Watch Ron Johnson

The relatively new, highly dynamic CEO of JCPenny says he is making changes in the department store’s operations. His ideas were revealed to all who watched ads broadcast during the Academy Awards.
     Now watch that CEO, Ron Johnson. There might be gems working for a larger retailer like JCPenny which can work for you, too. Track changes in the retailing landscape which you’ll want to take into account. Mr. Johnson had great successes overseeing the development of the retail store side of Apple Computer. He previously had successes at Target. His first job out of Harvard Business School was in retailing.
     The change that seems to be getting the most attention is a move toward everyday low pricing (EDLP) and away from promotional pricing. During 2011, JCPenny offered a total of 590 promotional sales. This year, it will be many fewer. The objective is to have twelve month-long sales each year plus “best price” discounts the first and third Fridays of each month.
     This isn’t an absolute move away from promotional pricing. In fact, the budget for promotions is being cut only 4%. More will be spent on each of the smaller number of monthly promotions.
     Shopper psychology research finds an advantage of promotional pricing over EDLP is the excitement of a special event. In your store, scrutinize each promotional event to see if it’s profitable. Realize that if you’re having almost 600 per year, as JCPenny was, the excitement of a special event is pretty much gone. Still, in reducing the number of events, be sure there’s still enough excitement to keep people coming to your place.
     Mr. Johnson envisions each JCPenny store as a set of specialty shops. He said he considers the JCPenny competitors to be specialty shops more than Kohl’s or Macy’s. The shopper psychology literature indicates Mr. Johnson is on to something. Retail shoppers have moved away from department stores and out in one direction toward Big Box stores, out in the other direction toward smaller specialty stores.
     Here are three research-based tips for carving out a nice niche:

• Diversify. Never limit yourself to only one niche.
• Cultivate the desire for the niches. Show customers what you think they should be hungry for, then evaluate how thoroughly they buy your pitch and your products.
• Avoid abrupt changes in your merchandise mix unless one of your niches is itself defined as always having something new.

Click below for more:
Promote Promotional Pricing over EDLP
Strengthen Your Barbell Retailing
Define Your Niches by Your Shoppers’ Desires