Key question is not whether the pricing is right or wrong, question is how does JC Penney differentiate from its competition. Why will I go to Penney when I can got o Macys when pricing for Penney now looks exactly same as Macys. Coupons from Penney were not just discounting mechanism but kinda their identify and changing identify in current market is going to be really tough…
Here’s a riddle: How do bargain hunters know they’re getting a bargain if there’s no hunt? The answer is, they don’t. That’s just one of the lessons Ron Johnson has learned in his six months as chief executive officer of J. C. Penney. Johnson developed Target’s (TGT) “cheap chic” persona before moving to Apple (AAPL), where he created the world’s most profitable stores. Now he’s trying something really hard. He wants to wean Penney’s middle-market customers from a steady diet of coupons and almost constant discounting. So far, they’re not buying. “The transition has been tougher than we anticipated,” Johnson said during a May 15 presentation to investors.
Johnson’s strategy was deceptively simple: quickly replace Penney’s relatively high list prices—which it aggressively discounted—with lower everyday “fair and square prices.” The early results of that grand experiment have been dismal. The department store chain, with 1,100 U.S. stores, had overall revenue of $3.2 billion in the first quarter, and lost $163 million during that time. Sales at stores open more than a year fell an average 19 percent. The number of people coming into Penney stores dropped by 10 percent, and the number of those who bought something fell, too, by 5 percent.
“What is the source of this?” asked Mike Kramer, Penney’s new chief operating officer, during the May presentation. “Coupons, that drug,” he said. “We did not realize how deep some of the customers were into this. … We have got to wean them off this and educate our consumers.” Added Johnson: “We have got to get people to understand our pricing strategy.”
Before Johnson’s arrival
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