thought that if Johnson could perform his magic at Apple, then he could do the same for the ailing department store dinosaur.
Not so fast, Dino.
To be sure, Johnson came out of the gate firing on all cylinders. He immediately announced the EDLP philosophy called “Fair & Square”, re-designed the logo, fired the Saatchi & Saatchi advertising agency (a five-year incumbent) and announced a new reliance on “store-within-a-store” features anchored by brands. Later, he went on to lay off more than 10% of the corporate work force, gut the executive team and trim middle management (mostly store operations) by thousands. Oh, and he abolished commissions for all sales people.
Now, many fans of Johnson would say that he’s an agent of change, that he’s been brought in to make tough decisions, trim operating costs and right the sinking ship. And that all of these moves are the unfortunate fallout from beginning a new day.
We’re not turnaround specialists at Weber Marketing Group. It’s a task we wouldn’t envy in a Plano minute. But we do know a little bit about branding and branding’s incubation in the culture of the organization. Johnson’s mistake was that he thought he could transfer the tenets of the Apple brand into the behemoth and ancient JCP with just some new “branding stuff”. It doesn’t quite work that way.
Since 1902 JCP has been enticing customers in by using sale events. For over 100 years, JCP has trained customers not to come in unless they are having a sale. It’s the promotional drug at its extreme and everyone has been mainlining for decades. You don’t change that behavior overnight be reinventing yourself to having “month-long savings”… or EDLP. The addicts went elsewhere.
Recently, JCP went back to having sales. But it’s too late. Analysts are saying that the constant rebranding of JCP is driving away its core customer. The stock has plummeted. The stores are deserted.
Why didn’t it work?
You don’t invent a culture of EDLP. You have to be born that way. Wal-Mart has had great success as an EDLP retailer because it has been part of their DNA since day one. Once you hook the consumer on the fact that you drive your business via sales and you train them not to buy from you unless it is on sale, you can’t suddenly announce that you were just kidding and that your non-sale prices are the best deal any day.
Re-branding never works when you invent it. It only works when it comes from the cultural sole. James Cash Penney would be aghast at what is happening to his namesake retailing chain. It’s adrift and going down fast. Next up… the going out of business sale.