If you aren’t sure where to take your business next, don’t copy JC Penney.
On 8 January this year I wrote about the sad case of the US retailer Sears CLICK HERE that seemed a little leaderless to me, or at least lacking in a leader ready to invest in a clear strategy to adapt to these drastically different retail times. Now JC Penney, another US department store group that competes in the same socio-economic market place, which has been described as down-market/suburban, is having a pretty torrid time of it too. This got me wondering if the poor performance of these two high profile retailers was just the result of: poor leadership; the depressed economy hitting this social group more than the rich, which is clearly has; or were these more price-conscious consumers also more likely to move their allegiances online? Perhaps it’s a bit of all of these things.
JC Penney began life back in 1902 with a store called The Golden Rule. Having survived more than eleven decades it has now got into rather a mess. It gave its shareholders nearly $1Bn of cash two years ago but then set out on a costly and gung-ho transformation programme. It began turning its stores into clusters of boutiques, whilst simultaneously cutting back on coupons and discounts: the strategy failed. It didn’t just fail a little; it bombed: sales were down a whopping 25% in the year to 2 Feb. Last year this rather deluded adventure cost it $4.3Bn in revenue and led to a $985M loss. Guess what? It is now running out of cash and panicking. Who wouldn’t in the circumstances? It has just reappointed its old CEO after his successor failed so hopelessly to deliver on the expensive revamp of more than 1100 of its stores. Didn’t it occur to anyone that this was rather a big risk to take on?
The new CEO, or rather the old CEO, who has now come back again, has some task on his hands as hundreds of the stores are still being converted into the failed format. I guess the head honcho at Sears would read this and say “I told you so! That’s what happens if you pump too much cash into transforming the business.” Yes, it is what can happen if you do it in such a desperately risky way: almost suicidal in fact. However, apart from the public humiliation of it all it is hard to say what is worse, this fiasco, or doing nothing?
Faced with the obvious need to change many people do one of these two rather extreme things. Something rather mad, or nothing at all. But there is a better way. Business development of any sort is all about trial and error, so try something. Yes, it does make a bit of sense if you think about it a bit first and make sure you are doing something that is likely to work, but you will never know if it will work or not until you try it. However, an 1100 store trial is probably not a good idea. How about a handful first? Well, I think JC Penny did in fact do some sort of trial but clearly it wasn’t a very good one.
The reason I think this is such an interesting example is that Retail is faced with enormous pressures to change and clearly different retailers will have more or less chance of adapting to the new demands of the networked era. For any business faced with pressure to change there is a very simple business development process that anyone can follow and it is set out in my book below, the one with the red cover. Take a look and let me know what you think. The process is deceptively simple though, it’s just that people don’t do it. In summary, it is this: be clear about what market advantage you have; think creatively about how it might be exploited in the new market scenario developing; research all the options and pick the best one; focus on a market, a segment and a proposition; and then make sure you take a cracking position in the market. Oh, and there is one other thing, let’s just call it my Golden Rule – always prove the idea at the smallest possible scale first! Sadly, JC Penney didn’t do that and look at them now.
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