There are a few companies whose decline seems more inevitable than JCPenney.
Malls are dying…
Department stores are dying…
Amazon owns the retail marketplace…
There’s just no place for a company like JCPenney or any department store in the new economy.
That’s the story I believed.. .until I dug deeper.
Looking at the stock price of JCPenney, they peaked in 2007 right before the recession, then like all other department stores started to decline.
Their target customer had a smaller budget to buy clothes with and the entire department store economy struggled.
Then the economy started to recover around 2011. But whereas Macy’s, Nordstrom, and many others started to march back towards profitability, JCPenney dug deeper.
Why is this? What happened in 2011 that held at JCPenney back while others started to recover?
The answer lies in the Apple Store.
In 2011, the CEO of JCPenney stepped down and Ron Johnson – one of the people most responsible for the Apple Store – took over to revitalize the company.
Instead, he ruined it.
Changing to Apple Store Practices
On the surface, the idea seems obvious.
Consumers wanted more of an experience when they went to a retail store. JC Penney wanted to give them that experience. So they hired one of the people behind arguably the best retail experience in the world.
What did Ron Johnson do? He tried to perfectly copy the Apple model.
He rebranded the company to look for a younger market.
He got rid of clearance, discounts, and sales.
He replaced that with a “fair price guarantee.”
These are all practices that worked spectacularly with Apple stores.
After all, Apple stores don’t sell any discount merchandise. You know when you go into an Apple store, you are going to pay sticker price for your phone no matter what.
Because of the massive success of the Apple Store, Johnson had a lot of faith in these practices that made it successful.
He was also eager to make a “big splash” in the retail market and separate his version of JCPenny from the old, uncool model of the past.
It was then that Johnson decided to fire a “cannonball.”
A “Cannonball” Strategy
As described in “Great by Choice“ by Jim Collins, a “cannonball” strategy is when a company invests a significant amount of resources in a massive expansion.
With his faith in the model, Johnson decided to do a massive rollout of the Apple Store practices to over 1,000 stores.
Customers hated this.
Part of the reason why customers will forego the convenience of shopping online in favor of a retail store is to have fun.
Much of the fun of buying Apple products is getting to play around with the gadgets. Embracing your inner nerd and finding a cool new toy. You don’t really need a discount in order to have fun at an Apple Store.
However, that is not the case for buying clothes.
Much of the fun of buying clothes is “treasure hunting.” It is a lot of fun just popping into a store like JCPenney to see what is on sale and if there is a great deal on any clothes you may like.
The people who were popping into JCPenney in 2011 to “treasure hunt” were the target market. They kept on coming back even though Amazon and other online retailers were an option.
Once JCPenney got rid of the “thrill of the hunt” that was once available in their stores, they lost that market. And they have been on the decline ever since.
This idea was a failure. But the company would surely not be in such a terrible position if they had fired “bullets” before firing a giant cannonball.
Fire Bullets, Then Cannonballs
Apple did not start out by rolling out with their Apple Store concept in 30 or 40 stores.
They started with 1 store. They prototyped that store by having customers come in to answer questions and engage with their products.
Customers also hated the first Apple Store.
Steve Jobs himself after prototyping the store said: “good God, we’re screwed.” It was far from the Apple store that we know today – but it was a start.
The Apple Store team, including Ron Johnson, took the feedback they got from customers and tweaked their concept.
Then they tried again, took more feedback, and repeated until they got it right.
Rather than fire a giant cannonball, Apple fired a bullet. They assessed if that bullet “hit the mark,” then adjusted their trajectory, fired another bullet, and so on until it made sense to fire a giant “cannonball” rollout of stores.
Had JCPenney put this principle into action, they would’ve been able to see with just 1 store that Theo bullet would miss the mark.
They would’ve been able to learn from their current customers, and the new customers they were trying to target, that the Apple Store model is not what they wanted.
They would’ve been able to see that their customers were disappointed by the fact they couldn’t hunt for great deals in their stores and therefore would have no desire to come back.
Through a prototype store like that, they would’ve also been able to ask questions to their customers to learn what they really did want.
Like the original Apple Store team, the JCPenney team could then tweak their concept store to something customers wanted.
They could’ve fired another bullet, assessed if it hit the mark, then recalibrated. Over and over again until they were ready to fire a cannonball.
This strategy may not have been enough for JCPenney to return to its former glory, but it may have been enough for them to carve out a niche in this new economy. Nordstrom and many other retailers have done just that.
There is still value in what physical location stores can offer. Had the JCPenney team followed the principle of firing bullets before firing cannonballs, perhaps JCPenncy’s decline would not have seemed so inevitable.
In your own company, rather than put all your resources into a giant cannonball, fire a single bullet.
See if that bullet hits the mark in the way you think it will. Then re-calibrate, fire another bullet, re-calibrate, and repeat.
Once you truly hit the mark, then it is time to fire your huge cannonball and watch your company grow.