A strategic mistake made in 2011 by celebrity CEO Ron Johnson continues to haunt retailer JC Penney, as evidenced by its ongoing sluggish sales growth and store closings that have made the retailer a fraction of what it once was. Meanwhile, investors have been bailing out from the company’s stock. JC Penney’s woes began with a change in the retailer’s pricing strategy — replacement of coupon sales with everyday low prices. The old pricing strategy has been popular among retailers because it hypes shoppers, making them feel smart and encouraging them to talk with other consumers about it. That’s how hype and buzz for merchandise begins and spreads in the shopper community. JC Penney abandoned this strategy after Ron Johnson assumed leadership of the company, modeling the stores after those of Apple. The company eliminated coupon discounts, changed the floor merchandise, and added boutiques. The mistake came from a misunderstanding of a crucial difference between retail stores and Apple stores: hype. Apple’s customers know what they want — they don’t need conventional sales promotions or hype to be lured to the stores. Retailers like JC Penney don’t have that type of marketing machine. Their products aren’t unique — they’re carried by Macy’s, Kohl’s, Walmart and Target. That means their customers have to be hyped up by sales promotions, something Ron Johnson did away with. The problem today is this: once the buzz has faded away, it’s almost impossible to get it back. That’s something JC Penney is still grappling with, as they continue in 2025 to close more and more stores.
