Through a special arrangement, presented here for discussion is a summary of an article from Retail Paradox, Retail Systems Research’s weekly analysis on emerging issues facing retailers.
In revealing his "fair and square pricing" program to the world, Apple’s former retail chief Ron Johnson presented J.C. Penney’s (JCP) future in the context of six P’s: Price, Promotion, Personality, Product, Presentation and Place. The company is an American icon of retailing and I agree with Mr. Johnson that this is a core value worthy of using for the company’s future. But he forgot one P in his presentation — People.
To his credit, Mr. Johnson gave out lots of kudos to his team, noting several times that the same merchants who had driven JCP’s past, broken strategy had stepped up to create the new one. The same branding team that had driven the notorious 590 promotions in 2011 also came up with all the imagery that consumers started seeing on Jan. 1.
But what about store people? When you have 590 promotions, it’s pretty hard for stores to keep up. Our own research has shown that retailers have begun to realize exactly how much trouble massive numbers of price changes create in stores — keeping track of what’s on promotion and what’s not, putting promotions up and taking them down, moving markdown merchandise around in order to make room for the new stuff coming in.
But on top of that, over the last decade and more, JCP has moved away from a service-based strategy and moved more towards one that relies only on cashiers and price taggers. I look at the sophistication of JCP’s current staff, and I wonder if, like the merchandising and marketing staff, they are really up to the challenge of the new strategy. I wonder, in fact, if JCP’s current staffing model is capable of executing on JCP’s new store strategy.
Also, one of Apple’s biggest retail differentiators has been its staffing model. While Mr. Johnson talked some about how Apple’s store design has been based around 50 percent floor space for products and 50 percent for owners (services), he didn’t talk about the people. I’m making a pretty safe bet when I guess that they have the highest labor per square foot costs in the industry (I don’t know the number at all) — but retailers often argue that it’s easy for Apple to bear that cost when they also have the highest sales per square foot in the industry as well. The funny thing about retailers’ response is they never question whether the two are related.
BrainTrust
Discussion Questions
Discussion Questions: Will Penney’s associate staff have to be transformed to successfully drive the chain’s makeover? To what degree do the chain’s store associates have to reach the caliber of those working at Apple to execute JCP’s new store strategy?
Poll
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We may all be surprised at what Penney’s store staff can do now that they are free of the burden of having to implement 590 promotions in a year. Will they be able to duplicate the shopping experience that all customers get at an Apple store? Probably not, but then again, not many have. The issue is can enough of them provide a good-to-great customer experience to change the perception of Penney’s? Time will tell, but at least now they have the time to try.
I would agree Nikki, it was the missing piece from a company that, when they started, were the standard of service. The comparison with Apple who enjoys what 85% margins to JCP’s doesn’t really work here. Don’t get me wrong, salespeople can absolutely move the needle of sales — a lot.
But does Ms. Customer need how to button a blouse explained to her? Washing instructions? I don’t think so. Apples to oranges, so to speak.
Nikki is right on to raise this question. Retail is about a customer experience and people are generally integral to that experience. Great merchandising alone can be very powerful — the right goods presented the right way and at the right time/price — but there is so much more in a department store like JCP that it’s going to take the right staffing for long-term success.
Judging from the typically low bar in department stores (exceptions like Nordstrom duly noted), this is going to be harder to fix than the brand and everyday promotional strategy.
I shopped my favorite JCP store the weekend prior to the 2.1.12 “changeover.” The store was beginning its transformation, with more to come per the store manager. She shared that they were fully informed, that defined goals and expectations were shared with staff at all levels. On first impression, I was impressed. The staff working the cash n’ wrap were thrilled to not have to deal with tear sheets from the newspaper, sticky coupons affixed to the newspaper main section and scanning direct mail coupons. If you shopped JCP regularly as I do, you know that the “couponfest” that was almost any transaction was a free for all, with shoppers who didn’t even have a coupon to buy the basket down by 20% or more getting the deal from helpful associates who had coupons to scan as a courtesy.
Mr. Johnson has responded. To his Board of Directors with a transformative approach. I’m not into “scheduled” shopping and so I will resist the every-other-week deep discounts on a select day in order to get red pricing. The staff will learn the cadence — quickly. The loyal customer that participates in their JCP Rewards program and is a preferred credit cardholder — like my household — will be challenged to behave incrementally. Give it two quarterly earning periods to see the effect. In this apparel sales environment, the factors JCP can control may be overwhelmed by those they cannot — including what Macy’s, Kohl’s and Sears among others will employ to counter punch.
In the world in which JCP competes, having friendly, attentive, and “customer focused” store associates is almost table stakes, given the number of stores and brands available to consumers both online and in-store. With that said, to the extent that simplifying the merchandising and promotions programs leaves the store associate time and energy to focus on the customer, I believe Mr. Johnson is setting the correct priorities.
The comparison of JCP back to Apple is irresistible, but it is really comparing “apples” to oranges…forgive the pun. Apple stores are staffed with exceptional people, and a large number of them. Given the technical and fluid nature of the products Apple sells, having skilled “experts” on the floor is both appropriate and working as a distinct competitive advantage.
JCP, on the other hand, competes in a world where buying something that isn’t “40% OFF” is considered heresy by many shoppers. Consequently, finding the balance between investing in well trained staff and fewer but deeper promotions to augment their everyday pricing, will ultimately be the challenge for JCP.
The creative mind of Ron Johnson demands awesome support from JCP store people for success. Everything presented to public by JCP recently is a dramatic change. But curremt cashiers and price taggers weren’t selected for their innovative and fast-adapting skills. So, Ron, quickly transform your associates to parallel your advertising … and good luck.
JCPenney has been exploring innovating ways to energize their brand for the past several years, experimenting with in-store media, kiosks, customer and shopper communication strategies. The challenge will be to integrate and synchronize all technologies and their new associated workflows with an existing culture. All too often these efforts are not coordinated and are implemented as a single ‘proof-of-concept’ rather than approaching this as a holistic view of the enterprise and how their customers are interacting with their brand and the competitive world around them.
People are the most valued brand ambassadors — a fact that is often overlooked because it happens to be viewed as an asset that is expensive. Retailers often believe that technology is a means to replace staff. This is unfortunately a cold truth that no one wants to admit. JCP will need to create an environment where employees will be empowered and rewarded to truly represent brand values to shoppers and customers. This is a difficult challenge in today’s culture and status quo.
I don’t think JCP’s associates have to approach Apple’s level of associate. The Apple model requires passionate and extremely knowledgeable associates with ever changing technology. JCP’s associates are more geared towards helping customers locate and match items versus explaining how to use them. I do believe the JCP associates need to be more engaging and less ‘stocker’. Reducing the number of promos should free up task labor to be reallocated to service labor.
As a shopper, I’ve been looking at JCP’s Sunday circular and I like the look and I get the feel I’m dealing with a much higher-end retailer. Not sure I feel like I’m getting a good value yet though.
Perhaps “people” as in store personnel aren’t that integral to Mr. Johnson’s vision. If he is the merchant he’s reputed to be, perhaps he’s figured out that comforters and sheets are not the high engagement purchase that computers and software are. Maybe that level of service isn’t required in the new JCP model.
Creating a new environment with shopping that is centred on the consumer, has a section devoted to demonstrations and interesting experiences, and an emphasis on providing service to assist consumers in solving problems and making decisions requires different skills than those you need to be a cashier. As a result, employee training will be a critical aspect of implementing the new strategy. Changing behavior and requiring the use of new skills is always a challenge. Creating expectations of a new environment is easier to do than changing the behavior of the current staff to ensure implementation.
Associates need to know what they are selling, what their goals are, and what is demanded of them in terms of customer service.
That’s true whether they are working at JCP, Apple or a bodega. It’s Retailing 101. And whose responsibility is it to see they get there? Why top management’s of course.
So, the first group of “people” that present a challenge are those asking for a change in behavior. If they’re up to it, my guess is the troops will be right behind them.
Reposition retail brand = retrain store associates.
If all the groovy new messaging is not met by an equally retooled store sales person, fuhgetaboutit.
Or as we like to say, “retail ain’t for sissies.”
I can’t help but think that store staffing is the Achilles heel of retail. There are certainly retail formats where minimum wage workers can do an adequate job, but for stores selling products more sophisticated than, say, donuts and coffee, stores should prefer a slightly older and more expensive workforce that has better people skills.
Penney’s associates will have to first believe in Mr. Johnson, look at his past successes and know in their mind that he can do it for them. But without this firm belief, even Mr. Johnson will have a problem. Both the associates and management have to be rowing in the same direction for the boat to move.
You want to know why Apple works so well? Three big reasons. R1: They have very innovative and cool products. People who buy tech like cool and innovative things to work with. R2: They know how to market an expensive item to the general populace better than any brand house in the world. R3: Their retail people make it FUN to buy. They create a FUN environment in the store, take interest in you as an individual and work relentlessly to solve your problem (Genius Bar) or make you thrilled to use the product (One to One, Workshops, personal attention). If Ron can somehow crack any of those 3 reasons in his stores, he is going to win big.
It remains to be seen whether Mr. Johnson’s strategies left out the seventh “P” or if the other six intentionally obviate the need for a topgrading plan. On the surface, Penney’s new scheme would seem to simplify rather than further complicate in-store execution and customer interaction.
Nikki’s original article is a terrific read, by the way, and a spot-on depiction of J.C. Penney’s previous pricing and promotion “strategy.”
I think the bigger issue than the store associates is the people at JCP’s corporate offices. The implication of almost everything the new team is trying to do is that the old team failed, which is a hard message to hear even if it’s true. And clearly Mr. Johnson is committed to expense cuts, which means some significant headquarters job losses. So it’s critical for merchants and others to understand their role in making the new JCP work, not just looking over their shoulders waiting for their pink slip.