Changing positions takes longer than you wish it would

JCPennylogoI’m a big fan of the new JC Penny. It’s also my wife’s “new favorite store.” I’m especially impressed with the fact they have found a position that is not just “another” department store. However, it has been a tough slog for Ron Johnson to pull this off, and given the poor short-term performance that is resulting from the shift, and Wall Street’s reaction, I have been concerned about his ability to stay the course.

The stores are truly different than they have been in decades and that is the problem and the opportunity. As Reis and Trout taught us 30+ years ago: It’s easier to capitalize on what people already believe than to try to change their minds. People have a belief about Penny’s that is no longer valid and that transition, like most, is taking longer than Mr. Johnson hoped it would. However, the impact of removing sales and promotions dropped store traffic quickly, while the impact of the “new” concept is not drawing new traffic as fast as needed to offset the decline.

In a nod to reality, Mr. Johnson has agreed to bring back limited sales promotions. This appeased Wall Street and may drive some more traffic. If it drives the right traffic that will help more people discover the new Penny’s. If not, it may appease Wall Street in the short-term, but not once earnings don’t move the needle.

I think Mr. Johnson’s strategy is a great one, but it is a reminder that re-positioning takes longer and is more costly than we might like, but sometimes it’s your only option.

Mitch

 

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2 Responses to Changing positions takes longer than you wish it would

  1. Pingback: And then it was over | Value Acceleration

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