As for shareholders, well, you don't really buy stock in a
department store because you're looking for risk. I can't help
thinking it was this risk-averse investor mentality that at least
influenced decisions such as the Martha Stewart product alliance,
which left me and other industry analysts scratching our heads.
With so many awesome upstart brands out there, why JC Penney
decided to hitch its wagon to a dinosaur was an absolute mystery.
What on earth could Martha Stewart mean to anyone under age 30, the
customer of tomorrow? The only thing the Martha Stewart line could
do, it seemed, was maintain the status quo and keep investors
happy.
Faster, Better, Cheaper
When it comes to product vendors, they want to write orders, not
history books. They're certainly not interested in redefining
anything, much less the department store. Most would rather keep
playing the game the way it's always been played -- a discount
here, a discount there and everybody's happy. The mere utterance of
the word "innovation" sounds expensive and risky to a vendor.
And if you ask customers what they want, inevitably, they'll
want you to do exactly what you do now, only faster, better and
cheaper. In fact, many consumers say they'd rather get a discount
than pay a fair and honest price --even if they know the regular
retail price is fictitious! Some would call that madness. But
consumers, and especially those of JC Penney, had developed an
insatiable addiction to coupons, discounts and rollbacks. It was
this very addiction to cheap that kept JC Penney in the race to the
bottom for decades. Yet the goal should never have been to make
existing customers happier but rather to find entirely new
customers.
On June 19, after just eight months with the company, JC Penney
President and Target alum Michael Francis was escorted to the curb
with a "Kick Me" sign on his back and $10 million in his pocket. It
was a strange fate for the man who only 10 months earlier had been
hailed by Mr. Johnson as "an extremely talented executive with the
vision and courage to reimagine the department-store experience."
Short of his own employment, Mr. Francis didn't get much of a
chance to reimagine anything.
In the lead-up to Mr. Francis' departure, total organizational
sales had fallen more than 20%. Same-store sales were off 19%, and
most financial analysts were pointing to the new retail-pricing
model, lack of coupons and bad leadership as the culprits. Mr.
Francis seems to have taken the fall for all of it, but now many in
the industry are wondering if Mr. Johnson was ever really cut out
for this job in the first place. Perhaps he doesn't have what it
takes to turn around JC Penney. Perhaps he just doesn't get how the
game is played.
The real question is , does anyone? Could anyone around turn JC
Penney or any major business anymore? We live in a world that
considers "long-term vision" as the span of time between earnings
calls. We demand innovation so long as it doesn't interfere -- even
for a quarter -- with shareholder greed. We'd rather sell to the
wrong customer than lose a customer. And we love risk -- provided,
of course, that it's risk-free.
You see, the point is not that Mr. Johnson is failing. It's that
he just can't win.
ABOUT THE AUTHOR
Doug Stephens is the founder of Retail
Prophet Consulting and is the author of "The Retail Revival."