Ron Johnson's brand-oriented boutiques couldn't save JC Penney. Is Best Buy any different?
Ron Johnson, the former Apple executive responsible for the company's retail stores, left Apple to helm JC Penney in November of '11. And last night, Johnson left the flailing retailer after just 17 months as chief executive. Under the Johnson administration, JC Penney stock plummeted 50 percent and the company experienced sensationally bad losses, hemorrhaging $427 million in the fourth quarter alone as sales dipped 28 percent versus the previous year. His strategy for renewal included killing coupons, revamping prices to offer the best deals, ending sales, and spinning out specialized "mini shops" centered around specific brands and products like Levis and Joe Fresh. That last bit is perhaps the most interesting aspect of Johnson's attempted "revolution."
Instead of devoting an entire store to row upon row of clothing racks, Johnson built miniature boutiques in an attempt to attract younger, more brand-focused customers and improve the retail experience for clothing in the same way the Apple Store redefined consumer technology stores. The initiative has been described as a failure that, in conjunction with Johnson's other changes, failed to draw more customers while alienating existing ones.
Despite the constant kvetching over shoddy retail experiences and the first-world agony of visiting the modern-day department store, consumers didn't take well to Johnson's attempts to reinvent JC Penney. But can the same, brand-oriented approach work for, say, Best Buy? The big box retailer is betting that the answer is "yes," as it recently announced that miniature Samsung stores would be coming to some 1,400 retail locations.
Dubbed "Experience Shops," the Samsung-branded -- and, in some cases, staffed -- glorified kiosks will separate the company's products from Best Buy's usual mishmash of cameras, phones, stereo receivers, cables, computers, peripherals and software. Where Johnson bet that consumers would welcome a mini shop dedicated to Levi's, Best Buy is banking on mobile customers desiring a Samsung-built smartphone, tablet, or laptop.
This isn't Best Buy's first foray into branded experiences. Upstart reported in 2011 that the retailer was looking to lease store space to "smaller retailers such as grocers, beauty-supply stores, and home-furnishing outlets" in its attempt to reduce its retail footprint by 20 percent. Best Buy, like JC Penney, intended to become a "mini mall" of sorts.
The question is whether or not an approach that failed in clothing can work for computers. Johnson's misadventures in retail proved the opposite: Despite his experience at both Target, which he revived as a more "hip" brand, and the stunning success of Apple Stores, his strategy at JC Penney was not what the doctor ordered, and certainly not what the company thinks it needed.
Best Buy is similar to JC Penney in myriad ways. Both have suffered from "showroomers," people who visit a store and use it as a glorified dressing room or demo area before purchasing from Amazon at a lower price -- even though Amazon doesn't excel at fashion (yet). Both sell a wide array of products from numerous brands. Both have been struggling in recent years. And both are furiously trying to turn things around.
Such a turnaround depends, at least in part, on improving customer experience. When almost anything average consumers might wish to purchase is a few keystrokes and one click away (often with free shipping if Amazon Prime members) convincing those same people to make their way out into the cold, cruel world and interact with other humans requires a vastly better experience than what many stores provide.
If there's anything consumers seem to love, it's Apple's approach to retail, which could be described with an old maxim: Simplify, simplify, simplify. Instead of featuring row after row of every product imaginable, Apple's stores feature the company's relatively minuscule product line on spartan wood tables. Apple offers the support of so-called "geniuses" rather than relying on untrained, unmotivated, and poorly compensated customer service workers.
The strategy has paid off. Apple is said to make more than double the revenue of its nearest competitor, Tiffany, per square foot. Competitors' attempts to mimic the Apple Store are met with derision from pundits and, according to reports from the holiday season, a lack of interest from consumers. It may not be that Apple's approach simply doesn't work for clothing; rather, it might be that Apple's approach doesn't work for anyone besides Apple.
Samsung is installing its own employees in some of these "Experience Shops," but it's hard to imagine such a strategy working for other companies -- or for Best Buy. Product lines from companies like Dell, HP, Lenovo, and other computer-makers are often disparate and, in all likelihood, a mess for even employees to keep straight. Try keeping products straight when so many are simply the word "Ultrabook" with a different screen size.
If more miniature shops opt to staff the glorified kiosks with their own employees, Best Buy could find itself as less of a retailer and more of a landlord.
Despite Best Buy and JC Penney's shortcomings, customers have grown accustomed to shopping there and experiencing sensory overload, navigating unpredictable sales events, redeeming coupons, and traipsing past products stacked on dirty shelves. They might not like being annoyed, but they like change even less.
Apple (and Johnson) captured lightning in a bottle with the Apple Store. Best Buy seems to be hoping to recreate something similar within its own walls, hoping that a focus on the world's most influential technology company not named after a fruit (Samsung) will improve its somewhat bleak outlook. And it's doing so without one of the men responsible for that initial capture.
Now we just have to watch and see if Best Buy can both out-Apple, well, Apple, while also avoiding the same fate as JC Penney. Otherwise another CEO may soon be shown the door.