Stupid, Self-Defeating Technology Strikes Again

The headline tells the story in JCPenney to get rid of check-out counters and clerks, use self check-out machines and RFID chips (hat tip, Mish).

TAMPA - Struggling retailer JCPenney is making some big changes that will affect customers and its clerks. The store is getting rid of its check-out counters.

CEO Ron Johnson said it will remove check-out counters in stores and replace them with a system that won't require clerks. It's all part of an effort to return the department store chain to profitability.

Shoppers will be able to use self check-out machines, similar to those found in grocery stores.

JCPenney is also planning to replace traditional bar codes on price tags with high-tech radio frequency identification, or "RFID" chips to make purchases faster.

Johnson told Fortune magazine he hopes to phase out check-out counters by 2014.

CEO Ron Johnson went to JCPenney from Apple, which is where he got this clever idea. Let's get the details from the Fortune interview.

JENNIFER REINGOLD — So can you give some examples?   Will we be able to pay the way we are in the Apple store?

RON JOHNSON — Yeah.  I'll give you a couple of examples.  We're rolling out right now WiFi networks, really advanced WiFi to all stores.  We'll have mobile checkout, you know, rolling out now and in the fall.  But we're also doing something that no retailer has done completely, is we are going 100 percent RFID with ticketing this fall.

So February 1st next year, the entire Penney's platform will be on RFID tickets.  Now most people use RFID for internal operations inventory management.  We're going to jump right to the customer, and my goal in 2013, by the end of 2013 is to eliminate the cash route.  So you think of a physical store without a cash routing.

Can you imagine a Target store without a place to checkout?  You think of a Macy's store.  But what it does is we currently, about ten percent of all the money we spend, half a billion dollars a year, goes to transactions.  Well that can be done through technology.

So all of that investment in people goes into service, and that's part of the redesign of the platform, because you go to the Apple store, you feel the people, the connection.  You go to most retail stores, all you see is people doing work to execute the retail strategy.  It's stocking shelves and transacting business.

That's going to all change, because of how we use WiFi, RFID, mobile checkout.  You'll be able to check out anywhere anytime, from anyone including yourself, because we're going to roll out self checkout to our stores next year, and it's really cool and it's really easy because it's RFID-based.

You don't have to scan an item.  You just throw it down and there's the price.  You couldn't do that if you had coupons, and you couldn't do that in a promotional business strategy, because the customer has to figure out that every item had this unique price and was it right for this hour, you know.

So all of the strategy we're doing are linked together by a high integrity pricing strategy, and it's really complicated to see the future.  But you know, people will discover as time goes on.

JENNIFER REINGOLD —  So the way you roll it out, it sounds like, you know, why doesn't everybody do this?  Wal-Mart has tried and struggled with RFID.  It's very expensive; correct, right?

RON JOHNSON —  Yes.

 JENNIFER REINGOLD —  I mean I understand you're saying that on the back end, you're going to end up saving if it this works.  But why do you think everybody else hasn't done this?

RON JOHNSON —   You know, I don't know.  I can't talk for someone else, but RFID clearly is a technology that's been waiting for prime time based on the cost of the ticket.  You know, I believe the ticket cost, the increase in the ticket cost versus UPC label is now at a point where the benefits way outweigh the cost of doing it.

The reason JCPenney is "struggling" is because few people in their traditional customer base have spare cash to spend at their stores. Ron Johnson's brilliant move will—

1. eliminate cashiers and other job positions because, magically, you (the customer) will be able to check out anywhere anytime, from anyone including yourself.


2. cause far more problems than it solves, and the likely result will be that you (the customer) will often have no way to check out accurately or at all, anywhere anytime, from anyone including yourself.
   

The alert reader has also noticed that item #1 will have the happy side-effect of reducing the potential JCPenney customer base in so far as they will be laying off many employees. Eliminating service jobs is of course the tried & true method of raising corporate profits and increasing worker productivity.

Regarding their dwindling customer base, Ron Johnson is introducing the "shops" concept.

J.C. Penney is garnering more attention for the debut of its "shops" concept this week. On Wednesday, the company opened branded Levi's, Arizona Jeans and i Jeans by Buffalo spaces within 700 of its stores. If all goes according to plan, J.C. Penney will eventually recruit 100 brands to open such mini-boutiques, transforming cluttered department stores into modern "main streets" with myriad shopping experiences. The company will also eliminate cash registers, arming staff with iPads and other mobile devices to check out customers.

But J.C. Penney is transforming only its best 700 stores. The remaining 400, mostly located in small towns, will receive limited selections of new merchandise. Although the company built its empire on small-town America, many of those stores are becoming burdens as the company attempts to rebrand.

Some loyal shoppers at those locations are also frustrated by the edgier fashion and end of coupons, two changes that Johnson has implemented since starting at J.C. Penney in November. In the early months of the rebrand, sales at J.C. Penney stores open at least a year declined 18.9 percent.

No doubt the JCPenney "strategy" here is to target upper crust shoppers because they are the only ones who have any spare cash to spend. And they will screw the poor by closing small town stores, as they recently did in San Fernando, California (follow the "shops" link above). That store had been serving customers since 1953.

This is obviously another Planet Stupid story, and beyond that I have little to add. The Technology Dream goes on and on, and on and on and on, and on and on and on and on...

Bonus Video — Ron Johnson speaking at Fortune's Brainstorm Tech conference (from CNN Money)

 

Comments

[PBD]

Several months ago my wife "won" a subscription to "The Economist" magazine, which has provided us with hours (OK, milliseconds) of amusement ever since.

Their July 14th article "Comeback Kid: America’s economy is once again reinventing itself" is particularly hilarious, with unbridled "techo-optimism" on vivid display:

"But there is a boom, too, in high-value services ... and a growing “app economy”, nurtured by Facebook, Apple and Google, ... its games, virtual merchandise and so on sell effortlessly across borders."

Can jumpsuits, flying cars and faster-than-light spaceflight be far behind?!

[Wanooski]

Another example of how all the whiz bang techno garbage screws over the average person and benefits only the affluent.

[John D]

FYI Walmart started a large project to put RFID tags on all its products a few years ago. They cancelled the project after realizing it would take acres and acres of server rooms to store and manage all the data associated with each item transaction.

[elvinator]

How ironic that j.c. are the initials for james cash. they are shooting themselves in the foot.

[H Read]

And in related news, Knight lost $440 million related to the installation of new trading software. The company is now exploring its financial options.

[James]

It's a poor business decision. Several businesses have backed away from the self checkout model because of problems. Theft is a big one and can be up to 5 times higher without a cashier presence (some of it is just mistake, not malice). It alienates customers just like automated phone "services". Lines tend to backup during busy periods. But, it cuts personnel so boosts short term profits, which is all most CEOs are interested in.

[Dave]

I prefer the self checkout machines, most of my experiences with cashiers have been negative. They're always asking me if I want to sign up for a credit card, donate to a charity, or they're somewhat rude, or I feel rushed to cram my receipt and go quickly because of the queue behind me.

The self checkouts are easy and don't bother me like a normal cashier does. The only bad thing is if I'm taking my time the human they have hanging around will sneak up behind me and ask if I need help which I don't, I'm just marveling at all the payment options.

I wish more stores had self checkout as an option while leaving a few human checkouts for those who prefer checking out that way.

[Anywhere But Here Is Better]

Is it just me, or has anyone else noticed that the Fortune "interview" comes across like a reform school exchange between two semi-literates.

Planet Stupid is getting more stupid by the hour. We now have CEOs with little ability to string words together clearly. I particularly noticed the idiotic use of You know, I don't know. Once upon a time, this is what an initiate would have admitted to his guru, but now it's a meaningless jumble of what used to be known as the English language.

Accordingly, I will myself resort to primitive language. Fuck off chief asshole Ron Johnson, and fuck off piss-poor journalist Jennifer Reingold.

At least one word in the transcript was accurate. (Laughter.)

[Joy]

Odds that JCPenny will still exist in any form in 2014?

[Bill McDonald]

Why am I not surprised?

Has anybody had a good buying experience recently anywhere? Have you encountered a knowledgeable, friendly sales person around ready to answer your questions and ring you up lately?

Didn't think so.

Stick a fork in them, JCPenny is done.

[teri]

Theft is a problem with no cashiers around? Hey, get some of those mini-drones to electrocute would-be shoplifters on the spot. Beauty part - you can lay off some of the security staff, too.

Wait, how about Penney's just sell virtual clothes and close the physical locations altogether? Save some rent money. I could go on, but why bother?

[Mister Roboto]

I infrequently shop at a grocery supermarket that has self-checkout lanes inaddition to regular ones. There has to be at least one supervising cashier for every four self-checkout stations to deal with the problems that inevitably arise. Even then, many employees there feel that the self-checkouts are more trouble than those machines are worth.