JCPenney’s Johnson: “We’re Sticking to Our Plan”

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Attention Getter: Ron Johnson, JCPenney’s CEO

Aspen, CO—Despite layoffs, controversy over eliminating coupons in favor of a everyday low price strategy, a marketing misfire, dwindling in-store traffic, a 20% drop in sales in the first quarter and Standard & Poor’s Ratings Services lowering its credit rating further into junk status, JCPenney isn’t backing away from its “Fair and Square” transformation.

Speaking to mostly tech executives at Fortune’s Brainstorm Tech conference, JCPenney CEO Ron Johnson, former head of Apple retail, said today: “Apple went through much tougher years than we are going through this year at Penney’s. Transformation takes time.”

In fact, Johnson said the company’s board of directors have been “totally supportive” about the pricing strategy and other changes.

Eliminating Register Check Out in 2013

“We’re in a marathon here. We are going to stick to our plan,” said he added, noting that when shoppers get used to the new pricing, “we’ll “have a business based on integrity.”

Johnson also said today the department store will be eliminated something else besides discount coupons: traditional registers and checkouts.

By the end of 2013, Johnson hopes JCPenney stores will be 100% RFID (radio frequency identification) and Wi-Fi enabled. That way shoppers wouldn’t have to stand in line anymore, freeing up their time and allow JCPenney to reinvest savings from registers into customer service. But it’s conceivable too that some additional jobs might be eliminated to accomplish it.

Johnson said the store will begin testing RFID tags on its merchandise in February 2013. While Walmart first introduced and tested RFID tags several years ago, most retailers tend to use the RFID technology in warehouse operations only due to the cost.

JCPenney will be working with Oracle on new software systems that would simply “our processes and our technology infrastructure to deliver the best possible customer service,” Johnson said.

These technology initiatives are more of what Johnson has said is treating JCPenney as if it were a start-up company rather than improving an existing business. The question, he said, “is what size we the start-up is.”

Johnson also surprised some at the conference, especially those who foresee that e-commerce will eventually replace brick and mortar retail. Johnson claimed he is “bullish” on physical retail and believes that eventually online retail will reach a plateau much like catalog shopping did 20 years ago.

‘Bullish’ on Bricks and Mortar Retail

While different retail channels or categories may level off at different times, “the physical store will have a permanent place.” Choosing between an e-commerce platform or a bricks a mortar, Johnson told the crowd: “I take a physical retailer in a heartbeat.”

Some of JCPenney’s new concept shops-within-a-store will be rolled out starting next week with “denim bars” by Levi’s.

While the retailer have only used a few examples of brand and designers that might occupy these shop concepts, one of the most anticipated, Martha Stewart, got squeezed last week.

After JCPenney trumpeted its agreement with Martha Steward Living (including taking a 16.6% stake in the company), Macy’s Inc. filed suit to block the agreement, saying Macy’s had exclusive rights to many of the products through 2018. A New York State Supreme Court agreed and issued a preliminary injunction blocking the deal. Now many of the Martha Stewart products JCPenney hoped to sell won’t be available for years.


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