J.C. Penney Co. Inc. is planning a “meaningful” change in its pricing strategy beginning early next year, which will have major ramifications for consumers, vendors and the company.
This story first appeared in the October 10, 2011 issue of WWD. Subscribe Today.
Penney’s is among the most price-promotional retailers in the country, aggressively advertising meaty markdowns and storewide sales throughout the year to compete with Kohl’s Corp. and Macy’s Inc., among other stores.
Two sources said Penney’s disclosed the plan in an e-mail letter, and they interpreted it to mean that Penney’s will shift from “high-low” to “everyday low prices,” similar to Wal-Mart. However, in a statement sent to WWD, Penney’s said, “We don’t plan to move to an everyday low price model, since we don’t believe that would best serve our customers or drive our market share.”
The statement, which could have been an excerpt from the vendor letter, also said, “J.C. Penney is currently in the process of reimagining its business strategy in order to become America’s favorite store. As an initial step in this long-term process, the company plans to make a meaningful change to its approach to pricing beginning with the spring 2012 season. This pricing change, which customers will begin seeing in stores and on jcp.com in February, will enable J.C. Penney to offer clear and straightforward pricing that delivers incredible value every day.”
Penney’s declined to disclose details of the new price strategy, citing competitive concerns.
A shift in the strategy, if it moves at least in the direction of an everyday low price policy, could benefit manufacturers. “It will be a better way to figure out your costs,” said one market source. The source also said consumers are often confused by Penney’s pricing, and that of other department stores as well, so change would be welcomed. “This could be a great step forward in building customer confidence” that products are fairly priced, the source said.
However, a source who saw the letter said Penney’s would have to be patient with consumers who have come to expect price slashing and tend to hold back on a purchase, expecting further discounts later. “The only risk is how long it takes to reeducate the consumer,” said the source. “How long will it take for consumers to embrace the new model? Penney’s could also be subjecting themselves to some competitive risk once the competition comes up with a response to the new pricing.”
At Wal-Mart, there’s been a lot of price tinkering, particularly in apparel, which has been a tougher business for the mass merchant.
It’s possible some vendors that received the e-mail letter believed there would be a shift to everyday low pricing at Penney’s because the department store’s advertising slogan has for some time now been, “every day matters.”
Penney’s is expected to see many changes in the coming months because a new chief executive officer, Ron Johnson, the former head of Apple retail, joins the chain on Nov. 1, succeeding Myron Ullman 3rd. Johnson already made an impact last week when he named Michael Francis, formerly Target’s chief marketing officer, as president.
Penney’s increasing consumer centricity was highlighted Friday at the annual Retailing Summit produced by the Center for Retailing Studies at Texas A&M University, where Tom Nealon, the retailer’s executive vice president of information technology, said the store is engaged in a wide range of social media actions, including promptly responding to posts by disgruntled shoppers.
The chain is also preparing a significant relaunch of its e-commerce site in the first half of next year, he noted. “It will have much greater product assortments, new forms of payment and much richer mobile capabilities, including tablets,” Nealon explained after his speech. “We are really bullish. There are businesses that we could and should be in online that we would never put in the stores. For example, we sell cribs [online], and the assortment is not nearly big enough.”
The retailer sees new patterns in Internet traffic, he noted, with growth from 8 a.m. to 10 a.m., and more use of tablets like the iPad.
In addition, Penney’s is deploying radio frequency identification systems at the item level nationwide, which he called a “game changer” and a competitive advantage.