April 08, 2013


Yup, you heard the news ... Ron Johnson out at JCP (click here for details).

First of all, there are way too many people out there cheering this news.  Have you ever been fired?  How did it feel?  You pour your heart and soul into a job.  More than a hundred million dollar golden parachute may soften the blow, but it doesn't soften the impact on the ego.  Try pouring your heart and soul into a new strategy, try changing the minds of tens of thousands of employees sometime ... seriously, give it a try.  It's terribly hard work, and when it fails, it eats at you.

Second, there are way too many people out there who, based on tweets, blog posts, and articles, appear to believe they know how to fix JCP.  Good!  Why not dive into retail and prove if your hypothesis has merit?  It is way, way too easy to stand outside of an industry and point at it and beat it up publicly in an effort to generate page views that you directly benefit from.  It is terribly hard to fix real world problems.

Third, JCP wasn't exactly thriving prior to this dramatic change in strategy.  Have you looked at the five year sales trajectory?
  • 2012 = $13.0 Billion.
  • 2011 = $17.3 Billion.
  • 2010 = $17.8 Billion.
  • 2009 = $17.6 Billion.
  • 2008 = $18.5 Billion.
Here is the comp store sales trajectory:
  • 2012 = -25%.
  • 2011 = -3%.
  • 2010 = +1%.
  • 2009 = -5%.
  • 2008 = -7%.
In other words, if you go back to what "worked" previously, you're back to a compound average -3.5% comp store sales decline.  Is that the success you crave, now that the CEO you didn't like got fired?

And look at Operating Income(Loss):
  • 2012 = -$1.3 Billion.
  • 2011 = -$0.2 Billion.
  • 2010 = $0.8 Billion.
  • 2009 = $0.7 Billion.
  • 2008 = $1.1 Billion.
Not exactly a resounding four year trend prior to 2012, correct?

This was a business that was dying prior to the major changes we've all heard about.  So if you are an expert, you now have two problems to fix ... the old one, and the new one.

Fourth, many of you suggest that JCP should have "tested" their way into this strategy.  Not a bad idea.  But that's not how the real world works.  Let's say they did test ... rolled out a new strategy in all stores in California, for instance.  What do you do when the rest of the store profile is dying a slow 4% death?  Try having patience when others scream at you at 110db, spittle flying everywhere.  Human nature has little tolerance for the slow, incremental progress of testing.  Retail is very different than e-commerce, folks, regardless what the omnichannel experts suggest.

Fifth, and this is the thing nobody has an answer for ...  discounts and promotions are taxes placed upon brands for being unremarkable.  This means that JCP generated between $4 Billion and $5 Billion per year of business that was discount/promotionally driven ... one out of four items was not sold because of a love of merchandise, but because of a perceived bargain.  How does a company fix that problem while maintaining sales levels?

What we've learned in the past year is that when we train a customer to purchase via discounts and promotions, we train that customer not to shop when we abandon that strategy.  I see it all the time in my projects, now you got to see it in a real-life laboratory.

This is so important, folks.  I keep getting questions ... "What is the right promotional strategy to tickle the buying bone of the customer?  Is it free shipping?  Is it 20% off plus free shipping? Is it 40% off?  Is it a gift with purchase?"  These are valid questions.  An equally valid question is this ... what is your exit strategy when you decide that you can no longer afford to tease customers with discounts and promotions?

We've destroyed retail (stores + e-commerce + catalogs, the whole thing).  We turned it into a game where chasing a promotional strategy is more important than identifying outstanding merchandise.  The latter is terribly hard.  The prior is, unfortunately, too easy, and impacts every employee outside the marketing department.

So, here we are.  We know that what JCP was doing prior to 2012 wasn't working well.  We know that what was done over the past year-plus really didn't work - it couldn't possibly work given that the entire customer file craved discounts/promos like a drug addict craves drugs!  You have to build a customer file of full-price customers, and that is VERY hard work.  So hard, in fact, that almost nobody does it anymore.

Given where we are, it's time for you to put on your strategy hat.  In the comments section, please offer your thoughts.  I will stay away and not offer my thoughts - this is your forum:
  1. How do you get this business back to where it was - describe your strategy, and the benefits of your strategy?
  2. Once you get the business back to where it was, how do you fix the original problems that caused the business to veer in the direction it took in the past year?
  3. Show cases studies or links that defend your proposed strategy.

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