Issue of the week: J.C. Penney’s no-sales misfire

last updated 8 January 2015

These are “turbulent times at J.C. Penney Co.,” said Anne D’Innocenzio in the Associated Press. The retailer’s sales have plummeted since it introduced a new pricing strategy this year that all but banned the word “sale.” The approach is the brainchild of CEO Ron Johnson, a former Apple executive Penney recruited last year on the strength of his phenomenal success in creating the Apple Store. Johnson ordered Penney to cancel its hundreds of annual sales events in favor of a “fair and square” model that reduced prices by 40 percent and kept them there. But the strategy has backfired with customers, said James Covert in the New York Post. Last week, marketing chief Michael Francis, a former Target executive handpicked by Johnson, left abruptly after just eight months on the job. The company let Francis be “the fall guy,” claiming his marketing blunders left customers confused. But analysts say Penney’s ads aren’t to blame; it’s just that “consumers want discounts.”

Penney’s bold pricing plan is “a reinvention of traditional retail,” said Brad Tuttle in Time.com, and it “asks a lot of shoppers.” They tend to “like playing games and hunting for deals,” but Penney has pulled the sales equivalent of “grabbing the ball and taking it home.” The retailer claims that it has lowered prices, pointing out that a T-shirt that retailed for $14 but wound up selling for $6 on sale is now $7 from the start. But where’s the fun in that? After all, if “a store’s prices are going to remain the same tomorrow, and next week, and the month after that, there’s not much incentive to browse the aisles for special deals today.” Someone should remind Johnson that Penney isn’t Apple, said Daniel Ferry in MotleyFool.com. The retailer has always been about bargain-hunting, whereas Apple built customer devotion with status-symbol products. In breaking with Penney’s past, Johnson “wastes an advantage that its brand does confer, and counts on a branding power and loyalty that it doesn’t possess, hasn’t earned, and doesn’t look likely to gain.”

Don’t count Johnson out yet, said Laura Heller in Forbes.com. This is, after all, the man who “worked at the feet of Steve Jobs,” developing an operation “that is the envy of every retailer on the planet.” There are always doubters, but turnarounds take time. Johnson recently reintroduced the word “sale” and is striking partnerships with personalities like Martha Stewart. But most importantly, he is “sticking to the plan. Just like Jobs.”