J.C. Penney revamp: Lower prices, fewer sales

By Msnbc.com staff and wire

No more waiting for?sales. That's the word from retailer J.C. Penney, which announced Tuesday a revamp that would mark down prices on all of its merchandise?by at least 40 percent.

The company said?the move would simplify pricing for consumers, who may have been confused by its constant promotions and discounts.

"The customer knows the right price. To think you can fool a customer is kind of crazy,"?chief executive Ron Johnson said at an event in New York to present?Penney's plans to reinvent itself, boost revenues and catch up with rivals such as Macy's and Kohl's.

He said that only 0.2 percent of sales came from full price items. He also said Penney's 590 unique promotions a year were confusing and failed to draw shoppers. Some 72 percent of Penney revenue came last year from items discounted at least 50 percent.

"At some point, you seem desperate," said Johnson, who become CEO in November after 11 years at Apple Inc, where he built that company's retail chain.

Starring Feb. 1, Penney will offer three types of pricing -- everyday pricing, best prices and month-long deals -- and do away with clearance.

Johnson said the barrage of promotional emails from Penney was "confusing," leading him to see the need for simpler pricing.

The plan is similar to Wal-Mart Store Inc.'s iconic everyday low pricing strategy except that Penney's goal isn't to undercut competitors. Instead, Penney aims to take the guesswork out of shopping in its stores by offering customers fewer sales and more predictable pricing.

Penney's plan comes at a time when stores are struggling to wean shoppers off the profit-busting bargains that they have come to expect in the weak economy. The move is risky because shoppers who love to bargain-hunt may be turned off by the absence of sales.

"The big question on investors' minds will be how customers will react to a single price point versus a perceived discount under the old strategy," says Citi Investment Research analyst Deborah L. Weinswig.

Here's how Penney's pricing will be different:

• Sale prices become everyday prices. The company will use sales data from last year to slash prices on all merchandise at least 40 percent or lower than the previous year's prices. So, a woman's St. John's Bay blouse regularly priced at $14.99 could have the "Every Day" price of $7.
• Fewer sales. The retailer will pick items to go on sale each month for a "Monthly Value." For instance, in February, it might be jewelry for Valentine's Day and in December it could be Christmas decorations. Items that don't sell well would go on clearance and be tagged "Best Price," signaling to customers that's the cheapest price.
• New tags. The retailer used to pile stickers on price tags to indicate each time an item was marked down. But now each time an item gets a new price, it gets a new tag too. A red tag indicates an "Every Day" price, a white tag a "Monthly Value" and a blue tag a "Best Price."
• Simpler pricing. Penney will use whole figures when pricing items. In other words, you won't see jeans with a price tag of $19.99, but rather $20.
• New advertising. There will be an ad that shows shoppers screaming "No" to discounts as they look in their mailboxes, a pile of coupons and big sales signs. A 96-page colorful catalog that highlights "Monthly Value" items will be mailed each month to 14 million customers, along with other promotional efforts.

Reuters and The Associated Press contributed to this report.

CNBC's Courtney Reagan has the details on J.C. Penney's plans to revive itself with a new look.

Source: http://bottomline.msnbc.msn.com/_news/2012/01/25/10233945-jc-penney-revamp-lower-prices-fewer-sales

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