June 7, 2013
Has Penney Made Another Pricing Blunder?
J.C. Penney, which drove customers out of its stores by eliminating sales under previous CEO Ron Johnson, may have found another way to keep shoppers away. This time, the chain was found to be placing stickers with higher everyday prices on top of its previous, lower everyday charges. By raising its everyday price, Penney’s sales would now appear to be offering even greater savings. Unfortunately, according to reports, closer inspection shows the chain’s sale prices are now often higher than the original everyday price.
According to John Matarese of WCPO in Cincinnati, he purchased a men’s short sleeve shirt on sale for $13.99 marked down from $20. What appeared to be a great deal turned out not to be when he removed the $20 sticker to see the shirt was originally sold for $10.
"That’s awful," Sue Jackson, a shopper in Dallas, told WFAA when she was shown a men’s shirt with a $50 sticker on top of one reading $30. "I never thought they would do that, especially after all the trouble they just had."
Penney defended its Hi-Lo pricing model as being consistent with industry practices.
"We now understand that customers are motivated by promotions and prefer to receive discounts through sales and coupons applied at checkout," according to a statement from the department store chain. "So we are returning to a promotional pricing model that is commonly used in the industry to give customers the value they are looking for when they shop with us."
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Discussion Questions
What effect, if any, will the latest news reports on Penney’s pricing practices have on its sales performance? How could Penney have more gracefully handled the transition back to Hi-Lo pricing?
Poll
Listen, J.C. Penney is lost in the wilderness these days and it doesn’t appear that there is light at the end of the tunnel. That said, consumers are a little bit like retailers; all that matters is “right now.” What’s in the news comes and goes and if executives at J.C. Penney ever figure out why the retailer still has relevance, then advertising and PR can fix a lot of indifference pretty quickly. It’s all about the “now” and right now J.C. Penney is in an identity crisis and I don’t even know that the consumer is paying much attention.
If this actually happened, it’s hard to believe that people can be so stupid. For goodness sakes if you’re going to dupe the public, do it with some skill!
Just what Penney needed, another pricing problem. Every retailer can set its own pricing scheme, but please be smart enough to make it invisible to consumers. In many ways, the current scandal could be worse for the chain than Johnson’s EDLP strategy. And the way that Penney is defending itself only adds insult to injury. Can the new-old management be so tone deaf?
How many times can you treat customers like fools, before the final nail in the coffin is put it? Get the EMT squad ready, as JCP is on the ropes, and it is not going to be easy getting through these scandals, because there are many other fine options to choose from.
Worst. Makeover. Ever. Redux.
The JCP story, while mind-boggling in number of missteps and breadth is now legendary. Who can step in and alter what everyone else sees?
While I love a challenge, I have to ask if these recent missteps emanate from the CEO, the board or Ackerman and are intentionally working to bring this brand to its knees?
I think JCP needs to get the merchandise content and store experience right first, but I felt that way a year ago before the EDLP experiment. That is still the big challenge facing Mike Ullman and his team, more than the conversion back to promotional pricing.
Penney’s can’t become what it needs to be by remaining what is. JCP is only doing what it knows how to do. Scary.
Penney’s continues to be the dupes of the retail industry. The competitors must love this. What will be the next misstep in their rocky road to oblivion? You can almost assure the misstep will happen. The only questions are when and what it will be.
Don’t you just love it when the proverbial “company spokesperson” hides behind pathetic cliches defending their practices “as being consistent with industry practices’! It’s a BAD practice and in today’s digitally empowered and connected shoppers, their attempts to fool their shoppers will be exposed quickly and efficiently. It’s another example of the board room being totally naive and out-of-touch with the digitally-empowered shopper reality.
Did it ever occur to someone to replace the price tagging rather than simply place a sticker over the top!? It would almost be funny if it wasn’t so desperate. Their actions and associated rational is a silly attempt to turn back the hands of time and ask for a ‘do over’.
Let’s not forget that it wasn’t for nothing that the company tried to reinvent itself. Johnson had the right idea, just terrible, awful, horrible (pick your negative adverb) execution and not enough money to get the whole job done in any case.
Johnson himself was pretty frank about what he was being asked/forced to do in returning to hi-lo pricing. He basically said “Fine…you prefer promotions? We’ll mark everything up so we can mark it down for you.” So that’s what they’re doing, and also trying to eke out a few extra sheckels at the same time.
Defending the indefensible is not a good idea, and waiting for new merchandise and new tickets would have been worse.
Couple this pricing policy with half-pregnant stores (flashy new home departments next to dowdy dress departments) and all you can say is—”Man, this is one hot mess.” Mr. Ullman will either appear to be a hero if he manages to somehow pull success out of the jaws of defeat or he’ll shrug and walk away and say “I just couldn’t finish fixing it.”
At the end of the day, I have to lay the problem at the feet of the board. This is the group that approved a $900 million stock buy-back program in 2011, and bought exclusive rights to the Liz Claiborne brand for another $267 million that same year. That left them with about $2 billion in cash to fund product purchases and the remodels of 1100 stores Johnson promised. Who was doing THAT math? In fact, I’m not sure anyone involved with the company has been particularly good at math at all for a very long time.
I’m sad to say that at this point, I don’t see a great and long future for JCP.
JCP has been expected to fail anyway. On the fast highway to failure, these types of activities are common place. It’s desperation. Just like when a person has been pushed so far they will do something in desperation they regret later. Corporations and their stressed executives do the same thing. Sometimes it’s just foolishness, like the old saying, as a dog returns to his ‘mess’, a fool returns to his folly.
Well, duh. If you’re going to eliminate EDLP and go to promotions, you have to jack up the price of the item first. Shoppers shouldn’t be surprised by this.
I think I might have been the only person who thought that shiny stores and exciting, underpriced merchandise were a great idea.
This episode, though embarrassing, will have no long-term impact on JCP. Forgetful consumers will be tempted by the next promotional deal!
Penney’s customers are motivated by promotion, not deceit. If they’re going to change sticker prices, they should at least remove the original pricing that shows a lower amount. A more graceful approach would have been to offer the lower coupons on higher priced items, but if the item re-price is under what they’re proposing, keep it as-is.
The EDLP strategy was probably the right one—they just didn’t give it enough time. This kind of gaff is a clear signal the end is near.
Spend some money and re-ticket everything. Develop a plan to reintroduce prices by department. The list is endless….
They took the easy, stupid way out of their mess only to trip on their 1970s mentality.
I’m probably a broken record on this one by now. I really liked what Ron Johnson was doing! I thought it was the right thing at the right time. So there! He just didn’t execute in quite the right order, maybe bit off a little more than they could spend and couldn’t finish the job.
The question is what to do now? Reversing was never, IMHO, a good idea. If JCP needed a new image then, it is more than imperative now!
I’m just gonna say, focus on the stores to raise the bar. Do some good visual merchandising to blend the new with the old. Do something to inspire the sales associates to make a great experience. Keep the ads upbeat. Do fun promotions and in-store events.
Let’s quit talking about the big mess and get our hands dirty!
Seriously, it was too difficult to remove the $50 price tag and re-tag at the lower price? Savvy shoppers like my mother seek out opportunities like this (re-tagging) to escalate to management, and would cut up her department store cards in front of them—regardless of how long she’s been a customer. What happened to “this shelf/rack 30% off” (plus loyalty card members get an additional xx% off)?
If JCP claims to be doing what everyone else is doing, then they are blind to the current state of brick & mortar retail. Other stores are going above and beyond to check, double-check and recheck price tags on the floor because of the shrinkage associated with mistagged items. The really smart ones are moving out-of-season and “as-is” items to clearance centers like Nordstrom’s Rack and Saks Off Fifth and are rotating incoming inventory on the floor every 7-10 days.
Very disappointing indeed.
I liked Kinshuk Jerath’s comment the best. JCP has identified their customers as promotion-centric, and this pricing hiccup won’t matter to them at all. JCP’s traditional customers are only interested in the next shiny-new sale.
“Customers at this J.C. Penney store in Dallas told News 8 they’ll keep shopping as long as the price is right.” WFAA.
I don’t think JCP should worry, at least any more than then daily panic they probably endure already. People have short memories. And the problem will go away once the merchandise with the older stickers is gone…though admittedly that could decades with the level of sales they have now.
Penney would seem to be in a position of not being able to get out of their own way. A retailer must have the trust of their customers. Penney’s doesn’t have that trust anymore. You cannot move from EDLP to YoYo pricing by raising the price on existing inventory! Who would have imagined they would try?
This is a symptom of the greater problem. Apparently Penney’s doesn’t have a board who understands the business, and the board has put people in place who don’t understand the business. Can anyone spell E S T A T E S A L E ?
On the other hand, this “gaffe” has had 21+ people, just in this chat, discussing JCP and their brand. Brings to mind the old saying, “there is no such thing as bad press.” Just having people discuss their issues keeps their name relevant and is likely to generate additional traffic in their stores. And while they’re there, probably grabbing a $5 t-shirt off the clearance rack….
Amazingly poor execution. I doubt this was specifically orchestrated from the top. The direction was a return to hi-lo pricing, which in fact is what the JCP customer wanted (along with all consumers in this moderate retail level). The direction was surely not to paste over old pricing with new. This is likely the decision of a low to mid-level executive trying to save money by using stickers instead of re-ticketing. Pathetic. This is an organization of people searching for a vision and clear direction to follow. They are not receiving it, so mistakes—sometimes monumental ones—are made.
Seriously, with Kohl’s and Macy’s executing quite well is there really a need for JCP? I hope they can find a unique way to excite the consumer differently from Kohl’s and Macy’s for the sake of the employees and the malls who count on JCP filling anchor slots. But I am not feeling terribly hopeful at the moment. Things like this don’t help….
Other than vendors, the competition and business enthusiasts I’m not so sure anyone else, as in consumers, is paying attention to J.C. Penney. The only news of interest will be final sales. Sad but true!
I saw this on some slacks, but they put the new, higher price not fully over the old price. They were now $7 less 40%; the old price was $40 and it was clear on most of them.
Most price tags are perforated and it is easy to tear the old price off and put the new higher price elsewhere on the label.
Maybe JCP should have copied the practice of a locally owned furniture store in our area. When you entered you were told that everything was one-half the price marked. Psychologically many consumers thought they were getting 50% off but they never said that did they. That furniture store was very successful. I was surprised to see them close, but I don’t think the reason was lack of profitability.
What JCP is facing currently is a big execution challenge.They have inventories lying in the store and the quickest way to change the strategy and get back to the promotions model was to stick new prices over the old ones. With company facing losses, they probably didn’t have budget to mark down the old inventory (obviously that would mean a huge loss). Also if you have to deep discount few items, you have to make up for the losses on other items, so they had to relabel. Of course they could have done it more smartly.
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Listen, J.C. Penney is lost in the wilderness these days and it doesn’t appear that there is light at the end of the tunnel. That said, consumers are a little bit like retailers; all that matters is “right now.” What’s in the news comes and goes and if executives at J.C. Penney ever figure out why the retailer still has relevance, then advertising and PR can fix a lot of indifference pretty quickly. It’s all about the “now” and right now J.C. Penney is in an identity crisis and I don’t even know that the consumer is paying much attention.
If this actually happened, it’s hard to believe that people can be so stupid. For goodness sakes if you’re going to dupe the public, do it with some skill!
Just what Penney needed, another pricing problem. Every retailer can set its own pricing scheme, but please be smart enough to make it invisible to consumers. In many ways, the current scandal could be worse for the chain than Johnson’s EDLP strategy. And the way that Penney is defending itself only adds insult to injury. Can the new-old management be so tone deaf?
How many times can you treat customers like fools, before the final nail in the coffin is put it? Get the EMT squad ready, as JCP is on the ropes, and it is not going to be easy getting through these scandals, because there are many other fine options to choose from.
Worst. Makeover. Ever. Redux.
The JCP story, while mind-boggling in number of missteps and breadth is now legendary. Who can step in and alter what everyone else sees?
While I love a challenge, I have to ask if these recent missteps emanate from the CEO, the board or Ackerman and are intentionally working to bring this brand to its knees?
I think JCP needs to get the merchandise content and store experience right first, but I felt that way a year ago before the EDLP experiment. That is still the big challenge facing Mike Ullman and his team, more than the conversion back to promotional pricing.
Penney’s can’t become what it needs to be by remaining what is. JCP is only doing what it knows how to do. Scary.
Penney’s continues to be the dupes of the retail industry. The competitors must love this. What will be the next misstep in their rocky road to oblivion? You can almost assure the misstep will happen. The only questions are when and what it will be.
Don’t you just love it when the proverbial “company spokesperson” hides behind pathetic cliches defending their practices “as being consistent with industry practices’! It’s a BAD practice and in today’s digitally empowered and connected shoppers, their attempts to fool their shoppers will be exposed quickly and efficiently. It’s another example of the board room being totally naive and out-of-touch with the digitally-empowered shopper reality.
Did it ever occur to someone to replace the price tagging rather than simply place a sticker over the top!? It would almost be funny if it wasn’t so desperate. Their actions and associated rational is a silly attempt to turn back the hands of time and ask for a ‘do over’.
Let’s not forget that it wasn’t for nothing that the company tried to reinvent itself. Johnson had the right idea, just terrible, awful, horrible (pick your negative adverb) execution and not enough money to get the whole job done in any case.
Johnson himself was pretty frank about what he was being asked/forced to do in returning to hi-lo pricing. He basically said “Fine…you prefer promotions? We’ll mark everything up so we can mark it down for you.” So that’s what they’re doing, and also trying to eke out a few extra sheckels at the same time.
Defending the indefensible is not a good idea, and waiting for new merchandise and new tickets would have been worse.
Couple this pricing policy with half-pregnant stores (flashy new home departments next to dowdy dress departments) and all you can say is—”Man, this is one hot mess.” Mr. Ullman will either appear to be a hero if he manages to somehow pull success out of the jaws of defeat or he’ll shrug and walk away and say “I just couldn’t finish fixing it.”
At the end of the day, I have to lay the problem at the feet of the board. This is the group that approved a $900 million stock buy-back program in 2011, and bought exclusive rights to the Liz Claiborne brand for another $267 million that same year. That left them with about $2 billion in cash to fund product purchases and the remodels of 1100 stores Johnson promised. Who was doing THAT math? In fact, I’m not sure anyone involved with the company has been particularly good at math at all for a very long time.
I’m sad to say that at this point, I don’t see a great and long future for JCP.
JCP has been expected to fail anyway. On the fast highway to failure, these types of activities are common place. It’s desperation. Just like when a person has been pushed so far they will do something in desperation they regret later. Corporations and their stressed executives do the same thing. Sometimes it’s just foolishness, like the old saying, as a dog returns to his ‘mess’, a fool returns to his folly.
Well, duh. If you’re going to eliminate EDLP and go to promotions, you have to jack up the price of the item first. Shoppers shouldn’t be surprised by this.
I think I might have been the only person who thought that shiny stores and exciting, underpriced merchandise were a great idea.
This episode, though embarrassing, will have no long-term impact on JCP. Forgetful consumers will be tempted by the next promotional deal!
Penney’s customers are motivated by promotion, not deceit. If they’re going to change sticker prices, they should at least remove the original pricing that shows a lower amount. A more graceful approach would have been to offer the lower coupons on higher priced items, but if the item re-price is under what they’re proposing, keep it as-is.
The EDLP strategy was probably the right one—they just didn’t give it enough time. This kind of gaff is a clear signal the end is near.
Spend some money and re-ticket everything. Develop a plan to reintroduce prices by department. The list is endless….
They took the easy, stupid way out of their mess only to trip on their 1970s mentality.
I’m probably a broken record on this one by now. I really liked what Ron Johnson was doing! I thought it was the right thing at the right time. So there! He just didn’t execute in quite the right order, maybe bit off a little more than they could spend and couldn’t finish the job.
The question is what to do now? Reversing was never, IMHO, a good idea. If JCP needed a new image then, it is more than imperative now!
I’m just gonna say, focus on the stores to raise the bar. Do some good visual merchandising to blend the new with the old. Do something to inspire the sales associates to make a great experience. Keep the ads upbeat. Do fun promotions and in-store events.
Let’s quit talking about the big mess and get our hands dirty!
Seriously, it was too difficult to remove the $50 price tag and re-tag at the lower price? Savvy shoppers like my mother seek out opportunities like this (re-tagging) to escalate to management, and would cut up her department store cards in front of them—regardless of how long she’s been a customer. What happened to “this shelf/rack 30% off” (plus loyalty card members get an additional xx% off)?
If JCP claims to be doing what everyone else is doing, then they are blind to the current state of brick & mortar retail. Other stores are going above and beyond to check, double-check and recheck price tags on the floor because of the shrinkage associated with mistagged items. The really smart ones are moving out-of-season and “as-is” items to clearance centers like Nordstrom’s Rack and Saks Off Fifth and are rotating incoming inventory on the floor every 7-10 days.
Very disappointing indeed.
I liked Kinshuk Jerath’s comment the best. JCP has identified their customers as promotion-centric, and this pricing hiccup won’t matter to them at all. JCP’s traditional customers are only interested in the next shiny-new sale.
“Customers at this J.C. Penney store in Dallas told News 8 they’ll keep shopping as long as the price is right.” WFAA.
I don’t think JCP should worry, at least any more than then daily panic they probably endure already. People have short memories. And the problem will go away once the merchandise with the older stickers is gone…though admittedly that could decades with the level of sales they have now.
Penney would seem to be in a position of not being able to get out of their own way. A retailer must have the trust of their customers. Penney’s doesn’t have that trust anymore. You cannot move from EDLP to YoYo pricing by raising the price on existing inventory! Who would have imagined they would try?
This is a symptom of the greater problem. Apparently Penney’s doesn’t have a board who understands the business, and the board has put people in place who don’t understand the business. Can anyone spell E S T A T E S A L E ?
On the other hand, this “gaffe” has had 21+ people, just in this chat, discussing JCP and their brand. Brings to mind the old saying, “there is no such thing as bad press.” Just having people discuss their issues keeps their name relevant and is likely to generate additional traffic in their stores. And while they’re there, probably grabbing a $5 t-shirt off the clearance rack….
Amazingly poor execution. I doubt this was specifically orchestrated from the top. The direction was a return to hi-lo pricing, which in fact is what the JCP customer wanted (along with all consumers in this moderate retail level). The direction was surely not to paste over old pricing with new. This is likely the decision of a low to mid-level executive trying to save money by using stickers instead of re-ticketing. Pathetic. This is an organization of people searching for a vision and clear direction to follow. They are not receiving it, so mistakes—sometimes monumental ones—are made.
Seriously, with Kohl’s and Macy’s executing quite well is there really a need for JCP? I hope they can find a unique way to excite the consumer differently from Kohl’s and Macy’s for the sake of the employees and the malls who count on JCP filling anchor slots. But I am not feeling terribly hopeful at the moment. Things like this don’t help….
Other than vendors, the competition and business enthusiasts I’m not so sure anyone else, as in consumers, is paying attention to J.C. Penney. The only news of interest will be final sales. Sad but true!
I saw this on some slacks, but they put the new, higher price not fully over the old price. They were now $7 less 40%; the old price was $40 and it was clear on most of them.
Most price tags are perforated and it is easy to tear the old price off and put the new higher price elsewhere on the label.
Maybe JCP should have copied the practice of a locally owned furniture store in our area. When you entered you were told that everything was one-half the price marked. Psychologically many consumers thought they were getting 50% off but they never said that did they. That furniture store was very successful. I was surprised to see them close, but I don’t think the reason was lack of profitability.
What JCP is facing currently is a big execution challenge.They have inventories lying in the store and the quickest way to change the strategy and get back to the promotions model was to stick new prices over the old ones. With company facing losses, they probably didn’t have budget to mark down the old inventory (obviously that would mean a huge loss). Also if you have to deep discount few items, you have to make up for the losses on other items, so they had to relabel. Of course they could have done it more smartly.