J.C. Penney’s Pricing Is Faker Than Ever

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Just in time for Valentine’s Day gift-buying season, J.C. Penney is jacking up list prices just so that it can slash them and make the sale price seem more impressive.

Many retailers engage in what’s known as “price anchoring.” That’s the retail-world term for setting a high list price to anchor in a perception of value for a product. Because these anchor prices are often so high that almost no customers actually pay them, and because they exist mainly so that the inevitable sales and markdowns appear larger and more tempting, there’s another term frequently applied to the strategy: fake pricing.

In recent years, J.C. Penney, the old, struggling department store chain, has had a rollercoaster-like relationship with the tactic. In early 2012, the new CEO Ron Johnson—a veteran of Target and the Apple Store, then considered the company’s best hope for a successful turnaround—promised an end to fake prices in its stores. In lieu of absurdly high original prices that no one would pay thanks to coupons galore and eye-catching markdowns, Johnson pushed a “fair and square” everyday pricing policy, in which list prices were cut dramatically and discounts were almost nonexistent.

The strategy failed to resound with J.C. Penney’s sales-hunting, coupon-loving core customers, and Ron Johnson was ousted as CEO last spring. Within weeks, J.C. Penney’s old playbook had largely returned, including the reintroduction of fake prices and coupons. Overnight, the list prices for some items rose 60% or more, though when discounts were factored in, the pricing changes often amounted to a wash for customers.

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The return of such pricing has been seen as marginally successful in wooing back some J.C. Penney loyalists who felt alienated by Johnson’s vision. Overall, though, the department store chain has remained in rough shape, with subpar sales and many doubtful that the company can be saved.

Now, apparently because the reintroduction of fake prices hasn’t moved the needle enough, J.C. Penney pricing appears to be becoming even faker. According to J.C. Penney staffers and price checks cited by the New York Post, the department store has been hiking list prices skyward, particularly for jewelry and other goods that will likely be in demand as Valentine’s Day gifts. “They had us up all night changing the prices on everything,” one J.C. Penney jewelry salesperson said.

In many cases, original prices were increased 10% to 30%, though sometimes the price hikes have been far bigger. For instance, in December, a pair of gold earrings was officially listed at $200 but was available at the sales price of $160. Recently, however, the list price for that same pair of earrings shot up to $450. Though the new discounts represent a larger percentage markdown off the original price compared to the holiday season, consumers will ultimately often be paying more than they would have for the same items a couple months, or even a couple weeks ago.

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Hedgeye retail analyst Brian McGough said that the strategy of “raising prices to allow for discounting to protect gross margin … makes sense” for J.C. Penney. Yet the move is not without risk: “the obvious risk here is that sticker shock will keep some customers away.”

We’ll have to wait and see if that happens. For now, one thing’s for sure: Investors are certainly moving away from J.C. Penney. On Thursday, JCP stock was trading for under $6 per share, a new low.

16 comments
wit_knee_jones
wit_knee_jones

This is why I don't shop at JCPenney, Macy's, Kohls, or other big box stores like that.  They all do this.  Koh's is even worse.  JCPenney had me back with their Fair and Square pricing - I appreciated that.  But now? No way.  The pricing schemes combined with the stores' reluctance to react fairly after the Bengali factory collapse has turned me off of big box stores for a long time.  

John
John

Another trick JCP seems to be playing lately is that when you give then your JCP card they bill you for something LESS than what you should have paid them, usually less than $1.  The normal thought is "I'll just add that on to my check for the next bill!"  Don't do it!  If you are late paying it, they will nick you for $30 or $35 late charge!  This is why I now pay them with MC or Discover,(if I even buy anything from them).  I have not bought much from anyone for about the last two years because I am mad at a lot of chain stores because of this kind of nonsense.

DetroitFilmDiva
DetroitFilmDiva

Honestly, I liked the "fair and square" pricing that JCP tried. You could buy what you needed anytime without waiting for a sale, the prices were more in line with the products (and the quality, which has been steadily going downhill every year), and you never had to worry about buying something at full price or10-20% off, only to have the prices randomly change the following week to 40 or 50% off (a better discount if you had waited to purchase).


I was a loyal customer for years, but recently I decided to stop shopping at JCP and return everything I had with a price tag still on it and a receipt. Why?  I saw the fake pricing and price gauging firsthand.  I had been considering a pair of earrings for several months and had even placed them in my online shopping cart. Two days after I viewed them last online, I went to the local store to see them in person. Guess what?  The price (both online and in store) had jumped from $60 to over $200.  Even with their highly publicized Valentine's Day jewelry sale approaching, the "big" discounts they were touting made the final price higher than the original, "every day price".  That was the last straw for me.  I'm done with JCP. I hope they have fun with the $800+ in merchandise I'll be returning this weekend.

JonusGrumby
JonusGrumby

Five years from now few will even remember the name JC Penney.

michelle000
michelle000

Thats every store though!! Trust me its not just J C penneys...

mikies88
mikies88

In Australia that would be considered as fraud and investigated with convictions. Companies are under law not allowed to jack up prices before sales

championbc
championbc

That buzzing noise you hear is James Cash Penney spinning in his grave.  You know, the one who called his original stores "Golden Rule," who hated credit and would not allow credit cards.  The man who lived by honesty and integrity, who kept 10% of his earnings and gave the other 90% to charitable work.


The store that bears his name needs to just fold up and disappear.

Uncle_Frank
Uncle_Frank

I remember this being done when I worked for JCPenney in 1995-1996. The poor stock people had to relabel all the items with inflated regular price tags prior to each sale.

panazzo
panazzo

This is what brazilians face everyday and everywhere

JCPGoldenBoy
JCPGoldenBoy

@DetroitFilmDiva  


Good for you Diva!

Many more like you have taken a stand against all of these pricing "games". The Federal Trade Commission has labeled this practice as deceptive!  One shouldn't have to be a detective to receive "fair" pricing when shopping.


I am a former employee of JCPenney, a somewhat "well-known" one. 

I spoke out very publicly about these "scams".  


What most people do NOT know is that when JCPenney "jacked-up" many of the prices from the "fair & square", "everyday low prices", then put them on "Sale" - the "Sale" prices were actually much higher than the everyday low prices were. 


Example: 

Towels were DOUBLED from $5.00 "fair" price to the new $10.00 "original" price with a 40% OFF Sale - Whoopie!  

That means WITH the "BIG SALE" you are NOW paying $6.00 - NOW $1.00 MORE than the old FAIR price!


So, the "Sale" price is 20% HIGHER than the "old" FAIR, EVERYDAY LOW PRICE!!  

What a Bargain - NOT!!!


It wasn't just towel prices that were "inflated", it was across the board increases and some were more than doubled.  In fact, I know of NO items that did NOT have their prices increased significantly to make "room" for the new "Fake Sale" pricing "SCAMS".


Business has a right to make a profit - but this move to deliberately "trick" the customer is DESPICABLE!   



Read more: J.C. Penney’s Pricing Is Faker Than Ever | TIME.com http://business.time.com/2014/01/31/j-c-penneys-pricing-is-faker-than-ever/#ixzz2tVF7QqyT

Idothemath
Idothemath

@JCPGoldenBoy  But what does this all say about the American consumer.  When JCP went to their "fair and square" pricing, people didn't respond.  It cost a well-respected CEO his job,  After all these years asking for fair pricing, Americans didn't recognize an ethical approach when it came...

DeweySayenoff
DeweySayenoff

@JCPGoldenBoy  

You do realize that this is a common tactic employed by all retailers and not JUST JCP, right?

zhikelu
zhikelu

@JCPGoldenBoy  


If the price is so fake, why Macy's and Kohl's has ~40%  gross margin while JCPenney is less than 30%?

JCPGoldenBoy
JCPGoldenBoy

@Idothemath @JCPGoldenBoy  


You are soooo correct - to a point.

Sadly, the "everyday low pricing" was not rolled out properly.  Mr. Johnson was very much on the "right track". He just didn't roll out this or many other significant changes properly - He HAS to own that!


He also HAS to own the complete disrespecting of JCP's customers at the time he took over and he has 60,000 terminations of loyal employees on his head!  The customers, employees and his "retail vision", are all victims of his ego-driven, untested methods of change.