JCPenney adds sales, after dropping them

Sally Herships May 31, 2012

JCPenney adds sales, after dropping them

Sally Herships May 31, 2012

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.