If you raise prices and then lower them, that should make everybody happy, right?
March 27, 2013
There's a wonderful Yiddish reflection -- "The difference between genius and stupidity is genius has its limits." That may explain the difference between Apple stores and JCPenney/jcp. What's interesting is the strategies for both retailers were set by the same person -- Ron Johnson, formerly SVP, Retail Operations for Apple, currently jcp CEO. It was JCPenney when he joined and announced his long and short-term strategies.
Long term: re-do all of the stores in the 111-year-old chain into mini-boutiques-under-one-roof, which sounds really cool, but, alas, to do that you need time and money and jcp is running out of both. Short-term: a plan that was going to reinvigorate the store and restore profitability, stop what Johnson labeled fake prices, and move away from nonstop promotions and coupons with everyday low prices (like Wal-Mart) to fair-and-square pricing.
The change didn't work all that well, but in their defense, the Ellen DeGeneres commercials were fun. Until they cancelled the advertising and strategy, neither of which was working, and the regular sales, that Mr. Johnson had characterized as simplifying pricing. If that seems contrary to the previous fair-and-square positioning, we think that's a perfectly acceptable position for you to take, so go ahead.
That was about six months ago and Mr. Johnson finally acknowledged that, "It was clear that withdrawing from our promotional model to a more everyday model has been harder than we anticipated."
You think? It wasnt just harder; it was expensive, coming with a price tag of a $552 million 4Q loss, which is a lot of money and pretty much a sign that your strategy isn't working. So what's a CEO with a chain in a death-spiral of same-store sales to do?
Back to Square One
We're glad you asked, because Mr. Johnson has an answer to that question: go back to the original sales strategy they scrapped last year, and restore sales on a weekly basis. But if you do that, how do you protect your already tiny fair-and-square margins, where you're losing money big-time?
Now you might think that was going to be a really difficult question to answer, but not so much, particularly for someone who came from a company where simplicity and elegance were the watchwords. It's been reported that Mr. Johnson's elegant plan is to raise jcp prices to their former, higher levels the ones before the fair-and-square pricing and then cut them. Simple, huh?
No, no, you read that right. They're going to raise the prices and then -- wait for it -- lower them, figuring that will give them the appearance of having provided consumers with a large discount at a sales event, so it will appear even more special and of greater value to customers. So, all in all, not so fair-and-square and really fake prices.
If you are as dumbfounded as we, join the club. In a century where consumers are more marketer than fool, speak to each other before they speak to the brand, and have access to more digital information each day, how does Mr. Johnson figure this strategy hoax is going to bamboozle consumers? We'd be fascinated to hear Mr. Johnsons answer to that.
In the meantime, for those of you interested, the phrase "fair and square" dates back to the 16th century. Fair was spelled "faire," and meant aboveboard, and square meant honest. So aboveboard and honest. But given the circumstances, with their new, more modern jcp logo, and more contemporary consumers, perhaps jcp should consider a more recent tagline. One from 1941: Never give a sucker an even break!
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Robert Passikoff is President of Brand Keys, a research consultancy.