A shopper strode out of J.C. Penney at Ridgmar mall
without making a purchase because it didn't have what she was seeking at the
Sephora makeup counter.
"I used to come a lot but not now. Actually I wasn't thrilled with the changes. They're ending coupons and I cut up my Penney's credit card when they started using Ellen DeGeneres" as a celebrity endorser, said the Springtown resident, who identified herself only as Connie. "I'm very conservative."
Like other once-loyal Penney's customers, Connie was turned off by abrupt changes implemented by Ron Johnson, the chain's CEO of 17 months who was sacked last week after annual sales dropped 25 percent at stores open at least a year.
Before recently backpedaling, Johnson cut way back on coupons and promotions in favor of everyday low prices, and began filling its 1,100 outlets with branded mini-stores like Joe Fresh, many of them youth-oriented.
Business students at Southern Methodist University who recently surveyed Penney customers found that some were alienated by the changes, the loss of coupons -- even though they've been brought back -- and the feeling that it was no longer "their" store, said Ed Fox, a marketing professor at SMU's Cox School of Business. "They were put off by the changes and they found it difficult to find things."
Fox noted that Johnson did away with coupons and promotions -- which was easy and cost nothing -- long before he fully implemented his ambitious "shop in shops" concept, so there was nothing to attract customers.
"He got the order wrong," the SMU professor said. "Why come? Where was the refreshed merchandise?"
Traditional Penney shoppers deserted the chain in droves.
"Ron had many good ideas but he alienated people, both customers and long-time employees," said Allen Questrom, who was Penney's CEO in 2000-04.
"He knew what he wanted Penney's to be in a grand scheme. The problem was he didn't test any of the strategies. And he neglected his customers' issues and gave up what they came to your store for," Questrom said, noting that Johnson dropped more than 400 suppliers and brought in new ones. "God only knows if they'll come back."
While retailing's entire midmarket is shrinking, two major Penney's competitors -- Macy's and Dillard's -- saw same-store sales rise 3.7 percent and 4 percent respectively in the last fiscal year, as they lured customers with promotions and, in the case of Macy's, had strong online sales.
So where have Penney's customers gone?
"Clearly Macy's has been taking market share away from them and capitalizing on Penney's problems," said Robert Leone, a marketing professor at the Neeley School of Business at TCU. "And even Target, despite recent missteps, has improved in the market, offering fashionable items at good value."
Fort Worth-based retail consultant Vic Gallese expressed surprise that competitors in the midmarket category -- which along with Macy's include Kohl's, Dillard's and Belk -- hadn't grabbed even more business.
"I would have thought 80 percent of Penney's loss would be picked up by the major rivals," Gallese said. "But the midmarket consumer has drifted off -- either upstream or downstream."
He figured they got 50 percent, while dollar stores and extreme discounters like Ross and Marshall's got much of the rest.
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