Wednesday, April 10, 2013

Ron Johnson, Apple, JC Penny

Ron Johnson, after 18 months where he saw same-store sales fall by 30%, and the share price half, is out of JC Penny. I feel sorry for the guy.

First, JC Penny's difficulties long predated Johnson coming on board. The mid-market department store chain has been under pressure as higher-end specialty stores pick off more affluent customers, and discounters pick off the price sensitive. And then there are online competitors putting pressure on retail on general.

These structural problems put JC Penny in a difficult position between serving it's shrinking base of existing customers--who by definition are particularly loyal to JC Penny since they haven't defected yet--or trying to find a new mass market. It's the classic position of an incumbent being disrupted, and it's a tough place to be.

I don't know to what degree Johnson was running his old Apple playbook, or to what degree he was relying on research, analytics, and calculated hunches to try and find a new market. I'm not sure who this market was (or could be). If Johnson reflexively reached for his old tool kit, then there could be hope yet for someone to come, focus on customer needs in a disciplined way, and find a market they can successfully contest. If Johnson was doing the best he could with data, then I'm not sure what options JC Penny has left.


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