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  • Does This Company Have a Future?

    Posted by David Foster on October 17th, 2012 (All posts by )

    In late 2011, Ron Johnson–creator of the Apple Retail Stores–joined J C Penney, of which he is now CEO. His appointment was greeted with considerable enthusiasm.

    Margaret Bogenrief doesn’t think much of the approach that he is taking…indeed, she uses the phrase “retail disaster of the decade.”

    What do you think of Johnson’s strategy and tactics, and what would you do if you were in his position?

     

    13 Responses to “Does This Company Have a Future?”

    1. Robert Schwartz Says:

      I haven’t seen a J.C. Penny for years.

    2. David Foster Says:

      1102 stores, according to their summary on Google finance. Market capitalization is $5.8 billion. Still trading at substantially over book.

    3. Bill Brandt Says:

      The way I view JC Penny if they don’t do something different they will be gone in 5-10 years – remember Montgomery-Ward?

      Even Sears – I have been surprised – going into one at a huge mall – I’ll bet there weren’t 30 customers in the whole store. I’m thinking as soon as the lease is up they are out of there.

      Difficult times for retail – all but the high end dept stores like Nieman-Marcus have changed – or disappeared.

    4. Michael Kennedy Says:

      Bill, at one time I worked for Sears in a management training program. My college scholarship was underwritten by several senior Sears executives. They had the worst, absolute worst, inventory management problem I have ever seen.

      Sears and M_W were creatures of the early 20th century. They provided amazing options, like whole houses, for people living in rural settings. All they needed was a railroad. When Sears closed their catalog operations, they were dead. How many catalogs do we get in the next two months every day ? Sears invented the catalog and couldn’t make a go of it in the age of catalogs. Why isn’t Sears doing what Amazon is doing ?

      When I worked in the Sears Boyle Street store in east LA in the 50s it was the largest Sears store in the country. The upper floors of the building were the catalog department. The customers were mostly Hispanic. Sears survived by offering credit to people who couldn’t get it anywhere else. One day the president of the company came through on a tour. He walked through mens wear and pointed to an awful tie with multicolored feathers on it. He said, “That tie is awful. Get it out of here !”

      No one had the heart to tell him it was their best seller. Sears died from the neck up.

      A friend of mine’s wife used to shop at Penny’s for everything. She loved the place. Then he got a promotion and they moved to Westport, Connecticut. She looked up J.C. Penny in the phone book to see if there was one in town and drove to the address. She pulled up in front of some huge wrought iron gates and realized it wasn’t a store. It was Penny’s home.

    5. Jason in LA Says:

      For a few years Penney’s would bombard our mailbox with these $10 coupons. I mean bombarded, like once a week a huge new coupon. I would just throw them away. But if my wife got the mail she would keep these coupons in her purse. This would incentivize her to go into Penney’s whenever she and our daughter went to the mall. They did not always buy something but they did at least always look. About a year ago, the coupons stopped coming. And not coincidentally my wife and daughter stopped looking into this outfit that now goes by “JCP”.

    6. Alcibiades Says:

      Were the feathers part of the tie’s pattern or were they actually feathers on the tie?

    7. Bill Brandt Says:

      Michael – it is ironic that Sears pioneered the catalog and yet could not profit by it. And yet, in this early part of the 21st century even the catelog by mail is going by the wayside.

      Expensive to produce and send and with the junk the post office is sending today likely to be tossed out.

      By accident.

      Lost my updated VISA card amid all the flotsam that rests on my garage floor – on its way to the blue bin.

      I figure I am 10-15 years younger than you but remember Sears – JC Higgins – had one of their bicycles . The American Middle class and Sears were intertwined.

      I suspect it is an era all but gone.

      Reminds me of Tower Records.

      They started in Sacramento , named because their first store was in the same building as the Tower Theater.

      At their height they were known by every record company in the country.

      A their peak they had stores even in Moscow, just a few years ago (by our standards).

      But they put their faith in brick and mortar stores – and died by that faith. Companies like Amazon sealed their fate.

      This is not a straight analogy to the plight of stores like JC Penney – brick and mortar stores are still needed – but in less capacity than traditionally thought.

      Just suggesting that times – and the means of selling goods – are radically changing.

      Not saying this fellow is right but the only hope for their survival is radial change.

    8. Michael Kennedy Says:

      The feathers were attached to the tie.

      Sears had company brands that were good. Craftsman tools are still good last I checked. I worked a time in hardware and we would get Craftsman tools brought that had obviously been buried for years. If they didn’t work, the customer always got a new one. The guarantee meant something.

      My cousin went to Australia to take over the new division when Sears bought a chain of stores there. He couldn’t make it work as the Aussies didn’t like the Sears store brands. Sears insisted on pushing them and the merger failed. That was about the time I learned how bad their inventory practices were.

      By the time the internet came along, Sears was brain dead. Just imagine if someone had the idea Jeff Bezos had. Move the catalog to the internet. Department stores were killed off by discounts. Too much inventory. That was the genius of Wal Mart but it was also the genius of catalogs if only they had been able to manage inventory like Wal Mart does.

    9. David Foster Says:

      It looks like Sears closed its catalog operations in 1993:

      http://www.searsarchives.com/history/history1980s.htm

      …just a little bit prior to the time the Internet started to take off as a commercial opportunity. However, by this time there were several proprietary on-line consumer services (AOL, GEnie, Compuserve, Prodigy…indeed, Prodigy was a joint venture one of the owners of which was Sears)….and it should have been obvious to Sears management that SOMETHING was going to happen to make on-line ordering a major force, even it it wasn’t in the form that we now know as the Internet.

    10. David Foster Says:

      Bill Waddell has an interesting post (from 2010) on Sears and its attempt to leverage its brand names:

      http://www.evolvingexcellence.com/blog/2010/02/dawning-of-a-new-manufacturing-age.html

    11. Mrs. Davis Says:

      What do you think of Johnson’s strategy and tactics, and what would you do if you were in his position?

      Prepare three envelopes.

    12. Bill Waddell Says:

      Walmart, in their existing business model – is doomed and they know it. The Walmart execs don’t lose sleep worrying about the likes of Sears/Kmart or JC Penney. They lose sleep worrying about Amazon and the rest of the on line world. The problem is that most brick and mortar retail add no value – just cost.

      Do the math – an item that costs $8 ex factory in China retails for $20 at Walmart. A better item with a much broader selection that costs $15 ex factory in the UnitedStaes can be shipped via UPS for another $3-4. More selection, better quality for the same price.

      Check out dollarshaveclub.com to see this in action (although the product is made in Korea the effect is the same)

      Walmart is trying to figure out how to leverage their massive brick and mortar investment by using them as combination retail stores and distribution centers for on line purchases – a short term band aid, at best.

      As far as JC Penney is concerned, the best advice is to get out while the getting is good. It will take 10-20 years for the massive downsizing of retail to play out, but the end game is getting clearer all the time.

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