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WHAT IT MEANS AND WHY IT'S IMPORTANT — The fate of beauty initiatives at JCPenney, along with a lot of the company's other plans, just became a lot less clear following the hiring of former Apple executive Ron Johnson as CEO.
(THE NEWS: Ex-Apple exec fulfills dream, becomes JCPenney CEO. For the full story, click here)
Johnson previously served as SVP retail at Apple and isn't due to join JCPenney in his new role until Nov. 1, but when he does, the guy who spent the past 11 years building Apple's network of 300 worldwide stores is sure to bring with him some fresh ideas about how to accelerate growth at JCPenney's 1,106 stores. In fact, Johnson contends reinventing the department stores is the single greatest opportunity in American retailing and in the press release announcing his appointment he said he looks forward to transforming the way America shops.
The company has been doing some transforming on its own the past few years to make its brand of retail more relevant to shoppers, but for the most part the changes have been incremental and results have been slow to materialize amid challenging economic conditions. One key initiative that stands out is an agreement with the Sephora division of the global luxury brand conglomerate LVMH to install 1,500-sq.-ft. Sephora branded beauty departments inside JCPenney stores. The new departments add some "wow" factor to the company¹s stores and address a major competitive shortcoming relative to other department store operators who offer prestige brands. However, the pace of the additions has been slow. Even though the agreement was announced in 2006, at the end of the first quarter there were only 254 Sephora departments inside JCPenney stores and that was after the addition of 23 new departments during the first quarter on top of the addition last year of 76 departments.
The potential to accelerate the rollout of this meaningful point of difference will likely be on a short list of priorities for a new CEO looking to execute transformational change. And an even deeper relationship with Sephora could also open new doors for JCPenney to tap into LVMH's roster of other premium brands with all sorts of intriguing possibilities. Nothing is likely to happen anytime soon though as J.C. Penney's merchandising priorities are set for the year and Johnson doesn't join the company until Nov. 1. But when he does, the market has high expectations he will bring some of the Apple magic to J.C. Penney along with design sensibilities obtained during 15 years of merchandising experience gained at Target. Upon word that Johnson was joining J.C. Penney, the retailer's share price surged $4.93.
Such optimism may ultimately be well founded, but for the time being it ignores gigantic differences between Apple and JCPenney. For starters, Johnson led Apple¹s retail efforts during a period when the company brought to market what was arguably the most innovative and differentiated product lineup the consumer electronics marketplace has ever seen. As a result, customers beat a path to Apple stores where they gladly paid premium prices and felt privileged to do so.
Conversely, JCPenney competes in a space with abundant competitors and operates stores that look remarkably similar to 30 years ago. The company offers a product mix of apparel, accessories, footwear and home goods that are largely undifferentiated and can be found at countless other locations at comparable or lower prices.
Johnson said he has always dreamed of leading a major retail company, but the top job at JCPenney could become a nightmare as the retailer faces countless challenges and there's no Steve Jobs behind the curtain working on the next big idea that will send shoppers flocking to JCPenney stores.