After months of abysmal sales tallies, the Ron Johnson era is over at JC Penney. Now that Johnson’s “fair and square” no-coupons pricing policies have proved to be a failure, the department store will have to try something else to win back customers and stop the bleeding. But what?
Mike Ullman, who was replaced as CEO when Johnson took over at JC Penney in 2011, and who began serving again as top executive when Johnson was pushed out, told the Wall Street Journal that he wasn’t planning on reverting to the old business model. “I wouldn’t recommend that we go back to the way J.C. Penney was when I left,” he said. “Things change.”
And yet, in some ways the department store is clearly trying to resemble the JC Penney of old. Management has already announced that newspaper ads will feature coupons once again. Johnson seemed to find coupon usage distasteful and silly, likening it to a drug that consumers needed to be weaned off. A little over a year after JC Penney went “drug-free,” so to speak, coupons are back.
Some retail experts think that the return of coupons is just the tip of the iceberg. John Sculley, former CEO of Apple, said on Bloomberg TV that it was absolutely essential for JC Penney to “get the cash flow of those old customers back into the store. And how did they do it before?” Sculley asked, before answering his own question. “They did it with sales.”
A new study indicates that JC Penney’s shoppers are older, poorer, and more price-sensitive than the average customer at, say, Target or Macy’s. It’s assumed that an announcement of major markdowns is the quickest (and perhaps only) strategy to bring these customers back to JC Penney. Martin Sneider, a retail professor at Washington University, told the St. Louis Post-Dispatch that he anticipates a flood of deals and discounts, at least in the short run while JC Penney is desperate to draw in shoppers and alert them that the Johnson way of doing things is gone:
“My guess is there will be sales galore — and lots of advertising urging customers to come back to the store,” he said. “This is an emergency situation.”
While the disappearance of coupons and sales alienated and confused JC Penney’s core shoppers, some absolutely loved Johnson’s efforts to get rid of what he described as “fake prices.” In May of last year, by which time it was clear shoppers were not responding well to JC Penney’s “simplified” pricing makeover, consumer advocate Bob Sullivan came to the conclusion that consumers “like being shafted.”
“Could we have a moment of silence please for what might be the last heartbeat of honest price tags?” Sullivan wrote, lamenting that customers seemed to prefer dealing with “confusing multiple markdowns” and “deceptive circulars full of sneaky fine print” rather than everyday low pricing.
After Johnson was removed as CEO, Fast Company rounded up a handful of key quotes that revealed why he was axed. The list includes this Johnson quote about nonstop discounting and the pricing games played by most retailers:
“My intuition as a student of the industry was every time I’d walk into a [department] store I’d go, ‘Why do they do this? Why do they lie to the customer about the regular price? Why do they make up a regular price to sell it on sale?’ I don’t understand being dishonest about pricing.”
Well, one reason retailers might be dishonest about pricing is that shoppers might assume it’s the case no matter what. “J. C. Penney might say it’s a fair price, but why should consumers trust J. C. Penney?” Kellogg School of Management marketing professor Alexander Chernev told the New York Times. Besides, while retailer pricing games may seem dishonest, manipulative, and annoying, apparently many shoppers like playing the game. “At the end of the day, people don’t want a fair price. They want a great deal.”
Or at least the appearance of one.