J.C. Penney Pricing Strategy Fails to Meet the Perception of the Masses

Monday, April 8, 2013
Posted in category Economics

I find this breaking news to be very intriguing, especially since I wrote a short post just over a year ago in regards to the new pricing strategy put into practice by the new CEO in 2012. A quote from the January 2012 article on Yahoo goes as follows:

Perhaps the biggest challenge for Penney is to sell shoppers on its new pricing. For years, Penney, like many other stores, has propped up price. The intent: to make it look like shoppers are getting great discounts when items go on sale.

The increased discounting has been a vicious cycle that only feeds into shoppers’ insatiable appetite for bigger and better discounts. In fact, whereas it took 38 percent off to get shoppers to buy 10 years ago, it now takes discounts of 60 percent, Johnson says.

I love this quote because as a very astute shopper who can quickly analyze and calculate all facets of a transaction, I am dumbfounded at how “sales” are becoming so dumbed down in order to attract and fool the masses. I love marketing, but I am also capable of not being tricked by marketing and shopping gimmicks. Yet folks, generally speaking, are easily maneuvered, as described above in the Yahoo article.

The breaking news is that the new J.C. Penny CEO, Ron Johnson, has been canned. Johnson, when he took the helm at the retailer, rolled out a strategy of “everyday prices,” new price tags that eliminated gimmicky markdowns, and whole figure pricing. Johnson, who came from Apple, brought his Apple-like strategy of shunning discount pricing while focusing on service and product offerings. J.C. Penny is a very traditional, old retailer with a core customer base that is not as sophisticated as the Apple customer base, hence the inability to sell sophistication to the masses seeking bargains – even if they are only perceived bargains.

As I noted in my previous post, Mr. Johnson’s fail may have been economics, and not marketing. The average shopper has been trained to see sales, and not the real value of the products they buy. The cheap-and-easy credit era helped to fuel that ignorance because the abuse of credit has been justified by folks who believe that there is an upside to all the debt: they are buying value because goods appear to be listed at bargain prices. In reality, they are overpaying for products and getting sucked into buying things they didn’t plan on buying, and the end result is more stuff, more debt, and a skewed perception of value.

Mr. Johnson tried to change all of that, at least for his customer base, but the world was not ready for a boutique J.C. Penney or a brutally honest retailer selling service and reality over perceptions. Wall Street, investors, and corporate boards want strategies and promises constructed around the easy-money economy. I say good luck to Mr. Johnson, because I think there is a place for his game plan somewhere in the modern retail world.

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7 Responses to J.C. Penney Pricing Strategy Fails to Meet the Perception of the Masses

  1. Onelasttime says:

    April 8th, 2013 at 10:26 pm

    For others, they noticed the quality of the clothing was lowered along with the prices, significantly so. JCP really fucked up.

  2. Ken says:

    April 9th, 2013 at 1:18 am

    I hate to say it, but when it comes to clothes, I am taken in by these gimmicks. If you want to see some real pros, look at Jos. A Bank clothiers. Their “buy 1 get 3 free” suit sales that they do every quarter are amazing. Of course, I know that they are not going to lose money on it, even as people pay more to get 2 for the price of 1 during their regular (read: everyday) sales. 

    The customer base for Penney’s have never been about high quality. When I was young, my mother would take me to Penneys for the things that weren’t going to last long either due to growth spurts, or single season wear. For good clothing, we’d go to Macy’s and later, Nordstroms. 

    There is a place for his game plan in the world, but taking the Apple model to Gateway (computers) would be a disaster. No one who buys from Gateway right now wants half a computer at twice the price, even if it is well designed, is easy to use, and is pretty to look at. They go to Gateway for bargains. 

    Frankly, I think we are wired to look for the path of least resistance, and that’s what JC Penney (of old) and the like aims to provide. The cavemen who would have chosen Apple today starved off as they went on long hunts to find the perfect game that tasted just right and didn’t require all that messy skinning and removal of offal. That’s why only a small percentage of them are fanboys today. 

  3. Wade says:

    April 9th, 2013 at 7:41 am

    JCP’s current product lines aren’t what they once were — for example, I once bought a Remington 870 shotgun at JCP…so maybe they need to get back to selling guns and ammo! :)

  4. Days of Broken Arrows says:

    April 9th, 2013 at 6:09 pm

    Johnson was put in charge of JC Penney’s, not Nordstrom’s. Penney’s customer base is middle to lower class people seeking bargains. It is not a high-end store. For Johnson not to understand that sale prices meant a lot to his specific market was a huge miscalculation. But it wasn’t surprising. The idea that CEOs can be plugged into any business is from the business schools and woefully misguided. I’m surprised this column didn’t pick up on the fact that his plan left out demographics, which throws into question his business acumen. Sale prices might be bogus, but a lot of retail is bogus: that $5.99 price is really $6, for example.

    Penney’s needed a CEO steeped in a retail background, specifically low-end retail. I’m sure Johnson will be fine with his bonus package. Failure is success for the American business class.

  5. JQ says:

    May 9th, 2013 at 11:54 pm

    Wow, your JC Penney’s in Michigan must be totally different than the one here in New England. About two years ago I came across a JCP about 20 miles west of me. To my total amazement I could not believe the quality, selection, variety and fantastic pricing of things I would normally find in Macy’s, Lord/Taylor’s, TJ Maxx and others. Jc P has come a long way in that whereas it used to be low end clothing with high pricing, it has done a 180 under the CEO who was let go. A couple months ago I visited that same store and spoke with a gal working there. I asked her why the store was dead..and also told her, I never dreamt that JCP would actually have the fine selection of quality and sophisticated clothing they had in their store. She remarked to me that folks are used to Penney’s being a low end store and when they visit their store they see that selections are more upscale..thus, they walk out the door even though pricing is fantastic…in short, american’s crave ugly now, hate beauty or fashion..the downside of that is this….most American’s now love mediocrity and so when confronted with sophisticated choices, they walk out the store..at least that was what the clerk told me happens at their store. Judging by what I see women wearing most the time now, I do believe they are sacrificing their feminine rights to be part of the commie, all look alike mentality. So I have no idea of what stores you folks above go to, but the one I have here in New England has more choices, better quality and prices than anything I can find at Macy’s!! We can thank the sexless/unisex look, the sheer crap culture that now surrounds us…guys looking like girls..gals going for the slouch, slop look and refusing to have anything to do with being sexy or feminine..and it shows all over the place. I don’t see that having your midriff showing or your ass hanging out is fashionable..but that seems to be the case. Even checking out what movie stars wear finds little brains or sophistication in clothing choices today.Too bad that the CEO didn’t realize that medocrity is where it’s at for Americans. They wouldn’t know a good thing if it bit their arses. @onelasttime…
    “For others, they noticed the quality of the clothing was lowered along with the prices, significantly so. JCP really fucked up.” Again, where do you shop, for the JCP I do to in MA is higher quality than ever…and prices commensurate with both quality/sophistication. In fact, what amazes me is that while quality is better than ever, pricing is lower. That CEO performed miracles if you ask me, as I have never seen such great choices…don’t even bother to go to Macy’s anymore…mostly a third world store now…I suppose if you are from Haiti or Mexico it’s a great place…fashions are crap for american women..why on earth would I want to wear hugh neon prints…frills all over the place…and be looking like I just came off some island or from Africa? Loud colors, hugh patterns, lousy detailing..and to add insult to injury in Macy’s I had to endure last year, some arabic music being piped into the ladies dept…I don’t want to wear Mexican….or African..and sure as hell don’t have to be lured via arab music reminding me of the living hell that all muslim women endure under a patriarchal misogynistic, religion in disguise of pure politics.

  6. jq says:

    May 15th, 2013 at 11:49 am

    Heard on the stock news yesterday that JCP’s stock has gone up….what a surprise,no? Ironically they also said that the CEO’s lower point pricing didn’t work..like I said above…the prices went down and quality went waaay up beyond anything I’ve ever seen at JCP.

    However the crowd that loves mediocrity/average mid to lower clientele that walked in the store and then promptly leaves proves my point that jane and joe boobus americanus now loves not just mediocre, but downright ugly…hence, it was too good for them who want ugly. How many want to place a bet that these same morons when confronted with quality and fashionable clothing, wear tatoos all over the bod and had rings in every orifice..much like the morons Karen has shown from time to time in the walmart pics.

  7. jq says:

    May 15th, 2013 at 11:53 am

    Heard on the stock news yesterday that JCP’s stock has gone up….what a surprise,no? Ironically they also said that the CEO’s lower point pricing didn’t work..like I said above…the prices went down and quality went waaay up beyond anything I’ve ever seen at JCP.

    However the crowd that loves mediocrity/average mid to lower clientele that walked in the store and then promptly leaves proves my point that jane and joe boobus americanus now loves poor quality and downright ugly. How many want to place a bet that these same morons when confronted with quality and fashionable clothing, wear tatoos all over the bod and rings in every orifice..much like the morons Karen has shown from time to time in the walmart pics.

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