Ex-VP Using Apple Experience To Remake Penney

All the signs and banners said “JC Penney,” but during the company’s press presentation Wednesday, there were plenty of references to Apple and its retail stores. During the 90-minute briefing, former Apple retail chief Ron Johnson explained his plans to remake JCP into “America’s favorite store” over the next three years, admittedly drawing from his 10-year stewardship of Apple’s stores. In fact, the very first item on Johnson’s agenda was to explain why he left Apple, and the very first presentation slide was an Apple logo.

Johnson sprinkled Apple stories throughout his presentation, sometimes high-level concepts and other times specific examples of business practices.

“What Were You Thinking?” was the second presentation slide Johnson showed the audience. But actually, his departure from Apple was the latest in a series of very important—and very good—decisions, Johnson said.

Johnson recalled working at Solomon Brothers during the summer of 1984 after graduating from Harvard Business School. He considered a career as an investment banker, after receiving a job offer from Goldman Sachs in the mergers and acquisitions group, a very coveted job. “But I had a different idea,” and he joined Mervyns department store, working both front and back-of-house. It was the first great decision in his life, Johnson said.

He moved to Target while it was flourishing, and in the midst of that great job was offered a position with Apple in 2000. His friends and co-workers were incredulous that he would consider leaving Target. But he knew the decision was right. “Well, that turned out okay,” he joked.

“It’s the best decision I’ve made yet,” he said of moving to JCP. The only hard part of the decision was driving to Steve Jobs’ house to announce he was leaving. Jobs looked up at him and asked, “Are you serious?”

Johnson showed the audience a comparison (see bottom of page) of Apple retail in 2001 and JCP today, and noted the many similarities, including an identical market share of three percent. He noted that share represented one row of attendees at the press briefing. Johnson said if he could convince one additional row of people to shop at JCP, the company’s market share would double. The concept is almost identical to the “5 Down. 95 To Go” campaign that became the tagline for Apple’s retail chain when it began in 2001.

Johnson said he firmly believes in the department store concept, but said the basic sales concepts are out of date. He recalled visiting shopping malls to scout for Apple retail store locations. The scouting team would always park near the department store, he said, because that’s where the empty parking spaces were. The team would walk through the department store to the interior of the mall. “And quite frankly they weren’t that crowded.”

He recalled traveling to Washington (DC) with Steve Jobs in 2001 to talk about Apple’s retail plans with 150 to 200 financial analysts. “There wasn’t one positive believer who thought an Apple retail store could work,” he said. “But we all know what happened.” Behind Johnson was a projected photo of the just-opened Grand Central (NYC) store.

He explained how the Apple stores are arranged—half for products and half for owners. “It’s not about buying,” he said, “It’s about enriching someone’s life.”

He noted the wide availability of Apple’s products: on-line, at discounters, at big-box retailers and authorized resellers. “It’s almost like buying gasoline,” he said. “Yet people like to come to the Apple stores.”

Promotions, Red Zone

Later in his presentation he noted that JCP generated 590 unique mail promotions during 2011, coaxing recipients to make just four visits to JCP. That means the customer is ignoring 99 percent of the promotions, Johnson said. “Steve would have called this insanity,” he added. “At some point, you as a brand look desperate.” By the way, JCP spent over $1 billion on these promotions last year.

In the future, JCP will have just 12 promotions a year, based on calendar months, with an advertising allocation of $80 million a month. Johnson recalled the early days of iPod advertising at Apple, spending just $50 million a quarter world-wide.

Johnson showed a diagram of a typical Apple store, identifying the “Red Zone” of products at the front of the store, and the “Family Room” of services at the rear. He said the Red Zone is “where the excitement is,” while the Family Room is where “owners gather to learn more.” He explained that, “The magic of the store that makes everyone want to come is all the stuff you get beyond the transaction, ’cause at Apple, the relationship doesn’t end when you buy. That’s where it begins. And we’re going to do that at JC Penney.”

As JCP remodels its stores over the next 3-1/2 years, it will follow the Apple model. At the center of the stores will be the “Town Square,” a place to make the shoppers experience better and more interesting, and make you want to return to JCP. Surrounding the Town Square will be “Main Street,” where products will be sold. Johnson said there will periodic attractions within the Town Square, but didn’t elaborate on what activities might appear there. The concept is similar to one used at Apple’s stores, with Summer Camp, Field Trips, live music events and a speaker series to make the stores like community centers and a hub of activity.

The transformation will not be quick. The Town Squares will appear during 2013, and all the plans will be completed by 2015.

Listen to the entire press briefing Webcast to hear Johnson’s department store memories and his enthusiasm for the future.

Ron Johnson displayed this slide to the audience to show the similarities of Apple retail in 2001, and JC Penney in 2012. Johnson said it demonstrated that he faced similar conditions when tackling both operations.

This presentation slide shows the traditional five P's of marketing. Johnson says the wisdom is that, if you can master two of the P's, you'll be successful. JCP is tackling all five by 2015.