Day before yesterday, the common wisdom was locked in: department stores were dying. Old news. The last vestiges of a bygone retail era. As “yesterday” as the Sears catalogue. The evidence had been mounting for years. Store closures, massive layoffs, profit slides and stock price drops. Sears bought Kmart and almost immediately wished it hadn’t. Macy’s expanded, then got slammed with one PR mess after another. JC Penney began a slow slide into retail irrelevance. Then it tried a “radical” new marketing method that nearly bankrupted the company. Market watchers began scribbling the epitaph of one of America’s great department stores. Now, according to Ronn Torossian, JC Penney said, “Not so fast!”
Recent reports in Bloomberg and other news sources confirm that, in the second year after Ron Johnson, JC Penney continues to experience growth in sales and steadily improving profit margins. Yes, investors are hoping for more, but this is still good news for a flailing American industry. Better still, the company’s $63 million operating income mark ended a streak of 13 straight losses.
Still, the stock fell (again), and this proves one thing. Sales alone won’t save this department store. They need strong PR and a shift in consumer perspective, and they need to do it in the right way. Johnson attempted a similar strategy when he shifted the marketing and brought in new brands. But consumers, for whom the available items were not the problem, recoiled at the abrupt shift in the look and feel of the marketing and the loss of a key shopping experience – the joy of finding a bargain.
Retail consumers know full price is too much, but they LOVE the feeling of getting a deal. It tweaks a happy spot in their spirit and gives them something to brag about to friends. We all know it’s frivolous, but we don’t care. A deal is a deal. Johnson forgot that. And he forgot because he failed to understand what made his customers tick. Yes, the company was losing money. But so was the entire American economy. And, yes, more people were shopping online…but that didn’t mean people didn’t want to come into the store. Fact is, while JC Penney and Sears floundered, other department stores made it through the tough times and some brands even expanded.
How? First, because they understood their customer. Second, because they understood the unwritten conversation between customer and retailer that is always happening, and they honored that conversation. Enticing people to buy is not difficult when you are giving them something they already want. It’s even easier when you understand that “thing they want” isn’t what they are buying.
