Sad News for JCPenney
Early this February, I posted an article on the new marketing strategy being taken by JCPenney. In an effort to revive a dying business, Ron Johnson, the then new CEO of JCPenney, released a new marketing strategy aimed to differentiate JCPenney in the marketplace. Johnson’s plan centered “fair and square” prices. While JCPenney previously sold most of its inventory at discounted prices, studies had shown that many shoppers began realize that a sale wasn’t really a sale. As a result, shoppers would wait until final clearance times to actually make a purchase, thus severely cutting down on the department store’s profit margins.
John had hoped to change this by releasing pricing that made sense. Products were given lower “full price” prices, and each month saw a new promotional mark down on certain items. While the market was full of buzz as this strategy rolled out, apparently shoppers weren’t ready for the new pricing structure. Since the strategy released, revenue dropped 20% for the first quarter compared to last year (from a profit of $64 million to a loss of $163 million).Traffic in the stores fell almost 10%.
These numbers are staggering, and to me as a marketer, are quite disappointing. I was very excited to see a struggling business make a bold move in their marketing strategy, and it looks like this move was a bit too bold. It appears that the shoppers who used to shop at JCPenney shopped there because of the sales. Once these sales left, they were gone, too.
What is JCPenney to do? In my eyes, they have two different options. The first is to forgo their current strategy. Consumers want value no matter what something is actually worth. For example, take a shirt that is actually worth $20 at fair market value. Consumers would rather pay $22 for this shirt if it was ticketed by the company at $30 than pay $20 for this same shirt if it was ticked by the company at $20. Why? Consumers believe that they are gaining $8 in value. Obviously, the truth is they’re really not. The second option JCPenney has is low prices slightly more and completely rebrand themselves to reach new consumers who are sales finders. A great example of a business doing this is Target. Many items at Target are never placed on promotion. Consumers at Target expect okay-made products at affordable prices. The current JCPenney consumers are looking for okay-made products at extremely cheap prices. The consumer is there, JCPenney just has to change their cheapened brand image to become more modern, more youthful, and more catered to young families and young professionals.
It is a sad lesson for JCPenney, and a sad lesson for marketers. I really enjoy seeing businesses think outside the box, but alas, business is anything but fair and square.
- Bryan Nagy