No deep discounts

Revitalizing stores with increased emphasis on interiors, product display and merchandising is a common strategy to lure shoppers. Many retail stores focus on expanding the range and diversity of goods on display – to provide them in every possible color and size, at the right time. Selling at discounted prices is another common strategy employed by retailers.

However, J.C. Penny (founded in 1902, now jcpenney) seems to be thinking different. Instead of using deep discount sales to attract customers, it launched its simple new “Fair and Square Every Day” pricing strategy. The basis for its new strategy is the realization that less than 1% of everything sold at its stores sells at full price. More than three-fourth sells at a 50% discount.

New CEO, new logo, new spokesperson and a new pricing strategy

According to Forbes magazine, J.C. Penney, under the leadership of CEO – Ron Johnson, will be the most interesting retailer of 2012. Before joining as CEO, Ron Johnson put together Apple’s retail strategy (the ‘Genius bar’ was one of his ideas). Ron joined J.C. Penney in November 2011 and went on to describe it as the single greatest opportunity in American retailing. In February 2012, Ron began a complete transformation process at jcpenney. To distinguishing itself from other retailers and resonate with American shoppers, the company designed a new logo in colors of the American Flag. The new square shaped logo reflects the new pricing strategy called “Fair and Square”. By August 2012, stores will have new merchandise and presentations. Every month the company plans to open two to three new shops until 2015. The company also hired talk show host Ellen DeGeneres as its spokesperson.

The new pricing strategy – Not EDLP

Jcpenney has a new “Fair and Square Every Day” pricing strategy. The idea is to keep pricing simple and build long-term relationships with customers. The store will have only three simple prices – Every Day (red stickers), Month Long Value (for theme sales, white stickers) and Best Prices (for clearance items). All prices will be rounded off to ‘0’ instead of ‘.95’ or ‘0.55’. The company will cut down on promotion budget and promotions from 590 a year to 12. As per the new pricing strategy, there will be no discount gimmicks and prices reduced before the products are placed on the shelf. The customers do not have to wait for reduced prices (like in Wal-Mart’s EDLP) and can get a low price every day.

The new jcpenney

  • No constant price discounting. Reduced prices before product is placed on shelf. Almost 40 percent cut in retail prices with prices in flat dollar amounts.
  • Promotions down from 590 to 12 a year
  • Promotion budget cut from $2 million per promotion to $80 million a month promoting all products.
  • Best Price Fridays – two clearance sales, on the first and third Fridays of the month.
  • Each store will have a ‘Town Square’ (on the lines of Apple’s Genius bar) to provide complimentary services and free items. The Town Square will be centrally located (customers can see products on the way through).
  • Make stores more appealing, highlight brand names and gain more.
  • There will be as many as 100 stores within a store to accommodate branded or thematic stores.
  • Trim private-label lines and celebrity lines. CEO believes in brand power.
  • Company motto – Let customers to shop on their terms, not ours.