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Tech and exec disasters put J.C. Penney in a bind

Kim S. Nash | Nov. 25, 2014
J.C. Penney's moves in the last few years stand as prime examples of how not to manage, how not to implement technology and how not to respond to looming business threats.

Getting a younger, richer customer into the store was just one goal. Johnson wanted much more. He envisioned his stores as town squares, offering a variety of niche shops for customers to browse as they strolled aisles 14 feet wide and dotted with beverage stations and comfy chairs. Kids would have mats to play on and Legos to play with, and there'd be candy stores. As he told analysts in 2012, "We are going to create a new category that we call the specialty department store and we think it is going to be profound."

In 2013, the company started to rip out cash registers, on a pace to eliminate all of them by 2014. Every store employee, Johnson promised, would get an Apple device loaded with 18 applications for mobile checkout, training and other tasks. He expected to have it all built by 2015 and for J.C. Penney to be "in demand by the malls."

It didn't happen. Johnson left in the middle of the revamp, leaving the company caught between strategies, says the former CIO. Early in Johnson's tenure, for example, IT had started to install a new merchandise planning system from Oracle, the former CIO says. "When Mike came back, they backed off."

Meanwhile, the stores were stuck in limbo: Few checkout counters, but no mobile checkout devices. As a result, customers were the ones roaming around, wondering where to pay for their clothes and housewares. To make sure last year's back-to-school shoppers didn't get frustrated, J.C. Penney wheeled 2,800 carts with cash registers on them into stores and eventually reinstalled 1,400 permanent counters.

Disaster 2: RFID and Thievery
Johnson, who spoke of his "vision dream" and "magic" when describing J.C. Penney's future, seems to have overlooked some technology practicalities.

By tagging clothing and home products with RFID chips, J.C. Penney aimed to provide fast mobile transactions and better inventory tracking. For many retailers, RFID has also become an important piece in building omnichannel capabilities, says Kilcourse, the retail IT consultant.

Traditional supply chain systems presumed that products are pushed out to warehouses and distribution centers and that stores are the final destination. But omnichannel retail allows demand and fulfillment to occur in multiple directions. A destination, like a store, can also be a source of fulfillment.

Retailers must analyze real-time, accurate inventory data to know where the best place is to fulfill an order. "Best" may mean most profitable, least expensive or most convenient to you or to your customer. And those criteria may be weighted differently at different times, depending on shifting revenue or profit goals. You define the algorithm, Kilcourse says, but the key is to start with excellent inventory visibility. "You have to be able to see the merchandise," he says, "no matter where it is."


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