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JCPenney adds sales, after dropping them
A sign displays a new pricing stategy at a JCPenney store in the North Riverside Park Mall February 1, 2012 in North Riverside, Ill.
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Kai Ryssdal: JCPenney had a big sale last Friday, just in time for Memorial Day weekend. Nothing out of the norm there.
Except that back in January, Penney said it was done with sales. The new strategy was going to be low prices all the tim with sales "only on certain special occasions."
Well now it seems everything is special. Penney's announced a larger than expected quarterly loss this month, in part because consumers pretty much expect to see those big sale signs.
Marketplace's Sally Herships explains.
Sally Herships: First of all, let’s get JCPenney’s new pricing strategy straight. We had the company’s CEO Ron Johnson on our morning show back in February.
Ron Johnson: We don’t run any more, like, daily, weekly, week-long or hourly events. We run 12 events a year which are called a month.
Johnson means no more sales, except for what JCPenney calls “Best Price” Fridays, twice a month. Today, the chain said it’s adding more Best Price Fridays, but denied it’s changing its strategy. Except that it sounds like it is.
Kenneth Homa: Well now their basic proposition is they’re not going to have sales, except for when they have sales.
Ken Homa teaches marketing at Georgetown’s McDonough School of Business.
Homa: I don’t know how they can possibly communicate that clearly to any consumers.
Especially since the recession conditioned us to expect sales. Before its new pricing strategy, JCPenney had almost 600 sales a year.
Jean-Pierre Dube teaches pricing strategies at the University of Chicago’s Booth School of Business.
Jean-Pierre Dube: You’ve just spent decades at a place like JCPenney, training your customers to wait for sales, training your customers to look for sale signs, promotional signs, all these things that cue them to know there’s a deal. You’ve trained them to do this and all of a sudden, that all disappears.
And as JCPenney is finding out so do many shoppers. Sears tried getting rid of sales in the '80s. It spent $110 million on advertising. But not long after it brought back sales.
In New York, I’m Sally Herships for Marketplace.
Facts have shown that people who use coupons from Printapons website for their shopping activities use coupons online. Although the "leading source" of paper coupons are still those that are found in newspaper inserts, online is a source that is not lagging behind.
Thank you to that last comment! You get it to a great degree! I think, if you head out to Jcp today, you'll find some great deals. It is a best price Friday, lots of new blue tickets. But be on the look out for the SALE that starts today and lasts all month. The signs for June are green and there are some fantastic deals! Also be on the lookout in August for some great new store makeovers! Give it a year. I think this will work. Better merchandise. Better prices. What's not to like?
I have to disagree, I get this strategy and I never shopped at Jcp until this was rolled out. I don't like Khols and Macys because many times in the past I have shopped there, I used the flyers and coupons and I was never sure if I got a good deal. The receipt had like 3 different prices printed on it and then come to find the whatever I bought days later gets marked down even more. Have you ever tried to get a price adjustment at Macys? I have spent more time in Jcp since they rolled this strategy out, and the system works. I look at the things with the red tags, make mental notes and then check out every other Friday and see if a red tag has gone blue, it works, and I only buy things from them when it has a blue tag. So that fact they are adding a new Friday doesn't mean they are adding sales, it's means that I have a better chance to get something that has a red tag and I won't buy anything until that tag goes blue. I found blue tags on shirts and sweaters for as low as $5.00, my Jcp clothes are lasting and wearing better then anything from Old Navy and Macys. I maybe looked down here by others on this website, but I have limited funds to spend, and I don't spend money for clothes with Credit Cards. My clothes are purchased with cash, so I want the best deal and the most value. At this time Jcp has my attention and my money. Also I can't wait for the new Jcp to open by my house, this new store which I think is Jcp newest store in the Baltimore/DC market in many many years won't be attached to a Mall, it's next to a Wegmans, I can't wait. I hope the executives at Jcp stick with this and don't switch due to short term pressure from stock holders who only want short term returns.
@Vans- Seriously? Whatever this bizarre strategy is- it remains failingly just that: a bizarre strategy. That the 'sales' strategy has to be explained at all demonstrates the fail. Ask most consumers familiar with JC Penny and they will comment that JC Penny no longer has sales. That IS the perception out there because of their own PR and misguiding advertising. When you have to explain 'Best Price' you've lost the consumer. I don't think Sally was 'misinforming' the consumer at all. It is simply too confused a policy (and a cycle of items on sale for a month is far too long with no incentive to check JCP weekly). This is not the Nordstrom or Lord & Taylor clientele- this is the Sears crowd and they understand sales. And they DON'T like change. As @MoniqueDC posted- JCP does occupy a niche- on the level of Kohls. JCP was fine when it pretended to be nothing more than that- a low-mid-level retailer on the level of Sears. To quote Ron Johnson the CEO himself "I didn't come here [to JCP] to improve. I came here to transform… You don't fundamentally change your position in the marketplace." The (for lack of a better description) J.Crew-like advertising campaign is an abject failure. It is far too 'editorial' for what JCP and its consumer base actually is (and for what the retail experience ultimately offers). To mind JCP is an old-school MALL anchor- with Macy's a step higher in that regard. Kohls successfully occupies that position at the more favored big-box centers to the late-comer JCP and Target (a Johnson success) occupies the cheaper 'trendier' (than WalMart) spot.
Beyond that, who okayed any of this? From what focus group information did they get affirmation for any of this current strategy? Did they listen? Truly observe? Or actually visit a JCP? Admittedly I'm an idiot. No BA, certainly no MBA. But to me- all it takes is common sense which apparently the powers that be at JCP lack to a large degree. It's not rocket science. People like a sale. Plain. And simple.
Clearly the current (and soon to be former?) CEO hasn't read Freakonomics nor listened to the show. Nor done any research about other major retailers trying this approach. I love the JCP ads, but knew the strategy would not work. Looking forward to sales being reinstated. JCP has a nice niche... better quality than Target/K-Mart, but more affordable than Macy's, Bloomies, and the like.
Sally- you started by saying you wanted to get jcp's pricing strategy right, but you got it wrong. Twice. They do have sales. Every month, all month long they have items on sale. In June there will be a thousand such items on sale. Ron said 12 events, and that's what he means by that. Also, Best Price isn't a sale at all. These are markdowns. They are never marked back up. So, that is not a sale. Last week Jcp added an extra Friday of BP. Not a sale. Just taking mark downs sooner. Gah. Come on, it was as though you were just having a bit of fun at jcp's expense there. And misinforming the customers while you were at it. I expect more from this show.
