Ron Johnson Out: The Customer Experience Files

I was in a cab yesterday with my wife, who works in the fashion industry, and she casually mentioned that Ron Johnson was out at JCP. I can imagine that everyone in the retail and fashion industry was aware of this 12 hours before the rest of us.

This morning I was watching Squawk Box on CNBC and Richard Branson along with Virgin America CEO David Cush were being interviewed. Cush was asked about JCP and replied that the key lesson is that you don’t destroy your existing business model before ensuring that the new one works. This is good advice but I think it radically oversimplifies challenges at JCP and creates false comfort for business executives prone to thinking that methodical change is better than radical change.

JCP is interesting to look at from the standpoint of customer experience and Johnson deserves credit for doing things that ultimately will prove to be essential retailers in all segments. What Johnson got wrong is that brand doesn’t drive customer experience, but rather brand reflects customer experience and a new logo, splashy store displays and forward leaning messaging can’t overcome what happens when actual people interact with the environment you create and worse, interact with other people called employees. If everyone isn’t up to the new task you will end up failing and doing real damage, this is the lesson I took away from the Ron Johnson era at JCP.

Brand Keys Customer Loyalty Engagement IndexBrand Keys is a company that measures brand engagement, specifically the emotional engagement that customers have with the brands they interact with. The 2013 survey was revealing on several levels in that across the 54 retail categories they survey, 39,000 consumers, several consistent themes are evident and all refute what Johnson actually did at JCP, which had a brand engagement score that s between 11-20 points below retail category leaders, they have been demonstrably failing at connecting with customers.

Customers today connect more strongly on brand values than at any previous time and this is critical because even in durable goods categories you don’t purchase things one-off. you come back and buy again, or make purchases of products in adjacent categories that reflect that brand experience you are striving for. Brands that have had consistent brand positions and deliver on that with everyday action also benefit from higher brand engagement, and companies like J. Crew, Apple, and Virgin America are good examples of this.

JCP is a mess and likely will not get better, they have lost connection with customers, who are now shopping at Macy’s and Kohl’s and unlikely to return. The physical retail experience is improved but the integration of digital and physical is weak, impairing their ability to convert customers from other brands, but most debilitating is the demoralized workforce that is the front line of customer experience. It’s a death spiral and I would not be surprised if JCP were acquired in the next 12 months. The new normal is unforgiving and punishing for brands that ignore it.

Small is the New Big on the Way to Hyper-Local

The turmoil in financial markets is revealing an interesting truth, “too big to fail” is fraught with public policy and financial risk. Seriously, is anyone really comfortable with the notion of any bank or insurance company having so much scale that our financial future relies on their continued existence? How about an auto manufacturer that is declared immune from bankruptcy and all costs to the taxpayer?

The “Wall St. and Main St.” analogy has been seriously overplayed, but that won’t stop me from using it one more time. Much has been written about the implosion of retail chain stores Linen-n-Things, Circuit City, and Mervyn’s …. but as I make my way through daily errands with local retailers I am not seeing the precipitous drop off in activity that would predict such large scale retail failures.

A very effective way to gauge retail activity at the local level is simply to ask. Most small business owners, store managers, and even retail clerks will be quite forthcoming when asked “how is business” and that picture can be compiled into a picture of overall economic activity in a local region.

There is a drop off in retail activity, clearly, as people think twice about purchases that would previously have been an impulse buy, but it’s not apparent that this is being felt equally by all retail segments (case in point, the store manager at Babies-r-Us told me their sales were up 2% last month).

I don’t think consumers are abandoning mass market retail, certainly not so with the sales and discounts that can be routinely found, but I do believe that local retail is resurgent as consumers stick close to home, and quite possibly value the intimacy of local retail experiences as, for lack of a better word, comforting. Greg Cohn dubbed this an extension of the “slow food movement” in a conversation we had recently.

I have always been a big advocate for local and hyper local but equally fierce in my criticism of local retailers who either fail to offer superior service and believe that it is a forgivable indulgence to charge prices well above what could be found elsewhere. In other words, local retail can’t suck and cost more than national chains just for the privilege of being a locally owned business, in fact the bar for good service is actually higher in local retail because there is an expectation of it born from the business being a member of the community as opposed to simply located there.

There remains a significant opportunity in local search but that window is closing. The big search engines continue to enhance their local search products and local retail is learning how to take advantage of these services. Niche search sites are improving the depth of their search results and in the case of review sites, it’s increasingly uncommon to find businesses and categories that feature no reviews.

Mobile local search is a related topic but that’s one I’m not so bullish on, primarily because mobile search in general is a niche compared to broader web search as a result of device and behavior circumstances. Having a mobile experience to augment a web-based service is a winner in my opinion.

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