The reason why door buster deals, coupons, dramatic markdowns, and a short-lived sales are staples of the retail holiday scene is simple: They drive traffic into the stores. So how does a store attract customers when it’s sworn off all of these strategies?
Well, you could try giving customers a coupon-like offer and pretend that it’s not a coupon. You could also try offering some freebies meant to win back the core customers you alienated by getting rid of coupons and nonstop sales.
This is what JCPenney has been doing as we enter the oh-so-important holiday period, when strong sales are essential for retailers. Yes, the retailer is also slowly rolling out a huge store-within-a-store concept, in which Levi’s, IZOD, and other brands are featuring in “minishops” in the department store. But it’ll take years to see if the concept, the baby of CEO Ron Johnson, a retail superstar known for his work with Target and the Apple Store, can save JCPenney.
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In the short term, JCPenney is trying to cope with the fallout over the transformation of its pricing system, which Johnson dubbed “fair and square”—and which has largely resulted in months of dismal sales. Most troubling for JCPenney is the fact that women have been especially turned off by the approach, in which initial prices are lower but coupons and dramatic sales markdowns are basically nonexistent.
In a recent poll, it was revealed that in between September 2011 and September 2012, 13% fewer women said that JCPenney was their favorite place to shop for clothing. Of the top 10 apparel retailers, JCPenney was the only one to post a loss in the category—which is tantamount to losing 1.3 million female customers. All of this occurred, of course, while Johnson was attempting to revitalize the company with a major overhaul.
Lately, amid periodic announcements that have led to puzzled head-scratching—like that JCPenney would be getting rid of checkout counters—the retailer appears to be trying to make amends to the women from whom it has taken away their beloved coupons. Sensing that one reason its new “simple” pricing scheme wasn’t being embraced by shoppers was because it was, in fact, confusing, JCPenney has been re-simplifying its simple pricing structure, including the reintroduction of a term everyone understands: “sale.”
While the JCPenney braintrust has shown obvious disdain for coupons, “fake” prices, and other commonplace marketing ploys, in recent months it has been willing to utilize another tactic: the freebie. Specifically, the freebie meant to appeal to women, moms most likely. One promotion, which offered free back-to-school haircuts for kids on Sundays, has been extended indefinitely. Throughout the month of November, meanwhile, JCPenney stores are giving away free family portrait deal, which covers sitting fees, a traditional printed 8×10 print, and a digital copy of the same image. (Customers can pay more if they want more images, holiday greeting cards, or any other products.)
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Both of these promotions—as well as the flat $10 credit sent recently via e-mail to JCPenney customers, which the retailer categorized as a “gift” not a coupon—are obviously meant to win back the deal-craving, bargain-loving JCPenney customer of old. Resorting to such offers can also be viewed as an indication that the retailer’s new approach isn’t working. Per Reuters:
“Why do that unless you want to drive traffic?” Morningstar analyst Paul Swinand told Reuters. “It’s another sign they’re having trouble weaning customers off of the old ways of shopping.”
Other analysts are more brutal in their assessment. “Ron Johnson is in the midst of the retail disaster of the decade,” wrote ACM Partners’ Margaret Bogenrief:
What’s perhaps most interesting — intellectually and psychologically, at least — is Johnson’s complete misread of JCP’s customers… Johnson wishes he headed up a store catering to an almost exclusively upper-middle class (and, let’s be honest, white), as opposed to a lower middle-class retailer featuring both power tools and discounted jeans. As appealing as leopard print panties and skin-tight faux-leather pants may be to the traditional Target shopper, JCP consumers traditionally seek out reasonable and reasonably-priced products.
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JCPenney customers also seek out special deals, including freebies like the haircut and family portrait promos. But what about the hottest deal-hunting time of year, the period traditionally beginning with Black Friday? Thus far, Johnson is refusing to play along with the usual retail games. Forcing customers to clip coupons and strategize how to maximize them by pairing up with 10%-off on top of 33%-off sales isn’t treating them in “fair and square” fashion. Neither is the commonplace practice of telling consumers they must wake up and go to the mall at 4 a.m. on the day after Thanksgiving in order to get the best price on something.
Johnson has said that JCPenney will participate in Black Friday in some way, but that it’ll be “fair and square” rather than gimmicky. As for shoppers seeking extraordinary markdowns on Black Friday and the weeks that follow, JCPenney won’t be the place to go.