In early 2012, JC Penney promised the end of “fake prices”—ones that were inflated just so that shoppers could be tricked into thinking the inevitable discounts represented amazing deals. Well, it’s already time to welcome back discounts and inflated prices alike.
Among other reasons, JC Penney CEO Ron Johnson lost his job recently because customers seemed to hate the no-coupons, no-discounting “fair and square” pricing that was a core part of the retailer’s dramatic 2012 makeover. In a new ad, JC Penney is apologizing for the changes made under Johnson. “It’s no secret. Recently, JC Penney changed,” the ad’s voice-over states. “Some changes you liked and some you didn’t, but what matters from mistakes is what we learn. We learned a very simple thing, to listen to you.”
“Come back to JCPenney,” the ad implores customers — especially the ones who were turned off by Johnson’s initiatives, one assumes. Nothing is specifically mentioned regarding pricing, coupons, or sales. And yet the ad, and JC Penney’s overall effort to woo back customers, has a lot to do with pricing, coupons, and sales. Soon after Johnson stepped down as JC Penney CEO, analysts began anticipating the return of “sales galore” as a magnet to win over alienated shoppers.
Indeed, at first glance, it appears as if the sales are back in a big way. A recent JC Penney brochure lists dozens and dozens of items on sale for Mother’s Day, and an online-only coupon (promo code: DEAL4ME) offered shoppers 15% off on purchases of $100 or less, and 20% off orders over $100 made by May 2.
But JC Penney’s changes of late aren’t limited to an uptick in sales and coupons. As Reuters reported in late March, even before Johnson was fired, the retailer had quietly started raising its “everyday” prices—mainly so that stores could regularly put them on sale and hope that more shoppers bite. “Under the strategy, an Arizona crewneck T-shirt that had an ‘everyday’ price of $5 now has a $6 pricetag to allow Penney more room to offer a markdown and arrive at the same price,” the article explained.
The bargain-hunting website dealnews has since commenced tracking prices at JC Penney. What it’s discovered is that the prices of certain items—designer furniture, in particular—have risen by 60% or more at JC Penney almost overnight. One week, a side table was listed at $150; a few days later, the “everyday” price for the same item was up to $245.
Of course, that $245 table could be purchased for a lot less if the shopper waits for it to go on sale, and/or if it’s purchased when a coupon is available. Accordingly, the folks at dealnews offer this advice:
Our recommendation for JCPenney shoppers: keep your credit card in your wallet until these products go on sale. If you’re looking for a special collaboration line, wait until the price is marked 50% to 60% off so you aren’t paying more than you would have before the strategy change.
Things would be much simpler for shoppers, of course, if JC Penney kept that table priced at $150 all along. But remember: Johnson lost his job partly because shoppers rejected his “fair and square” flat everyday pricing. When a table always costs $150, there is no sense of immediacy for shoppers to buy it now. Shoppers also didn’t really buy into the idea that $150 was a good price for the table. But a $245 table that’s marked been discounted to $150? That’s perceived as quite a deal.
JC Penney’s failed experiment in fair and square pricing reveals how irrational shoppers can be. Yet as a Science News post explained, Johnson’s pricing system failed to resonate with customers precisely because stores removed the cue that helps shoppers make what they think are logical, value-driven purchasing decisions. “By not showing marked-down prices, Penney’s removed an element that helps shoppers feel rational,” the post noted. “Seeing that marked-down price next to a higher original price provides an important yardstick for gauging whether we should buy something.” Put another way, with a specific example:
We see a $14 shirt, and conclude based on its price that it must be a low-quality garment made in a sweatshop somewhere by overworked, underpaid workers. On the other hand, seeing a red line through the $50 price tag on a shirt that’s marked down to $14 indicates to us that the shirt is of high quality and that for $14, it is a steal.
A year ago, nearly every item in a JC Penney brochure came with just a single price. Today, most feature no fewer than three prices: sale, original, and “appraised at.” (The latter is a price that no one ever pays.) When coupons are available (online or otherwise), prices can be tweaked further.
It’s all a game, one that’s employed by many retailers—most notably, the JC Penney of old. It’s considerably more confusing and complicated than a flat everyday pricing system. But this is the game that JC Penney shoppers have been asking for to return over the last year or so.