The ground-breaking retail makeover of JCPenney engineered by former Apple Store executive Ron Johnson has been rooted in the concept of everyday low prices. Instead of inflating original prices that’ll inevitably be drastically marked down via sales and coupons, the store slashed original prices and promised an end to “fake” discounts and nonstop sales. Now, though, only a few short months into the “fair and square” shopping experience, JCPenney is already tweaking its game plan by (surprise!) adding more sales.
Even after the numbers revealed an abysmal first quarter for the new JCPenney, the retailer’s leadership said it is sticking with its reinvention plans. “Our first 90 days are a little tougher than we expected,” Johnson told investors. “But the good news is the transformation, from my perspective, is way ahead of schedule. … We’re trying to essentially convert the Titanic into 1,100 WaveRunners.”
But has JCPenney already hit the iceberg?
When JCPenney released its first quarter sales figures, company executives announced that coupons were a “drug” that its customers must be weaned off of. Unfortunately for JCPenney, many consumers find this drug thrilling—and unlike most drugs, this one makes users feel good, even smart when it comes to their habit.
Despite widespread claims that JCPenney will stay the course and cleanse its stores of an overload of discounts and sales, there are already signs that markdowns and promotions are a drug that the retailer can’t quit either. Per the New York Post and AdAge, Deutsche Bank analyst Charles Grom says that JCPenney has already added five new special sales days to the 2012 calendar. Originally, Johnson’s plan was a simple (simpler anyway) three-tiered pricing structure, in which items were marked at their everyday price, a special sale price that lasted for the duration of an entire month, or a clearance price introduced on a “Best Price Friday,” which occurs on the first and third Fridays of the month.
Now, though, JCPenney has sprinkled the calendar with five extra Best Price Fridays. The first took place on the Friday before Memorial Day, and another is scheduled for the mother of all crazed shopping days, the Friday after Thanksgiving, a.k.a. Black Friday. Johnson has previously said that his stores won’t play the usual games on Black Friday, such as requiring shoppers to arrive at 4 a.m. in order to get the best prices.
Deutsche Bank analyst Grom writes that JCPenny’s slight shift in policy reveals problems in the original game plan, and criticizes the solution as potentially more confusing than ever:
“The change in strategy is an admission that the company’s existing three-tiered pricing strategy has flaws — less than 120 days since Ron Johnson’s new model took course on Feb. 1 … Furthermore, we believe the move could confuse its shopper base even more, with some Fridays now ‘Best Price’ and some others not.”
Another flaw may be JCPenney’s assumption that shoppers hate coupons and short-lived promotions and deals. In many cases, nothing is further from the truth, according to one retail expert cited in a Businessweek story:
“These are not women who feel taken advantage of by coupons and deals,” says Mark Ellwood, whose book, Bargain Fever, comes out next year. “To them, there’s the thrill of the hunt—it’s hunting and gathering with a credit card. No consumers have been complaining about discounts.”
They might complain, however, that the everyday low prices aren’t nearly as good as the prices that pop up on some, but not all Fridays.