J.C. Penney's Makeover Do-Over: What the Latest Backpedal Means

Barbara Thau
Updated

All you shoppers out there: J.C. Penney (JCP) is admitting that its five-month-old radical pricing strategy -- which ditched most sale events and all coupons in favor of 40% lower prices every day, "month-long" discounts on select items and "best" price bargains twice a month -- has confused you. And it simply hasn't worked.

The chain's decision Thursday to revive clearance sales, which it had previously reviled, and drop its new "month-long value" discounts, a term that meant nothing to shoppers, resulted from consumer buying patterns, a spokeswoman tells DailyFinance.

"As we looked at our results this spring, we found that nearly 70% of our sales came from our everyday prices, while only 15% came from our month-long values," Kate Coultas tells DailyFinance.

"Moving forward, we will commit to offering one everyday low price and will no longer offer month-long value prices," she says. "Customers are voting with their wallets that they want the first price to be the right price."

For the first quarter, which ended April 28, Penney's store traffic sank 10%, in part because shoppers didn't get the retailer's new pricing strategy.

The Makeover of a Troubled Makeover

Ron Johnson dropped a bomb on the retail industry in February when he set plans to eliminate 590 of the retailer's annual sale events and stop issuing coupons, in favor of an everyday low-price strategy.

At the time, Johnson stressed that Penney's needed to wean shoppers off their addiction to sales and coupons.

He then spoke aloud retail's dirty little open secret: A number of those big sales are not really sales at all, he said, because many stores have been putting increasingly inflated "full" retail prices on their goods in recent years.

So Johnson's radical makeover of the chain not only pulled the plug on Penney's sales, but also dropped the word "sale" from its stores and marketing messages, as well as "clearance," ditching language that has been shorthand for American shoppers for nearly as long as there have been stores.

But Johnson's push to sell shoppers on its idea that the chain is a destination for everyday deals with a new lexicon, such as "month long value" and "best price," which were intended to communicate bargains, has so far flopped.

And Penney's has been backpedaling ever since.

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Last month, J.C. Penney reintroduced the word "sale" into its vocabulary.

"We're moving away from the word 'month-long value' because no one really understood that, to calling it what we intended to do, a sale," he told Reuters then.

And now, clearance events will return too.

But to further drive home the message that it's serious about offering shoppers deals, Penney will start promoting its price-match guarantee program, Coultas says.

"We want customers to have the assurance that they are getting low prices everyday at J.C. Penney," she says. "So if a customer finds a lower price on an identical item at a competitor, we'll gladly match that price."

Nancy Pietschnig, a Penney's shopper from Lodi, N.J., whom DailyFinance has been following for her take on the makeover, is pleased to hear that the department store is moving away from its changes.

Penney's alienated the hospital patient care technician, who is a big fan of clearance sales.

"People think of J.C. Penney as one of the stores to find nicely priced bargains," she says. But with the new pricing strategy, "people just didn't get that."

"If I know that they've gone back to sales, I'd definitely them give another try," Pietschnig says.

It remains to be seen how many other shoppers will be as forgiving.

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