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.

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

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