It may seem like a decade ago when J.C. Penney\u2019s newly crowned wunderkind, CEO Ron Johnson, announced several revolutionary and rather bold changes for the more than century-old retailer.\u00a0 Johnson officially began operations as corporate CEO in November 2011.\u00a0 Just three months later, the company announced a completely new merchandising system among other proposed changes which caught retailing by surprise, to say the least.\u00a0 This resulted in an anxious but respectful wait and see attitude among savvy retail stalwarts, competitors, brick and mortar retailers in general and of course the financial markets headed up by Wall Street analysts.<\/p>\n
The JCP plan going forth was to include a radical overhaul of store design, pricing and promotions. \u00a0As good as these ideas may have sounded, it seems that many long-time Penney\u2019s customers were turned off and\/or confused by the new policies.\u00a0 Sales quickly plummeted and continued to consistently decline throughout 2012.<\/p>\n
Many retail insiders theorize that current JCP management was less than in love with the traditional customers they inherited.\u00a0 This theory states that as many of these customers were maturing, they were a less lucrative market than the more youthful groups that waited on JCP to make the right invitational moves.<\/p>\n
<\/p>\n
A Lesson from the Annals of The Home Depot<\/em><\/strong><\/p>\n Parts of this J.C. Penney scenario remind me somewhat of the time when Home Depot\u2019s founders decided to step down and devote their considerable energies to other exploits, such as owning an NFL team.\u00a0 The company\u2019s hand-picked successor was GE executive Robert Nardelli.\u00a0\u00a0 Nardelli too had some almost larger than life ideas about running his new company and quickly proceeded to create a Home Depot that pretty much all but abandoned its founder\u2019s roots to become essentially all things to all people.<\/p>\n Previously The Home Depot had been built on a foundation of primarily serving do it yourselfers, while also welcoming professional builders and contractors.\u00a0 The company\u2019s founders were well aware that these customer types are essentially two distinctly different audiences.\u00a0 They understood that do it yourselfers represent a wide range of project knowledge.\u00a0 While a few of these customers are extremely knowledgeable, most are not.\u00a0 In fact many are pretty much unaware of all that is needed to complete many simple projects.<\/p>\n Thus from its inception Home Depot management stressed the hiring of knowledgeable personnel to man the floor.\u00a0 The company was able to attract a number of associates with backgrounds in essential areas such as plumbing, carpentry and electrical installation.\u00a0 The company also implemented a continuing educational system which applied to all customer-based departmental associates.<\/p>\n The object here was to offer all customers the type of insightful feedback which would see them leave the location feeling that they had acquired the knowledge to complete even the most daunting of projects.\u00a0 At least as important, the expectation was that customers would leave the premises having purchased all that was needed to complete their respective projects.\u00a0 Home Depot management was well aware that, as many do it yourselfers have very limited knowledge as to the full necessities of a project, they often leave the store only to eventually discover the products they are lacking.\u00a0 This often results in a quick trip to the local hardware store where the customer service is generally excellent and the expense of time and gas is minimal.<\/p>\n Home Depot\u2019s educational system included tests required to pass the class and a completion notice which generally led to an increase in pay and\/or a promotion.\u00a0 The training served to incentivize personnel and better serve customers.\u00a0 It also served to increase sales and profits and make the daunting big box format a go to place for the do it yourself crowd.<\/p>\n In Nardelli\u2019s desire to grow The Home Depot in all possible directions, management went on a shopping spree, buying a number of very well managed local and regional pro dealers.\u00a0 This would likely have been off the radar of the company\u2019s D-I-Y centric founders.\u00a0 The Nardelli administration also began to expand ancillary retail operations to compliment the iconic Home Depot stores.\u00a0 Retail concepts such as the EXPO Design Center were greatly expanded.\u00a0 Stores were opened to determine the viability of specialty outlets such as flooring stores and landscaping centers.<\/p>\n Perhaps the most far reaching of these ancillary retail projects was when the company tested a group of convenience stores called Home Depot Fuel.\u00a0 In addition to offering gas and diesel, these units featured a variety of snacks, hot foods and beverages including beer.\u00a0 What was to distinguish this concept from typical convenience stores was their locations.\u00a0 To begin any rollout of the concept, Home Depot was going to situate locations essentially in Home Depot parking lots.\u00a0 It was thought this would first serve a captive audience, Home Depot customers.\u00a0 The most notable enticement here were the contractors, who often sought to stock up on food and refreshments for their hard working crews.<\/p>\n To pay for all this expansion, Home Depot management cut back on what had been considered the company\u2019s fundamental strengths.\u00a0 To meet quarterly earnings targets, jobs were cut.\u00a0 Educational programs were deemphasized.\u00a0 Recently completed call centers were virtually abandoned as jobs and services were shipped overseas.\u00a0 Many customers noticed the difference in the quality of customer services and virtually abandoned Home Depot.<\/p>\n As the subprime mess was becoming a subprime crisis, Home Depot found itself increasingly sinking into financial and customer difficulties.\u00a0 Pressures began to mount on Nardelli, especially from the stockholders.\u00a0 Finally, on January 2, 2007, Nardelli resigned.\u00a0 As is often the case with wildly failed administrations, controversy accompanied this departure under fire.\u00a0 Stockholders loudly protested as Nardelli claimed an over $120 million golden parachute.<\/p>\n To the surprise of some, Nardelli was replaced by a former understudy at both GE and Home Depot, Francis Blake.\u00a0 To right the ship, Blake immediately vowed to return to the founders core values.\u00a0 Hiring personnel was restored as a virtue.\u00a0 As luck would have it the onset of the recession found many very qualified plumbers, carpenters and electricians in need of work.\u00a0 Training was restored to its former corporate place of importance and once again properly rewarded.<\/p>\n To redirect the company\u2019s focus, the substantial pro dealer segment of the company was rapidly sold, at a loss.\u00a0 The EXPO Design Center was quickly abandoned along with all other ancillary retail operations.\u00a0 These bold moves quickly returned the company to financial bliss despite a recession that refused to quit and continued to punish the pro dealer side of the industry most heavily.<\/p>\n <\/p>\n A Lesson Lost on J.C. Penney?<\/em><\/strong><\/p>\n Had J.C. Penney\u2019s Ron Johnson chosen a course of change through evolution to begin with, he could have prudently clarified the company’s merchandising positions, without alienating a significant part of his loyal customer base. \u00a0He could have reinvented the look of his stores and implemented a new pricing strategy with a fresh product mix through proper consumer tests in select markets, over time.\u00a0 Evolution might have allowed him to maintain and reeducate his customer base while attracting new categories of consumers.<\/p>\n Certainly a proper evolutionary approach to change, including maintaining respect for traditional customers and their sensibilities, could have avoided some pratfalls and allowed for a graceful change in Penney\u2019s company culture.\u00a0 Now Mr. Johnson\u2019s personal fame is rivaling that of the JCP brand and that is simply not good.\u00a0 Currently there seem to be headlines breaking at least weekly about JCP\u2019s fortunes or lack thereof.\u00a0 This rush of events is perhaps too reminiscent of the final months of Robert Nardelli\u2019s reign.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" It may seem like a decade ago when J.C. Penney\u2019s newly crowned wunderkind, CEO Ron Johnson announced several revolutionary and rather bold changes for the more than century-old retailer.<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"post-template-no-sidebar.php","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10],"tags":[5],"class_list":["post-2643","post","type-post","status-publish","format-standard","hentry","category-home-hardware","tag-insight","entry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/posts\/2643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/comments?post=2643"}],"version-history":[{"count":0,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/posts\/2643\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/media?parent=2643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/categories?post=2643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/tags?post=2643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}