Why We're Disappointed Ron Johnson Failed at J.C. Penney

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J.C. Penney CEO Ron Johnson shows of a bread-shaped Michael Graves toaster at a Penney location in Dallas, Texas, on February 5, 2013. (Michael Ainsworth/Dallas Morning News/MCT)
Michael Ainsworth/Dallas Morning News/MCTJ.C. Penney CEO Ron Johnson shows off a bread-shaped Michael Graves toaster at a Penney location in Dallas, Texas, in February.
Ron Johnson finally stepped down as CEO of J.C. Penney Tuesday. While the news came as no surprise, it's disappointing that it had to end like this.

Make no mistake about it: J.C. Penney had to fire Ron Johnson. On Johnson's watch the retailer lost billions in sales and saw its stock lose more than half its value. And he was burning through the company's cash reserves trying to make his vision a reality.

But oh, what a vision it was. It's no exaggeration to say that Johnson will go down as one of the most ambitious retail CEOs we've ever seen -- and we may never see another like him.

New Clothes, Fair Prices

Take the "fair and square pricing" scheme, which abruptly did away with J.C. Penney's neverending stream of coupons, sales and promotions. Johnson wasn't just dismantling the company's long-standing pricing strategy -- he was challenging a practice that had become orthodoxy in the retail world.

Johnson saw the irrationality of keeping sticker prices artificially inflated and then constantly lowering them with coupons and sales. He hoped that customers would, too. Alas, the strategy backfired in a big way, proving that consumers are simply too used to being tricked by these sorts of gimmicks.

I think Bob Sullivan of NBC News put it best last May when it was becoming clear that the strategy had failed: "Could we have a moment of silence please for what might be the last heartbeat of honest price tags?"

While we're at it, let's talk about the clothes. Johnson totally revamped the retailer's apparel collections. Gone were the plain, inexpensive pants and sweatshirts; in were jeans bars, Nick Wooster and hip brands like Joe Fresh.

That change was likewise disastrous. We've heard from dozens of shoppers who say they ditched J.C. Penney because the new clothes were clearly intended to appeal to a younger audience.
JCP
JC Penney
But is it such a bad idea to pivot away from an aging customer base so that you can try to attract a younger generation? Johnson transformed J.C. Penney into a retailer where I and other young people would want to shop, and it will be disappointing if his departure does away with that stylish progress.

A Failure to Execute

Still, it's one thing to have a bold and innovative vision. It's another thing entirely to execute on that vision, and that's where Johnson failed miserably.

Johnson simply implemented too much change too quickly. While most product offerings and strategic shifts are tested in select markets before being rolled out nationwide, the new pricing strategy was implemented all at once. According to one report, Johnson shot down an executive who suggested they test the new pricing, retorting that "we didn't test at Apple."

That same philosophy was also on display with the apparel revamp. Johnson could have gradually introduced jeans bars and boutiques. Instead, he wiped out long-established brands like St. John's Bay without considering how loyal customers would react. While Johnson said recently that the company would bring back these "basic" offerings, it may be too late for customers who have moved on to Sears and Kohl's.
JCP
JC Penney


"To lure the new type of customer (20- and 30-somethings) that this CEO was aiming for takes a slow steady plan, not a leap off the high board like he did," chimed in reader Richard Brawer, a novelist. "Now they have an even tougher job, bringing back their old customers."

What's Next

J.C. Penney's stock briefly surged on the news of Johnson's departure -- and then plummeted as soon as word came down that his predecessor, Myron Ullman, would be taking over.

While Ullman's tenure wasn't as disastrous as Johnson's, the company did flounder on his watch -- which was why he was replaced by Johnson in the first place. Johnson may have moved forward too quickly, but investors seem concerned that the board may have swung too far in the opposite direction by hiring an old CEO who did little in the way of innovation.

Some are urging caution on that front -- Cory Johnson of Bloomberg, for instance, suggested that Ullman would continue the strategy of "more Sephora, less Walmart."

Still, many are taking it as a given that the new management will eventually roll back Johnson's strategy, and we've received several emails from disaffected shoppers rejoicing at what they see as the imminent return of the "old J.C. Penney." While it was smart of J.C. Penney to bring back some of the old basics, it will be a shame if it completely ditches its stylish new direction under the new boss.

And I won't be the only one disappointed if that happens. While most of our readers were glad to see Johnson's back, a few said they were sorry to see him go.

"I never shopped there for myself until I started to see the changes being made in the clothes and the look of the store," wrote one reader, who identified herself as a "fashion conscious" 60-year-old. "It might have taken some time before Penney's found a new array of customers, but I believe eventually they would have come. Unfortunately it may not happen now, for I fear Penney's will go back to its frumpy ole ways."

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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