Ron Johnson Business Model

When Ron Johnson took over last fall as chief executive of J. C. Penney Co. he and his staff were surprised at all the e-mail alerts they received in their inboxes. Not only was this overwhelming going through the emails but he learned that the year before there had been 590 separate sales that did not bring any shoppers in. He also discovered that the store merchandise was sold at discounts of 50% or more and until then he did not realize how much money he was losing. Mr. Johnson had a plan which involved taking each store from being a whole store into several different little shops also turning the spaces where there was high traffic into areas for entertainment or hang out areas. Mr. Johnson did not want to be like Walmart using everyday low prices to draw in customers he

wanted brand names, get more control of pricing and make the stores more inviting where people would want to come. His ideal behind this was consumers could have anything they wanted courtesy the internet and this lead them to hate big stores and they wanted little shops and you have to break it down for them.

Overhauling all the stores posed a huge cost and consumers missed the deep discounts that J. C. Penney’s was famous for also Penney had been hurt by their competitors like Macy’s Inc. and Kohl’s Corp. The former chief executive Myron Ullman phased out the catalog business and partnered up with the MANGO fashion line and Sephora cosmetics but this did not do too much for sales and lead to heavy discounts to clear out merchandise. According to our reading Mr. Johnson decided to lower initial prices on items by about 40% from where they started so consumers would be more comfortable and sales would improve. The next thing Mr. Johnson decided to do was reduce the number of promotions, pick a few in-season items and have them on sale for an entire month, have only two clearance sales a month and round off pricing to only dollars no cents. This is hopefully going to improve sales and Penney plans to spend eighty million dollars a month on this program because consumers will bargain hunt for the best

deals.

Now the new CEO plans to go back and replace the highest traffic middle areas in the stores to feature rotating monthly attractions and services. Examples of these are free back to school haircuts, free food items such as hot dogs and ice cream during the summer months. Mr. Johnson got his this ideal from his days at Apple and their “Genius Bar” where customers would have to walk through the different sections of merchandise to get to the “Genius Bar” where they would have their Apple products worked on. One other thing Mr. Johnson is doing is phasing out a lot of the private label lines and only keeping a few stronger ones because he is not interested in celebrity driven lines and private label apparel.