What was jcpenneys mistake

Clearly, Mr. Johnson assumed that a revamped J. Penney with steady prices would attract customer crowds to its stores, as is the case with Apple. Amazon and other online retailers have continued to chip sales away from traditional retailers.

Ron Johnson is long gone, and the new leaders brought back the old fashioned pricing strategy, and some of the old merchandise.

Still, the new leaders have failed to bring the hype and buzz back, offering a valuable lesson to modern marketers: once the buzz has faded away, it is hard to light it up again. I also teach at Columbia University. Interests: Global markets, business, investment strategy, personal success.

This is a BETA experience. You may opt-out by clicking here. More From Forbes. Feb 25, , pm EST. Feb 20, , pm EST. Feb 12, , pm EST. Feb 6, , pm EST. Jan 29, , pm EST. Beyond that, there are plenty of specialty stores such as The Gap and Gymboree.

Lal: To fix the problem of sameness and make it appealing for customers to come into the store, he came up with the idea of unique boutiques within each J. Penney—the store-within-a-store concept. He added services in the middle of the store where, for example, people got their nails done. He focused more on the more affluent—something that is harder to do in a bad economy, since you're spending more money to attract a new demographic that isn't showing up fast enough.

Meanwhile, your old demographic is deserting you, putting you between a rock and a hard place. He also tried to deal with department stores' biggest problem, promotional pricing, or what we often call high-low pricing.

When Johnson took over J. Penney, 50 to 70 percent of all sales were at discounted prices. Here's how it works. All the actual sales take place at 50 bucks. The problems that high-low pricing cause are tremendous. Customers come into the store, they look at the new merchandise, and they look at the prices.

They like the merchandise, but don't like the price, and so they don't buy. As a result, this new merchandise sits on the shelves. The first markdown takes place after six weeks, and only then does the merchandise begin to move. So for six weeks, not much happens. You're wasting your real estate and capital.

Johnson comes in and says we're not going to play this game. Customers, on the other hand, are accustomed to shop for discounts, especially lower- and middle-income families, while the boutiques didn't want their brands diluted by discount pricing.

The depths of the recession made this everyday-low-prices strategy difficult to carry out. Customer traffic dropped sharply, and without that, J. Penney and Johnson were clearly in trouble. If customers had had more disposable income and felt better about the future, he might have had more time to work things out—three years instead of two.

But reality created a different scenario. Sales fell like a rock. Under those circumstances, it's difficult, if not impossible, to attract vendors to carry out the store-within-a-store concept. If cash is in short supply, they're worried about getting paid, not to mention their concern about the diminished reputation of the overarching brand.

Finally, the corporate governance brouhaha in the midst of the back-to-school season couldn't have come at a worse time, except for the holiday season. Aisner: I know it's impossible to predict the future, but what might lie ahead for J. Lal: They might be able to get a couple of billion dollars in loans. That way, if they can manage their cash flow, have liquidity, and if the economy is in a better place, they can stabilize the company for the next 12 months.