J.C. Penney’s failed gamble with Apple CEO; a lesson for the automotive aftermarket?

As automotive technology advances, aftermarket shops face marketing and customer education challenges.


All of us are living in challenging times, and if you feel frustrated by your inability to master the diverse skills needed in what was once a fairly cut and dried business like automotive repair, take solace in knowing you are not alone.

Last week, J.C. Penney dismissed its CEO, Ron Johnson, whom it lured away from Apple in 2011 with the hope that he could do for the general merchandise giant what he did for the specialty retailer. If you haven’t been following this story, the long and short of it is that a management superstar was clearly unable his replicate success in another marketplace.

In fairness to J.C. Penney, board members at the time noted that Apple’s model wouldn't translate completely to J.C. Penney's stores, but they believed in Johnson’s merchandising creativity. Board members felt Johnson was particularly insightful about younger consumers.

So what does this have to do with the automotive aftermarket? Just as J.C. Penney found it difficult to apply specialty retailing concepts to its own business, comparisons between that situation and the automotive aftermarket are far from perfect. But that’s no reason not to consider some comparisons.

J.C. Penney recognized the consumer has changed and continues to change. Hence, it was reasonable to consider a manager who oversaw a retail concept that worked.

Automotive technology has also become highly specialized. And not just in the design of new vehicles. On the aftermarket side, hand tools, tire equipment, scan tools, borescopes, battery testers, thermal imagers, leak detectors and other tools have all improved at a rapid clip. Some technologies have changed so quickly, such as the diagnostic scan tool, that they have fundamentally changed how an automotive repair business is run.

While the automotive aftermarket has always been a specialized service, it is becoming more so every day. To succeed, today’s aftermarket shop must price its services according to a new cost structure. This requires a more educated consumer.

The aftermarket must recognize new marketing methods are needed. This much has been evident at aftermarket conferences and trade shows. Seminars and panel discussions address a wide range of marketing topics, such as social media, Internet commerce, and more.

Hence, today’s aftermarket companies face a scenario similar to J.C. Penney. They must convince the consumer they are offering a more specialized service.

At the same time, the consumer has expectations about the aftermarket that aren’t going to change overnight. Here is where the automotive aftermarket can learn something from J.C. Penney.

Apple’s Ron Johnson brought a specialty retail mindset to J.C. Penney. He eliminated the company’s complex promotional pricing and replaced it with more simplified pricing. He also overhauled the in-store displays into a more boutique look.

But as the Wall Street Journal noted on its editorial page last week, “Apple’s business practices work for Apple, which makes word-class products and designs that allow higher margins. Penney’s bargain-hunters don’t want or need a Genius Bar.”  J.C. Penney’s sales for the last fiscal year tumbled nearly 25 percent, by far the worst performance in the last five years. The company promptly replaced Johnson with its former CEO, Myron Ullman.

So if the top investment and corporate minds in the country could be so wrong, is there hope for the rest of us?

The investment community welcomed Johnson to J.C. Penney with open arms in 2011; the company’s share price jumped 17.5 percent on the news of his arrival. But the investment community, despite its great minds and extensive market research, miscalculated big time.

In fairness to “the rest of us,” many people questioned J.C. Penney’s decision in 2011. You didn’t have to be a business professor to realize big differences exist between general merchandise retailing and specialty retailing. And it goes without saying that performance pressure clouds people’s judgment.

This content continues onto the next page...