Disclaimer. Like Ellen DeGeneres, I also worked for a JCPenney in my youth. I spent about a year in the Visual Merchandising department of the Thousand Oaks Penney’s store, supplying promotional signs to my store as well as the Ventura store and one other that I no longer remember — either Santa Barbara or Oxnard. I got the job because I knew how to use a computer and it paid 10 cents more per hour than the estimate of my combined low wage plus commissions in the Juniors department. Plus it sounded like less work.

My job consisted of taking a floppy disk that was mailed out by corporate, loading it into my computer, and setting a very large, noisy, and smelly ribbon printer to printing massive batches of sign toppers that I then divided up between the 3 stores that I served. I also maintained the inventory of pre-printed signs for all three stores and the parts for the signs — the various topper mechanisms for connecting the signs on display racks, as well as the plastic sleeves the signs went in.

That printer hated me — I still have a scar from where the printer head bit me once, and if you ever left it while it was batch-printing all those signs — to go to the bathroom, to go home — it would immediately either mangle the ribbon to the point where you had to disassemble the whole dang thing to fix it, or the paper would slip the tracks and get mangled by that printer head until you had to disassemble the whole dang thing to fix it.

I’m telling you this because Ron Johnson spent a lot of time — and has gotten a lot of press for — talking about the future of JCPenney, and how he intends to transform the department store experience. He talked about it in the context of the last decade, and even referred a bit to the 1990′s, but from my own experience I can say that JCPenney was in promotional trouble for a lot longer than a decade. Or two. I know — I have the scars to prove it.

So I don’t want to spend my time rehashing what he said — you can find about 50 articles that do that. Instead, I’m going to focus on what people missed — commenters and pundits like myself, as well as Ron Johnson himself.

Analysis

Ron Johnson presented JCP’s future in the context of 6 P’s: Price, Promotion, Personality, Product, Presentation, Place. He characterized these as the 6 P’s of retail as he learned them himself both in business school and in retail. He missed one — an important one. I’ll get to that at the end (you can skip to that part if you really want.)

He broke the 6P’s into 2 groups. Price, Promotion, and Personality as things that will be addressed starting February 1, 2012, and Product, Presentation, and Place changes coming beginning August 2011 and progressing through December 2015.

February 1, 2012

 Everyone else has already hashed out the details of Price, Promotion, and Personality. But with Price in particular, I’ve found some misunderstandings of what he’s actually doing. Some people have characterized JCP’s new price strategy as everyday low price or even everyday values and questioned whether EDLP as it is sometimes called is a price strategy that can work in fashion or in department stores. Johnson went a long way to justify the massive lowering of prices that will occur on Feb 1^st, giving lots of detailed information about JCP’s average cost and price and the negative impact that the company’s heavy promotional strategy has had on everything from image to operations.

I don’t see the new price strategy as an EDLP one — there will still be promotions and there will still be markdowns. It’s just that the company is going to take a much more predictable rhythm with its prices than it ever has in the past so that the shopper knows that she can always trust that she’s getting the price she’s willing to pay — the best price for her circumstances, whether it is a clearance-type price or an “everyday value “. To me, this price strategy looks a lot like IKEA’s, which honestly isn’t that bad of a thing.

August 1, 2012

Starting in August, the company will begin rolling out what I think is the most brilliant piece of the new strategy, and which flies in the face of conventional wisdom about retail. Johnson laid out a plan where the company will completely redesign its store model, but instead of taking 5 years to roll this out store-by-store across the base of stores, he’s going to do it in 3 — department by department. Conventional wisdom about a remodel is, take a store out and do it fast and top-to-bottom and then move on to the next store, so that one, you can get the benefits of the remodel in that store as soon as possible, as well as minimize the length of time that the store is sort of out of commission. It’s relatively more cost-effective because it takes a lot more labor to touch every store 100 times than it does to concentrate on a 100% single store remodel.

But Johnson has turned this idea on its head — he will indeed touch every store 100 times between August 2012 and December 2015. But instead of being a chore, he has turned it into a marketing event. “Come into our stores every month starting in August and you will see something new. ” As I said, brilliant.

But the other thing that he slipped in around product is this idea that the pricing strategy gives the company a lot more headroom than it had before — and they plan on using that headroom to go after the higher end of the market. Not the luxury market per se, but that upper middle that has so long been something of a dead zone.

I personally thought JCP was in trouble because it occupied the middle, but with this new strategy, I’m on board 100%. As a shopper, I hated Penney’s not just because the aisles were crowded and the amount of merchandise in the store was overwhelming (and, as Johnson points out, I had no idea what the actual price of the item was going to be when I actually decided to buy something). If I wanted to spend $50 on a pair of pants — say for work — my choices were to wait for Macy’s and Banana Republic to have a sale so that I could by $80 pants for $50, which was annoying and doesn’t always fit into my work schedule, or I could go to JCP and find pants priced at $50, marked down to $20, and made mostly of polyester. Not exactly what I was looking for.

So Johnson made a really important point related to product when he discussed price. He went through the example of the $10 towel that actually only ever sold for $4 because of promotions and whatnot. And on Feb 1^st, that $10 towel will now be $5 regular price, $4 on promotion, and $2 on clearance until it’s gone. That’s all fine and dandy. But it also means that JCP now has no $10 towel in their assortment. In fact, they never did. All they ever had were $4 towels that they tried to convince people were worth $10, and no one was buying it. Literally.

So now JCP needs $10 towels. And $20 t-shirts to go with the ones that they were pricing at $20 but only selling when they were $14. And $50 pants instead of $20 pants disguised as $50 pants. Some of these changes will start rolling in when JCP begins unveiling the 100 new departments that will go up across stores at the pace of 2-3 at a time from August 2012 through December 2015. This is when JCP will move from taking down Sears to taking down Macy’s.

The Missing P

Like most everyone else, I am very hopeful for JCP. The company is an American icon of retailing. I remember having to pin foam block letters on the back wall of my store’s reception desk that said it was The Golden Rule Company. And I agree with Mr. Johnson that this is a core value worthy of using for the company’s future. But he forgot one P in his presentation, and it’s a big one. It’s People.

To his credit, Johnson gave out lots of kudos to his team, noting several times that the same merchants who had driven JCP’s past, broken strategy had stepped up to create the new one. Same for the Personality P — the same branding team that had driven the notorious 590 promotions in 2011 came up with all the imagery that you’ll start seeing literally tomorrow.

But what about store people? Here’s the big challenge still ahead for JCP. When you have 590 promotions, it’s pretty hard for stores to keep up. Our own research has shown that retailers have begun to realize exactly how much trouble massive numbers of price changes create in stores — keeping track of what’s on promotion and what’s not, putting promotions up and taking them down, moving markdown merchandise around in order to make room for the new stuff coming in — which gets lost in a crowd of promotions and product.

But on top of that, over the last decade — and more — JCP has moved away from a service-based strategy and moved more towards one that relies only on cashiers and price taggers. I don’t know what the current wage is that JCP pays today for a starting store associate. In my day, the $4.35 I was offered was actually quite a bit above minimum wage (at least it was to a first-year college student). I look at the sophistication of JCP’s current staff, and I wonder if, like the merchandising and marketing staff, they are really up to the challenge of the new strategy. I wonder, in fact, if JCP’s current staffing model is capable of executing on JCP’s new store strategy. One thing that Johnson did not address is the company’s past decision to consolidate cash wraps from the departments into Customer Service Centers at aisle intersection points around the store. Will those stay? Go?

Also, one of Apple’s biggest retail differentiators has been its staffing model. While Johnson talked some about how Apple’s store design has been based around 50% floor space for products and 50% for owners (services), he didn’t talk about the people. I’m making a pretty safe bet when I guess that they have the highest labor per square foot costs in the industry (I don’t know the number at all) — but retailers often argue that it’s easy for Apple to bear that cost when they also have the highest sales per square foot in the industry as well. The funny thing about retailers’ response is they never question whether the two are related. Might there be more than a correlation here?

So, Mr. Johnson has laid out a lot of cards on the table, as well as been a little cagey about a few — including the Town Center concept that he presented. What he has discussed sounds promising and visionary in a category of retail that has long lacked either one. But I suspect that there is more of this story to be told — and I hope that People eventually gets added as the 7^th P when it comes time to tell it.