Ron Johnson is now out as the CEO of J.C. Penney. He was hired to grand fanfare 17 months ago, with a reputation as a retail master gained from turning the Apple Stores into fantastic profit machines. His vision for Penney’s, a middle-market retailer, was to end the culture where the vast majority of merchandise was sold at a “discount.” I put “discount” in quote marks because when most of your merchandise is sold at a discount, that means the first price wasn’t the real price. It’s a Moroccan bazaar without the actual haggling. The idea was to launch fresh lines of products in small in-store boutiques, and price the merchandise at the level that you would have arrived at after various discounting schemes.
A year and a half later, it’s pretty clear that Penney’s customers didn’t like the transformation. The new fashions got good reviews, but a good chunk of Penney’s shoppers turn out to like the idea of bargain hunting. They want their shopping to feature the discount game even if the resulting price paid isn’t particularly different.
I know the adage that the customer is always right, though I have to say my sympathies are with Johnson in this case. I don’t think it’s respectful to the customer to make her feel she got a steal when she didn’t — creating a false price in order to make her feel that she’s pulling one over on the store, when in fact she winds up paying what the store thought she would pay all along.
I also dislike the discount strategy because it plays into an unfortunate cultural mindset (one I wrote about in the coupon chapter of All the Money in the World). In The Feminine Mystique, Betty Friedan lamented the belief that “Women can save more money by their managerial talents inside the home than they can bring into it by outside work.” The coupon clipping mindset, and the bargain hunting mindset, isn’t just about playing a game. Video games are more fun. Bargain hunting on household items is elevated beyond video games because it’s perceived as conferring the virtue of making you a thrifty home economist — someone who’s serving her family by finding a deal. Except, of course, in Penney’s strategy, you really aren’t.
We will see what the new CEO, who is the old pre-Johnson CEO, does to revamp the retailer. It may be that the economic winds are against anyone playing to the mid- and broad market in malls. Perhaps he’ll come up with a new strategy. What Johnson’s turnaround effort revealed is that certain habits and stories run deep — certainly more than 17 months deep.