Penney for your thoughts

A leading department store switches to Everyday Low Pricing. The question is will it work?

JCPenney Company made a lot of news this month as it switched to the “revolutionary”
concept of EDLP (everyday low pricing) on February 1, a practice that has been
used in the supermarket channel for decades. The event was marked with a slew of
commercials featuring people screaming at coupons falling out of their mailboxes and
being surrounded by sale signs in the store, including one customer who bore an uncanny
resemblance to that crazy blonde lady who spends three weeks gearing up for Target’s
Black Friday sale.

As part of the transformation, prices are now in whole numbers, $20 for a shirt, instead
of $19.99, for instance, and weekly coupons, discounted merchandise and slashed prices
have been eliminated. Also, the store’s name has been changed to JCP.

While the effort generated lots of publicity, including local news reports, I question
if it will have long-term staying power. After all, the bottom line is people love sales.
Especially in a recession, people love to hunt for bargains.

I paid a visit to the JCPenney in Herald Square last week to pay my bill. It was lunch
hour and the store was relatively empty, at least by Manhattan standards. There were
people were walking around, but no more than one person in line at any of the registers.
I asked one of the associates how the new program was going over. “It has been going
great,” she remarked. I mentioned that I thought the store was rather quiet. “Well, it
is taking time for people to get used to this concept,” she admitted. “I think once they
get used to our new pricing strategy sales will pick back up, but that will probably take
awhile.”

The thing is in today’s fractured retail environment you have to use every gimmick
possible to draw customers in – and nothing works better than a good, old-fashioned sale.
Penney’s, or JCP as they now prefer to be called, can run endless commercials of dizzy
kids pinning the tale on the donkey, but if Macy’s runs a commercial saying they are
having another two-day One Day Sale, with early morning and late night “door busters”
and you can save even more with your 20% discount coupon (with limited exceptions),
guess which store is going to have the more traffic.

And that is because people love coupons. I know that when Lord & Taylor mails a $15.00
coupon as a “gift,” about once every four months, I definitely make time to go shopping
there that week – no matter how busy I am. After all, it is a sin to let $15.00 go to waste.

Supermarkets can and are using coupon offers to drive traffic too. About every three
weeks or so, I will get an e-mail from A&P featuring a coupon for a free product that is only good for three days, usually Friday, Saturday and Sunday. It might be for Totino’s
Pizza Rolls, a brick of cheddar cheese or a bottle of Greenway private label organic
dish detergent. It makes the consumer feel that they are getting something for free, even
though A&P requires a $10.00 additional purchase. I find by the time I get my all-butter
croissant, Hartford Reserve apple pie and a few other treats that $10.00 has mushroomed
into $40. But as an educated consumer I know I still got something for nothing!

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