April 18, 2013
Dallas Morning News
A time-honored tradition in the editorial writing business is “shooting the wounded,” a euphemism that roughly translates to piling on when a person finds misfortune. We will try to resist.
Take Ron Johnson, until recently the bold and even revolutionary CEO of J.C. Penney, the middle-market department store chain and familiar face in malls across America.
Penney has been around since 1902 and has had its headquarters just north of Dallas in Plano since 1987. We offered optimism — enthusiasm, even — for a corporate neighbor and key North Texas employer when it brought Johnson aboard in June 2011.
He came with a head full of ideas from triumphs developing Apple Inc.’s stores and Target’s transformation from big-box budget store to something decidedly more hip and happening. Penney, it seemed, could be another trophy redesign.
Instead, he joined the wounded, brought down by ideas that alienated more shoppers than they attracted and the hubris to resist leavening his bold strokes with realistic data analysis. The customer might not always be right, but in the retail game, the customer almost always has a choice.
Johnson’s philosophy, born of past success, was that he would not wait for the customer to tell him what kind of Penney to build. Instead, he would remake the chain based on his intuition of what they should want. Daily sales reports would not dissuade him.
With New Coke finality, the customers rejected Johnson’s concept of specialty shops within each Penney store. Instead of discounts and coupons, Johnson implemented “low everyday prices,” take ‘em or leave ‘em. As bargain shoppers fled, Penney’s revenue fell 25 percent last year, even more in the critical holiday quarter. The key measure of same-store sales showed a 32 percent collapse. Losses for the year approached $1 billion.
The irony is that Johnson’s concepts, over time, might have worked. Even a Johnson critic like retailing legend Allen Questrom was impressed personally; yet he advised Penney board members to test them before rolling them out everywhere. “I like the shops,” he said, “but I’m not the customer. The question is: Do J.C. Penney’s customers like it?”
This was where bold strayed into reckless. Had Johnson shown the patience to test-market his shops-within-a-store, no-coupon ideas at selected locations, he could have evaluated customer reaction and, if necessary, adjusted. Instead, he went all in before the cards were dealt.
Penney will try to regroup behind once-and-current CEO Myron “Mike” Ullman, 66, who also will sit on the board of directors. Under Johnson, 20,000 employees lost their jobs as losses mounted and Penney sought cash to fund his transformation.
We hope that Penney — and especially its board — can emerge wiser. Taking a chance on vision and imagination can pay off big, but it’s never a bad idea to hedge your bet by scrutinizing data and listening to your customers.