Wednesday, August 8, 2012

JCPenney's big gamble

There was some interesting news a couple of weeks ago in the (shrinking) world of retail, where department store JCPenney announced what amounts to a "bet the company" proposal.
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.
This is a gutsy move, and one that only a desperate company could realistically get away with attempting. JCPenney is on the fast track to bankruptcy, so risky proposals are more acceptable to shareholders than they would be in other situations.

Will it work? Maybe, maybe not. But if necessity is the mother of invention, then desperation is at least a step-father or a surrogate. In fact, I see this dynamic as the great silver lining to our current economic malaise—in fact, I think it's the exact reason that we need a good recession every now and again, so that we can innovate our way out of it.

When things are going well, there's rarely any obvious reason to take big risks or try anything new, even though there should be (call it the curse of mediocrity). But when the sh*t is hitting the fan, people are willing to try just about anything, and this desperation very often breeds incredible technological and strategic breakthroughs. Does it also introduce extreme downside? Of course, but when you're going bankrupt anyway, who cares when it happens? Let's take a shot, right?

I generally welcome and embrace economic recessions, because they force people to be creative and thoughtful about their lives, careers, and relationships with other people in their communities. Creative destruction is at the root of capitalism and free markets, and without it there can be no lasting economic growth. I'm rooting for JCPenney here, if only because I like to see a gutsy move rewarded. Time will tell.

[ABC News]

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