What will Ron Johnson do next?
For 15 years, Johnson worked at Target, where he pioneered the retailer’s image. Then, he spent about a decade changing the way Americans shop for electronic gadgets at Apple. Now, the question is whether Johnson will strike creative genius a third time as CEO of J.C. Penney.
The 30-year retail industry veteran already is using Apple’s techniques by innovating Penney stores, cutting out heavy discounting and providing services, not just products.
Penney is moving away from hundreds of sales promotions it has each year to focus on what it is calling everyday pricing. The retailer says it will offer discounts on groups of different items each month and clearance sales on the first and third Fridays of the month when many of its customers are paid.
Additionally, Penney in the next few years is planning to open areas in the middle of its stores called Town Square. Like the popular Apple Genius Bars that Johnson created so customers can get hands-on technical support, Town Square areas will offer services. The rest of the store will be divided into 100 specialty shops.
Despite Johnson’s innovative past, overhauling Penney won’t be easy. Department stores, as a whole, have lost market share to specialty retailers like H&M and Zara. The group’s market share in clothing and other areas fell to 31 percent last year from 57 percent in 1992.
And Penney, in particular, has struggled. The retailer’s sales have slipped as its core middle-class customers have been among the hardest hit by the economic downturn. Analysts say Penney has failed to attract younger customers with its stodgy image and its stores increasingly look uninviting compared to competitors.
For the 11 months through December, Penney’s revenue at stores opened at least a year — an indicator of a retailer’s health — rose 0.7 percent, while competitors such as Macy’s rose 5.4 percent, and Kohl’s was up 1.1 percent. Penney posted a loss in the third quarter and cut its fourth-quarter earnings outlook after a disappointing holiday season.
Johnson, 52, discussed with the Associated Press the challenges Penney faces. Johnson, who started his job at Penney in November, mentioned Apple 19 times.
Here are some excerpts:
Q. Why Penney?
A. ... Inherently, department stores have significant advantages compared to all other retailers. Yet, our productivity is at the low end, and that just doesn’t make sense.
Q. What was your first impression of Penney?
A. ... It just wasn’t modern. It wasn’t top of mind. Everybody can tell a story about their mom or their grandma or the old catalog days. But they don’t have modern stories. Because we haven’t been creative enough so we have to rethink everything.
Q. Who are the chain’s competitors?
A. Our No. 1 competitor is ourselves and our way of thinking, which is informed by decades of experience. It’s not another store; it’s not another format like the Internet. ... Our best friend is our imagination.
Q. How did you come up with the new pricing strategy?
A. Pricing is actually a pretty simple and straight-forward thing. … I have been struck by the extraordinary amount of promotional activity, which to me, didn’t feel like it was appropriate for a department store.
Q. Won’t shoppers be turned off because they won’t see the big markdowns?
A. I wouldn’t assume they like the pricing strategy. I think they’re insulted by it.
Q. What are your plans to make the shopping experience more exciting?
A. We are going to make the store a place people love to come — just to come. Because they can get support before they’re ready to buy. They can get great support when they want to buy and they can come in after they buy. We’ll transform the buying experience not unlike what we did at Apple.
Q. When will we start to see improvements?
A. You’ll start to see the experience change month by month. Everyone thinks it’s an overnight success but it never is. I was at Apple from 2000 to 2011, but it wasn’t until 2004 that the iPod became an important part of people’s lives. It wasn’t until 2007 that Apple reinvented the phone. It wasn’t until 2009 that Apple launched the iPad. But we look at it today and we feel Apple had always been beloved. It took time and this will take time as well.
