JCPenney stores have created the biggest retail story till date with its newly announced growth strategy squarely resting on its pricing policy, which is a bold move for any retailer let alone a department store, where mixed strategies like hi-low pricing and promotions have long been the norm for as long as one remembers. With a reinvention policy, the department with fewer sales promotions, a more lenient return – policy, less cluttered displays, store within store concepts and more in line for the coming times, is all set to deliver its consumers a shopping experience for tomorrow in the yesterday store.
With consumers picking up on different options to shop, for different reasons – Walmart for price, Target for providing cheap styles, high-end stores for their luxury treats, the Web for ease and comfort and specialty stores for experience, the retail giant JCPenney got lost in the background. However, the store’s shares soared nearly 19 per cent a day after the debut of its pricing plan, when it delivered a 2012 profit outlook way above analysts’ projection. Nearly 72% of JCPenney’s revenue is generated from products sold at a discount of 50 per cent or more, and the company is now re-pricing all its items so that the sale prices become everyday prices, increasing the sales and revenue of the store.
The new price policies by JCPenney include simpler pricing policies, which mean that the garment pieces with a price tag of $ 19.99 would be sold at round off figures of $ 19 or $ 20, to give the perspective of fair pricing policies to the buyers. A new tags scheme, different from retailers format to pile stickers on the price tags to indicate discounts and sales, the retail giant is planning to use different tags for all the merchandise, a red tag for an “Every Day” price, a white tag for a “Month-Long Value” and a blue tag for the “Best Price.”
The markdowns on the items are expected to go to 40% on major items and apparels available at JCPenney. So, a woman’s blouse regularly priced at $ 14.99 would be present at the store at the “Every Day” price of $ 7. The pricing policies are expected to increase the footfall of the shoppers, who hate to wait in long queues during sales and those who always regret to be late and chose from the leftovers, but, it might be risky as shoppers who love to bargain-hunt might not show up due to the absence of sales. Penney laid out the format as stores today are struggling to wean off the consumers of the bargains, they have come to expect in the weak economy.
Along with the markdowns, the promotional schemes and marketing strategies are also being reworked for the store. The store will move to month long promotions at a cost of approximately $ 80 million a month, which is a decrease from Penney’s current marketing tab. And instead of mailed fliers, the company is planning to send the shoppers a 96-page catalog each month with a more magazine-like presentation. All the efforts being taken to raise the footfall and the sales of the store seem to be important, considering the change in the attitude of buyers towards departmental stores, with figures depicting a rise of 0.7% sales in the year 2011 for JCPenney, while competitors like Macy’s Inc. rose 5.4 per cent, and Kohl’s was up 1.1 per cent, the new policies are proving to be a new ray of hope for JCPenney, banking on the success of Ron Johnson’s ideas for Apple.
According to an estimate by management consultant firm A.T. Kearney, a typical retailer is expected to sell between 40 and 45 per cent of its inventory at a promotional price, up from 15 to 20 per cent a decade ago and the increased discounting and coupon systems have worked around like a vicious cycle, that has only fed into the shoppers’ insatiable appetite for bigger and better discounts. Still to see if the new policy is a winning strategy for the retail giant, but it sure has created the waves and people are getting attracted towards the stores for the sake of curiosity, primarily to see what the retail world has to offer at fair prices.