Ron Johnson is broadly credited with building out Apple’s insanely profitable retail store business. Last November, Johnson shocked the business world when he announced he was leaving Apple to become CEO at department store chain JC Penney. On Quora, Brian Roemmele provided this terrific answer to why Johnson made the move and what it could mean for JCP’s prospects.
Why? His desire to change just about every aspect of the department store experience.
The Department Store, Reinvented
Ron Johnson has always had his heart in retail all the way back to his product positions at Target. This has been a theme through his entire career, the turnaround for retail. He helped bring Apple from no retail stores in 2001 to a rather high zenith during his years at Apple. I think he was looking for a new challenge and found it in the form of J.C. Penney’s. It was a bold move for Ron, so much so, that the late Steve Jobs said, “What are you crazy?”. Apparently after Ron shared his vision with Steve, he sort of agreed. Steve actually personally recruited Ron from Target where he had already completely reinvented what was a mild Discount Store brand. Steve trusted Ron with just about all of the broad strokes we now take for granted at the Apple retail store.
Yesterday (1/25/2012) at Pier 57 in New York City, Ron revealed what he has been working on since he left Apple in November. It is his plan to completely remake what we have become used to in the department store experience.
It is his plan to remake every aspect of J.C. Penney’s by 2015. In his very Steve Jobs like presentation he presented just how “broke” the traditional retail department store model has become (Full video:http://www.jcpmediaroom.com/post… -thanks to Mark Burton).
Ron has a vision to recast the role these retail space play in a similar way he helped recast the computer store experience for Apple. It will start with a bold new Logo. The logo is designed to become iconic in both shape and color. The Red square will become a frame to highlight products in a very direct way. There is an element of the American Flag embodied in the design, and it is a gutsy statement:
Each store will be redesigned to have an open and accessible, uncluttered Apple Retail store-like feel.
He made a clear point that J.C. Penney’s is at a similar financial postion that Apple was in 2001.
“We want our pricing to be fair and square”
Ron has broke down his plan into the six P’s: Price, Personality, Product, Promotion, Place and Presentation. This will become the very foundation of how the company will reinvent itself.
The bold unique pricing concept will be transformed to three levels:
- Everyday - are the competitive, but reasonable prices.
- Month-Long – are sales on select items that last a month.
- Best-Price – the first and third Fridays of every month, cutting the price of products they want to move off the floor.
The plans will eliminate the standard fare of sales that have been expected for department stores.
Ron is going to echo brands like Apple, Target, Nike, Mercedes Benz and Tiffany with an iconic symbol and colors. Most department stores have stuck to the early 1900s use of word marks like Bloomingdales, Macys, Walmart. Just like the Target Red circle logo, if used correctly can be instantly identified and tied to a particular image. Ron predicts that over time, the logo will embody a sense of conscious style and “hipness”.
With the new pricing concepts there will be a drive to have more variation in the products, described as “editing the content”. For example, Brands that did not perform well the last year will potentially be eliminated. There will be a drive for J.C. Penney’s to motivate suppliers, much like Apple to innovate in every way possible. The ideas the company creates may be shared as a reward to very responsive partners.
For the year 2011 J.C. Penney’s ran 590 promotions that only brought a customer in an average of just four times a year. This means that each promotion cost about $2 million. However about 99% of the potential customer base simply would not respond to these offers.
Ron said, “Steve (Jobs) would have thought that was insanity,” The new model will be just 12 promotions, “They’re called months,” as Ron puts it. instead of getting people in four times a year, he hopes to draw them in just once a month. If successful, they could triple their business from just promotions.
Ron makes no apologies that he is drawing from the ideas he had at Target and Apple to propel the new company’s retail spaces. He admits that he is “stealing” Apple’s floor plans concepts and layouts. Currently, Apple stores are split in two sections, the “Red Zone” for customer discovery of new products and the “Family Room” where returning customers come to learn something new or fix their products, the Genius Bar. He has recast this concept into:
- Main Street – will be the aisles that guide you around the store, passing all of the shops. Just like a Main Street in a local town.
- Town Square – will be in the center of the store, replacing the old jewelry counters and some of the seasonal areas that currently use this space.
Each month the stores will will receive a color that will be dominant inside and outside of the store, using signage and dynamic lighting fixtures. This will also extend to in the companies printed advertisements and catalog along with the websites.
Ron envisions 100 specialty stores all bound inside of J.C. Penney. This will create a very unique feel to each store. This is a similar effect that is created inside of Fred Segal (http://en.wikipedia.org/wiki/Fre…) in Beverly Hills and Melrose sections of Los Angeles. This can already be seen with the successful partnership with Sephora. And it is very profitable – the Sephora specialty stores in J.C. Penney average $600 in sales per-square-foot but currently the rest of the story is just $200 per square foot. Over the years specialty stores work and are far more dynamic. Stores like J. Crew, Pottery Barn, Banana Republic have flourished while the department store has equally lost business. Ron says, “In a world where the product we want is just a key-word search away, we’ve lost our tolerance for complexity”
A Last Hope For The Department Store
This may very well be the last bold experiment to take place since John Wanamaker in 1861 at Oak Hall, at Sixth and Market Streets in Philadelphia, Pennsylvania invented this concept (When during the Industrial Revolution did fix price tags first appear?). The department store has not really changed a great deal and survived many attacks including the invention and devolution of the classic Mall. However, in the age of Amazon and mobile commerce, there is little space left for this concept.
Ron has a very large challenge at hand, but I think other than Steve Jobs himself, there are few people that can grasp the skills and magic to make this all work.
Time will tell, he has till 2015.