Insights

J.C. Penney Lesson No. 1: Know Your Customer

BY CSA STAFF

By Leslie Hand, research director, IDC Retail Insights

Ron Johnson’s highly publicized short tenure at J.C. Penney, or JCP, as it was rebranded, will certainly make it into the textbooks and graduate theses on what to do and what not to do when undertaking a significant retail business transformation. The primary failure was not putting customer needs first in what promised to be an excellent long term strategy. Oops — forget the customer in an omni-channel customer strategy?

What a colossal mistake!

The long-term strategy was good, but execution failed at the outset. If only — if only — the first step wasn’t so blatantly ill informed and poorly executed. That step, of course, being the move to Fair and Square pricing without making sure the customer would keep coming to the store if regular discounting and promotions suddenly vanished. This step failed because customers have been trained to be driven to shop because of promotions.

U.S. retailers created this environment, and many would like to turn back time, and create loyalty without discounting, and I would like to think that one day more retailers will achieve this. Some have – think Costco – pricing at Costco is essentially fair and square — fixed markups based on cost, and customers love it and are very comfortable putting things in their carts that they never intended to buy without doing mobile price comparisons. But Costco’s business model is different and customers understand it and like it and embrace it. Costco didn’t change how they go to market overnight.

What J.C. Penney should have done / what they can still do?

JCP should have executed a bit more like Macy’s, competing strongly year over year, always very cognizant of meeting market expectations while fully embracing omni-channel, and making very deliberate moves towards higher levels of omni-channel engagement. Macy’s, moving very visibly towards omni-channel, started with reorganizing the business around the omni-channel customer experience and building the supporting infrastructure.

Macy’s MOM strategy, which stands for My Macy’s localization, Omni-channel, and MAGIC selling is a holistic omni-channel strategy designed to enable in Macy’s words "extraordinary service to customers". Under the covers, the Macy’s program is driving towards increasing visibility and intelligent utilization of data. In the Manhattan Herald Square store, RFID and mobile devices have combined to create an amazing capability in the women’s shoe department where the customer not only gets better service, but the sales staff is well equipped to find and supply the products customers want. If the product is available anywhere in the visible network which includes the DC’s and hundreds of stores, Macy’s can satisfy customer need immediately.

When the product isn’t available, Macy’s could electronically capture what isn’t found. Imagine the power to improve service when we can quantitatively define with precision what we didn’t have in the physical store, and subsequent lost sales and loyalty caused by out of stocks. Valuable data is also being sourced from improved social listening systems, further improving Macy’s ability to meet customer needs.

And like many other high profile omni-channel retailers Macy’s is testing a variety of technologies to further engage and delight the consumer, including Beauty Spot, virtual concierge, Google wallet, PayPal self checkout, mobile POS and virtual manikins. The manikins rely on strong common content management capabilities shared with other digital systems, another cornerstone of a good strategy — strong infrastructure, integration and governance.

I’d argue that Ron Johnson could have been successful if he had built this new environment first, giving the customer a new reason to be loyal, creating an engaging omni-channel environment that would draw them to JCP. Pricing policies could have changed later, over time – definitely not overnight.

All this of course, sounds like hindsight now, but certainly wasn’t through the years as we have advised other retail clients to define how they will differentiate going forward, and invest in transforming their organizations to compete successfully for the omni-channel consumer dollar. The formula for success always depends on who the retailer ultimately wants to be in the eyes of their customer, and well thought out strategic moves executed with foresight of the consequences of missteps, and a plan to recalibrate quickly should one overstep.

At stake, the ability to Increase sales, inventory turns and return on invested capital, in much the same way that Macy’s and others like Nordstrom’s are proceeding. A big opportunity lost for Ron Johnson, but hopefully not for JCP.


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S.Anderson says:
May-29-2013 09:53 am

bad service
The main mistake is that people who are going to run their own business are not aware of all nuances of certain business and very often mistakes appeared in weak points like bad service. People don’t like to wait and to be ignored especially if they are in an expensive place like restaurant or so. I want to add that really good service can defuse a lot of disadvantages like comfortless place or even bad cuisine. Payday loans in Alberta for instance used to be very unpopular organization, but thanks to its quick service they are on the top positions. Every business is possible to start, though it takes a lot of efforts to continue.

S.Anderson says:
May-29-2013 09:53 am

The main mistake is that people who are going to run their own business are not aware of all nuances of certain business and very often mistakes appeared in weak points like bad service. People don’t like to wait and to be ignored especially if they are in an expensive place like restaurant or so. I want to add that really good service can defuse a lot of disadvantages like comfortless place or even bad cuisine. Payday loans in Alberta for instance used to be very unpopular organization, but thanks to its quick service they are on the top positions. Every business is possible to start, though it takes a lot of efforts to continue.

V.Souz says:
Apr-24-2013 09:51 am

retail strategies
Great post, recently came across this very interesting audio cast and whitepaper on retail growth strategies "Thinking about tomorrow: Post-recession strategies for retailers" It offers very good information on consumer trends, multi channel marketing , readers will find it useful @ http://bit.ly/10XoIQa

J.River says:
Apr-24-2013 06:59 am

Oh please
Shopping those mini stores is a nightmare, example toaster, well hope you like a choice of one in that Graves store, $70, looks like bread. A store the size of a JCP made up of 100 mini shops is dysfunctional, can you imagine Walmart stocking its groceries this way, you want tuna, well, go to the StarKist mini shop. Want to compare price on other brands of tuna, good luck, you might find it in another mini store somewhere in the store. You ever look at a Bed Bath & Beyond? How they arrange stuff, grouped by type, with brands beside each other, bursting at the seams with merchazdise? Check their stocks, their growth, this year. Ron's vision was one big pipe dream. The new parts of JCP is minimalistically stocked by design with crap no one needs and it would appear, wants. JCP has the following hope, rip out as much as possible those mini stores, or reduce the damage, get it done by October, pray to some deity for Christmas. If Christmas fails expect nothing more than an oil slick left. Ron will have "Ron Johnsoned" JCP into history.

V.Souz says:
Apr-24-2013 09:51 am

Great post, recently came across this very interesting audio cast and whitepaper on retail growth strategies "Thinking about tomorrow: Post-recession strategies for retailers" It offers very good information on consumer trends, multi channel marketing , readers will find it useful @ http://bit.ly/10XoIQa

J.River says:
Apr-24-2013 06:59 am

Shopping those mini stores is a nightmare, example toaster, well hope you like a choice of one in that Graves store, $70, looks like bread. A store the size of a JCP made up of 100 mini shops is dysfunctional, can you imagine Walmart stocking its groceries this way, you want tuna, well, go to the StarKist mini shop. Want to compare price on other brands of tuna, good luck, you might find it in another mini store somewhere in the store. You ever look at a Bed Bath & Beyond? How they arrange stuff, grouped by type, with brands beside each other, bursting at the seams with merchazdise? Check their stocks, their growth, this year. Ron's vision was one big pipe dream. The new parts of JCP is minimalistically stocked by design with crap no one needs and it would appear, wants. JCP has the following hope, rip out as much as possible those mini stores, or reduce the damage, get it done by October, pray to some deity for Christmas. If Christmas fails expect nothing more than an oil slick left. Ron will have "Ron Johnsoned" JCP into history.

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Cabela’s co-founder named chairman emeritus

BY CSA STAFF

SIDNEY, Neb. — Cabela’s co-founder and chairman Richard N. Cabela will be named chairman emeritus June 5, during the company’s 2013 annual meeting of shareholders. His brother, James W. Cabela, who is vice chairman and co-founder, will be named chairman at that time.

“Dick Cabela is a legend at Cabela’s as well as throughout the entire outdoor industry,” said Tommy Millner, Cabela’s CEO. “From their kitchen table in Chappell, Nebraska, 52 years ago to pioneering direct catalog marketing and experiential retailing, Dick and his wife, Mary, revolutionized every aspect of outdoor product sales. Dick’s passion for the outdoors transformed Cabela’s from a small company in western Nebraska to a $3.1 billion globally recognized brand.”

“We are particularly pleased our long-term succession plans once again worked,” Millner added. “This has been a key focus over the past four years for our management team and board of directors at every level of leadership within the organization.”

“Dick’s enduring legacy continues, and I look forward to continuing to learn from Dick’s wise counsel and advice in his new role as chairman emeritus,” Millner said. “On behalf of Cabela’s employees, shareholders and customers, I would like to thank Dick and Mary Cabela for their passion for the outdoors and vision and business acumen, which led to the founding of this extraordinary company. Dick, Mary and Jim weren’t the first to offer outdoor goods through the mail, but nobody did it better or with a greater focus on customer service. This passion for delivering legendary customer service will forever be Cabela’s foundation.”

“As we look toward the future, we are very pleased to have our co-founder, Jim Cabela, become chairman,” Millner said. “Jim’s leadership has been a powerful force in building our company over the last five decades. Jim’s passion for the outdoors and his role as our new chairman will ensure we remain focused during this exciting growth period.”

Cabela’s Incorporated is a leading specialty retailer and the world’s largest direct marketer of hunting, fishing, camping and related outdoor merchandise. It was founded in 1961.

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Starbucks, Chicago

BY CSA STAFF

Starbucks Coffee Company’s two-level store at the corner of Chicago’s Oak and Rush Streets has a distinct Chicago feel, and reinforces the company’s recycled, reclaimed and reused materials philosophy and coffee origins theme. The walls are lined with reclaimed local brick; salvaged wood from disused boxcars clads walls, ceilings and fixtures. A floor-to-ceiling diagram of the world’s coffee-growing regions, done by a local artist, is featured downstairs. A chalkboard rolling panel allows the baristas to chalk the day’s specials on the wall and roll it to the appropriate region.

(Click here to see photos)

The store, which took the Grand Prize in the Specialty Food Category of the A.R.E. Design Awards, is comfortable and inviting. Casual seating downstairs caters to to-go customers, while a fireplace and more sophisticated furnishings encourage lingering upstairs. Balcony seating capitalizes on the prime corner location.

Design: Starbucks Coffee Company, Seattle
Architect: Mancini Duffy | TSC, New York City


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