JC PenneyFair and Square Pricing Initiative Crisis
HistoryOriginally named Golden Rule andwas a small goods storeOpened by James CAsh Penney inKemmerer, Wyoming in 1902Sold blue jeans and other workclothes, shoes, fabrics and sewingneedsAt its height, there were over1,200 stores in all 50 states andPuerto Rico, Mexico and Chile
CEO Ron JohnsonFormer Target executive and creator of the AppleStorePlans to bring in better merchandise and createstrategic partnershipsRolled out a new pricing plan for J.C. Penney
New Pricing PlanThe plan stemmed from Johnson’s realization that 75% ofeverything sold at J.C. Penney was normally sold at a discountof 50%. Also, there was a $143 million dollars loss reportedbefore the change.Mailers and coupons are no longer used. Instead, in-storebargains are offered year round.Prices will now end in "0" instead of "99" and price tags willlist just one price. This means that price tags no longerinclude "previously sold at a higher price".The makeover is expected to save the company over $900 milliondollars over the next two years.
New Pricing Plan (continued) Meant to meet shoppers needs on a regular basis More merchandising changes in the store The new pricing initiative has three levels: Red tag items - indicate the everyday price Blue tag items - will be the best price for as long as the item is in stock. Month long values
New Pricing Plan (continued) Will begin to house affiliate brands and partners Will develop Town Squares to offer constant customer support and complimentary services Completed a 10-year agreement with Martha Stewart Living Omnimedia Used Ellen DeGeneres as a celebrity spokesperson The makeover is expected to save the company over $900 million
Results of New Pricing Plan Reported a unexpected loss and decreased sales for the second quarter Customers are confused about new pricing plan Shares decreased more than 8% in premarket trading There was a lost of $147 million or 67 cents per share Gross profit margin fell to 33.2% from 38.3% a year ago The sales decline accelerated to ~22% in the second quarter A lot of negative press about the change As a result, Penney’s does not expect to meet its anticipated earnings for 2012. Originally, the expectation was a profit of $2.16 per share. However, recent results decrease the expectation to $1.26 per share for the year.
Reoccurring ThemesCustomers like couponsCustomers do not believe they are getting dealsPoor customer serviceQuality is perceived as deterioratingCustomers are moving over to competitors such asTarget and Kohl’sOnline store is continuously out of stock
JcPenney Customer Apreciation: Back-To-Values Days The JcPenney BLACK FRIDAY WEEKEND EVENT!!!At JcPenney, we care about our customers needs and welistened!!!Coupons for All! Daily, Weekly, and Monthly Coupons areback and then some...JcPenney will Now Partner withOnline Coupon Giant...GROUPONS for an even GreaterShopping Experience and added $avings!!!To perk up interest in store shopping visits, JcPenneywill open new Cyber-Cafes in all of its stores completewith a ‘Fashion History’ theme, including props,photos, art work and various media depicting thehistory of American Fashion.