Friday, December 7, 2012

J.C. Penny as the Post-Modern Department Store.

-->
The “street” is punishing J.C. Penny, the department store, for its poor performance over the last year. It reported a $123 million loss in the last quarter, same store sales fell by 26% in that same period, and the stock price is down by 50% for the year. This, despite the fact that the relatively new CEO, Ron Johnson, who built Apple’s retail juggernaut, is bent upon transforming the chain, by drawing on his experience at Apple.  Once focused on offering discounts and coupons to low-income shoppers, Johnson hopes to re-stage J.C. Penney, which he now calls JCP, as an upscale aggregator of boutiques, where there are  “stores within a store.” Brand name manufacturers like Levis, Izod and Liz Claiborne would have outposts in J.C. Penney outlets. 

In a toughly worded article, Andrew Sorkin of the New York Times takes Johnson to task for being grossly unrealistic. How else to explain the company’s poor performance? Apple’s retail stores, he argues, are appealing because the products on offer are unique. While the Apple store concept and layout are terrific, these retail outlets would fail without the iPads, iPhones and Macs. But what can J.C. Penney offer? Jeans? Sweaters? Where is the thrill in that?

Sorkin’s critique poses the question of what being “realistic” means in the world of business. After all, we honor entrepreneurs who have “vision.” But doesn’t vision mean seeing beyond what is presently available or experienced? Doesn’t this mean being imaginative and therefore “unrealistic.” Steve Jobs, once Ron Johnson’s boss, and one of the great modern business visionaries, argued that customer focus groups were useless. Customers could not express desires or wants for products that did not yet exist.

But if a vision is not realistic, in the plain meaning of the word, if it is the product of imagination, how do we evaluate it before seeing if it can be fully implemented? This is not simply a matter of curiosity. Venture capitalists make judgments about ideas that have yet to be substantiated all the time. One conception of a fruitful business vision is that it needs to be simple. Think of Sam Walton’s vision for Wal-Mart, “bring large stores to small towns,” or Invagar Kamprad’s simple concept for building Ikea, “sell styled but low-cost knock-down furniture.” Simplicity signals that the business leader has not hedged his bets with provisos and exceptions. The leader has made an uncompromising commitment. Johnson’s business vision, “we are a store of stores,” certainly meets this test.

Fruitful visions are also linked to a social context that the business leader has personally experienced, but then interprets. This link strengthens the business’ leader’s conviction in what may appear to be at first too simple an idea. Sam Walton identified with small town America’s friendliness and frugality, but he also saw how the post-world-war two-highway system would link small towns together in a shopping region. Invagar Kamprad connected his experience of growing up in a poor region of Sweden with the country’s status as an international symbol of grace and design. He then saw how he could profit from the open world economy that emerged after the destruction of World War Two.  As these two examples suggest, business visionaries gain conviction because they link their personal experience to the context that gave it shape. It is not just about them, but about the social world that surrounds them.

One question then is; what is the context that gives Johnson's business vision its social character? His prototype or model store in Plano, Texas provides some clues. Divided into boutiques, the store aisles are uncluttered and shoppers have clear lines of sight to the far ends of the store. The cash registers are gone replaced by sales clerks with smart phones.  As the store architect said in an interview, the design theme is "square" so that people experience orderly right angles everywhere. This fits with the store's new pricing policy as well. There will be no more discount coupons. Instead the store posts "fair and square" prices everyday.

One hypothesis is that the "meaning" of the store is "transparency." There is no distance between surface and depth. What you see is what you get, but as a result what you see is entirely up to you. The store is a blank slate and you can project onto it whatever fantasy or meaning your shopping experience stimulates. The shopper's conversation is with the boutiques and their brands, the store is a container. Of course Apple stores have just this quality as well, the shopper's focus is entirely on the product.  Moreover, Apple computers were famously sealed, the hardware disappeared, while the user focused entirely on the screen.

This conception is strengthened in light of Johnson’s decision to change the store's appellation from “JCPenney” to “JCP.” The former is the name of a founder, and prompts recollections of an almost a century of experience. JCP, (actually the stock ticker), is by contrast an abstraction. Separated from its roots -- imagine a foreign tourist encountering the new appellation for the first time, it signifies that it signifies nothing in particular. Instead, as the company’s new logo below also suggests, JCP is a boundary marker and you are invited to fill in the blank.


 

-->
The new name, the new logo and the store design together suggest that Johnson is drawing on what we might call a "post-modern" sensibility. In this way of experiencing the world, reality is a blank slate, there is no script and it is up to us to invent who we are in conversation with one another.
-->
This hypothesis gains some credence when considering the company’s selection of Ellen DeGeneres, a publicly gay celebrity, to be its spokesperson. In response, the “million-moms network,” founded by the American Family Association- -a Christian conservative group opposed to homosexuality--announced a boycott of the stores that met with little success.

I have no knowledge of the decision process that led to DeGeneres’ selection. But it seems reasonable to suppose that J.C. Penney’s executives understood the risk they were taking with this choice, but believed on balance that they could benefit from it. If this is right it suggests that that they wanted to communicate their post-modernity, in the sense that in a post-modern setting sexual preference and even gender are matters of choice.

I was drawn in this regard to a shopper’s complaint posted on a web site. “I used to do most of my shopping at J.C, Penney,” the shopper writes. “But since their new fair and square program started, I have not bought much of anything. It is getting kind of scary when I walk in there. The store is half-empty. (Cash) registers are disappearing. There are more employees in the store than customers.”  If I may speculate for a moment, one reason the disappearing registers are scary is that they once marked out a boundary between the shopper and the store. They created a space of privacy in which the individual shopper, discount coupons in hand, could advance through the clutter to find a bargain. One feature of post-modern settings is just this loss of privacy, which as we know from the people who have been hurt by their own Facebook postings, can be risky. In this sense, the Christian conservative’s unsettled feelings in response to the world of modern media, particularly its sexualization, is understandable.  It is intrusive, preemptory and can undermine parental authority.  

So the question of whether or not Ron Johnson’s vision is realistic is linked partly to the question of whether a department store shaped by a post-modern sensibility is realistic. Interestingly, while only 11% of the company’s total retail space has been remodeled, the fully remodeled store returns $269 per square foot in sales, double the  $134 per square foot of the older store model.

This suggests that Johnson’s concept may in fact be right. But it does not means that his strategy will succeed. Reality is not simply a particular store, a design, or a prototype. Instead, it expresses itself everyday in the delays associated with any project, in the race between losing old customers and winning new ones, in the patience of investors as they watch a share price fall, and in people’s inertia.

Indeed, it seems likely that Johnson and his top team anticipated losing some of their old time customers as they transformed the stores. This may be one reason why Johnson has been sanguine about the decline in same store sales. But to ask Sorkin’s question again, where does “sanguine” stop and “wishful thinking” begin.

I don’t doubt that Johnson has what Abraham Zalenkik has called the “marketing imagination.” The Apple retail store network is a tour de force. But I don’t know if he or those around him also have the “logistical imagination,” a capacity to imagine the movement of materials, people, efforts and results through time. In the military this kind of imagination is critical. It ensures that troops never advance too far beyond their supply lines.

Ironically should Johnson fail in his transformation, we won’t know why. Was the concept grossly unrealistic, was the execution faulty, or did his new upscale competitors respond by offering shoppers a better experience or lower prices? This not knowing, really does mean that reality is to some degree, beyond our grasp. 

3 comments:

  1. Very interesting. Another element is the socioeconomic status/education level of the consumer, and what that means in their confidence in negotiating the marketplace. Apple Store patrons, especially early on, tended to be educated, urban, design-oriented people. In other words, confident and not intimidated by institutions. JC Penney shoppers are much less confident in relation to institutions and, therefore, will probably find the open layout and sales people approaching them directly intimidating. They need more private space in the store to figure out what they can afford to buy.

    ReplyDelete
  2. Vicki- thanks for this thought. I agree with you. Johnson talks about educating his customers. But he is probably not in touch with the anxieties his customers feel, and in some degree he has provoked.

    ReplyDelete