ron johnson

J.C. Penney and Procter & Gamble Bet on Boomerang Bosses

Thirteen years after first taking the helm at Procter & Gamble, A.G. Lafley has been reinstalled as the company’s chief executive, replacing his hand-picked successor, Bob McDonald, after four years on the job. Meanwhile, Myron Ullman boomeranged back to J.C. Penney as CEO last month, bringing former Apple executive Ron Johnson’s controversial year and a half reign to a close. The twists and turns leading up to these transitions and the unlikely link between Procter & Gamble and J.C. Penney could be fodder for a mini-series.

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High-visibility executive rebounds are nothing new, of course. Steve Jobs, Michael Dell, and Howard Schultz are all examples of leaders who responded to recalls, from Apple, Dell, and Starbucks, respectively. What makes JCP's and P&G's executive revisits so interesting is that both companies are in the midst of significant restructurings. Both also appear to have borrowed from the past, albeit for distinctly different reasons.

Ron Johnson’s scorched earth plan for Penney’s was well-documented and well underway when he was ousted last month amidst a series of sales swoons. Among other developments, denim bars had landed, the much-buzzed-about Joe Fresh shops had begun to roll out, and sizable Martha Stewart Pantry sections were being set up as recently as last week, even as Penney’s legal battles over the brand with Macy’s were still fresh on everyone’s mind.

Accounts of the effectiveness of Ullman’s previous stint at Penney’s range from unspectacular to destructive. In fact, some blame him for lulling the retail giant to sleep (ironically, a nice tee-up for Ron the Radical). In Penney’s first earnings call since Ullman’s return, he spoke of re-emphasizing private brands, a strategy that is in direct opposition to Johnson’s focus on trendy newcomers like Joe Fresh and established outsiders such as Martha Stewart.

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The ads that Penney’s has popped out under Ullman’s early watch are a study in mea culpa marketing, as they practically beg customers to return to the store.  Ullman hasn't said that he plans to scrap Johnson’s vision of creating “the first specialty department store” but the three-pronged segmentation that he introduced during the earnings call marginalizes the strategy by default. Private brands were referred to as “core” brands (hint, hint), national brands were the “middle bucket,” and the brand shops that Johnson banked on (literally) were referred to as “attractions.”

At this point, Penney’s revisit appears to involve slamming on the brakes or even retreating. Milquetoast reflexes are certainly understandable under the circumstances, but Penney's can't afford to give into them as competitors on every side, from Walmart to Macy’s, put the pedal to the metal on next-stage digital initiatives, while disruptors like Uniqlo broaden their U.S. footprints.

By contrast, much of the momentum at P&G was initiated during Lafley’s storied nine-year tenure, including the mega launches of Swiffer and Fabreze and its game-changing acquisition of Gillette. Under Lafley, P&G didn’t just launch new products, it created new categories. His winning streak is all the more impressive given that P&G wrote the book on CPG success with iconic hard-acts-to-follow such as Pampers, Tide, and Crest. Lafley also joined the pantheon of business thought leaders both during and after his term at P&G, as the author or co-author of highly-rated business tomes, most recently, Playing to Win.

Unlike Johnson and Ullman at Penney’s, Lafley and McDonald worked closely together at P&G, and Lafley’s anointing of McDonald as a successor would seem to have been intended to ensure that innovation would continue at a steady clip. Instead, the innovation pipeline dried up during the McDonald years, and although Penney’s would surely trade its sales nose dive for P&G’s middling performance, key P&G stakeholders haven’t been impressed. Activist investor Bill Ackman’s growing litany of complaints against McDonald, everything from what he saw as excessive participation in other corporate boards to comparatively lackluster performance in relation to competitors, put vice-like pressure on P&G’s board. In what can only be called an ironic twist, Mr. Ackman, the guy who decided that Ron Johnson would be Penney’s knight in shining armor, orchestrated McDonald’s departure.

J.C. Penney and Proctor & Gamble are both borrowing from the past in order to ensure the future, and both are must-watch barometers of retail progress during a time of unprecedented change. Will the next six to twelve months see them simply regrouping or will they leap forward? 

Article by Carol Spieckerman

Article by Carol Spieckerman

Two Mighty Myths

Best Buy is the latest member of a growing group of retailers that have recently announced significant business overhauls. Clearly, retail is about to get a whole lot more interesting, as many of the majors, including J.C. Penney, Lowe’s, Kohl’s, and others make simultaneous big breaks from their pasts. Before the momentum builds any further, it’s time to debunk a couple of myths.

Multi, Not Just Mini

Retailers’ preference for small formats has gained traction, to the point where “small is the new big” is fast becoming a retail cliché – and one that begs for clarification. A bevy of big boxers, including Target, Tesco, Walmart, Best Buy, and J.C. Penney, are driving their store format portfolios in diminutive directions, but only one, Best Buy, is actually shrinking the size of its existing stores (by 20 percent in select locations). The majority of big box retailers’ store portfolios are still weighted toward, well, big boxes. Their small format forays have, by and large, been separate launches, like Walmart’s Express stores, J.C. Penney’s JCP Express concept in Chicago, Target’s City Target launch, or Best Buy Mobile, none of which have hit anywhere near the scale of their legacy footprints. For others, smaller versions of their original templates figure prominently in their go-forward strategy, but the revised versions are still far from tiny. Last week, for example, Kohl’s announced that its new store openings will be disproportionately tilted toward a version that weighs in at two-thirds of its original version. However, at 64,000 square feet, these new additions are far from “small” and at launch, they represent less than 1% of Kohl’s total fleet.

Takeaway: Consider small formats a trend, but, until wrecking balls begin banging away at a big box near you, multi-format remains the current retail reality.

Integrity and Clarity, Not Just EDLP

Who would have thought that a century-old, mid-range department store would create some of the biggest buzz in retail so far this year? J.C. Penney’s appointment of former Apple executive, Ron Johnson, to its top post was audacious enough – it’s his rip-off-the-Band-Aids renewal plan that has the retail peanut gallery weighing in right and left.

Penney’s pricing and promotions plan represents the most significant of its shifts in strategy, as it puts the kibosh on the shocking number of unique promotions it normally runs (almost 600 in 2011) in favor of a “Fair and Square” three-tiered pricing strategy. But don’t call it EDLP. Penney’s isn’t lunging to low prices, it’s meeting customers somewhere in the middle, between inflated markups on one end and rock-bottom clearance on the other. Ron Johnson summed up the situation by stating that "People are disgusted with the lack of integrity on pricing,” and he’s not the only one saying game over. This month, Stein Mart announced that it will reduce coupons by as much as 50 percent this year since, according to CEO Jay Stein, the company’s coupon strategy had gotten “out of hand.” In the wake of a highly-promotional fourth quarter, Kohl’s is working hard to make its pricing message“very, very obvious” to consumers as it moves forward, according to CEO Ken Mansell. Even the king of EDLP, Walmart, has made price consistency and integrity its dominant message as of late, while Lowe’s EVP of Merchandising, Robert J. Gfeller, has spoken of eliminating the “peaks and valleys” associated with promotions as part of its recent transformation.

Takeaway: “Value” and “low prices” are still very much in retailers’ vocabularies, but integrity and clarity are taking center stage.

This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) website.