
Former Apple Exec goes to JC Penney and slashes prices by 40% - kennethologist
http://nymag.com/daily/fashion/2012/01/jc-penney-cuts-all-prices-by-40-permanently.html
======
blahedo
It's down at the bottom of the article, but this:

> _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 $19 or $20._

is actually my favourite part of the whole thing. Taken together, it's a major
overhaul that says, hey, sorry, over decades we'd gotten wrapped up in all
these little marketing tricks to increase our sales and bottom line, but we
decided it was time to treat y'all like grownups for a change.

I hope it works out for them.

~~~
noinput
My favorite as well. I've found myself in discussion with many on this logic
for some time but rarely does it go mainstream. On a logical stance, all these
moves represent honesty and no BS. Similar to when General Motors launched the
Saturn line of cars with flat pricing. We owned a few in my family growing up
and I remember my dad telling me one of the biggest reasons he bought it was
because he knew no one else paid a dime less than he did for the same car.

~~~
josefresco
"Similar to when General Motors launched the Saturn line of cars with flat
pricing"

And we all know now how well THAT worked out. Haggling, whether successful or
not, gives the impression to the customer that they are in control and are
'saving' money.

~~~
tseabrooks
How about CarMax? They are flat pricing no haggle if I recall and they're
going like gangbusters.

~~~
ams6110
My guess would be they will haggle if the buyer wants to haggle. They aren't
going to give up a sale. But, I've never shopped CarMax so I don't really
know.

~~~
lavezza
I had a roommate years ago that worked as a salesman at CarMax. He had about
the authority to haggle as the kid taking your order at McDonalds. I think the
volume is so high that if you don't want it at the marked price, someone
tomorrow will. Of course, that was years ago at one lot. YMMV.

------
matsiyatzy
This is referred to as the "fast fashion" business model. H&M and Zara in
Europe has been doing it for quite a while already. Wikipedia article here:
<http://en.wikipedia.org/wiki/Fast_fashion>

It's not so surprising that they go for this business model, since "fast
fashion" retailers have an average profit margin of 16%, compared to 7% for
typical retailers, at least according to this source:
[http://www.google.com/url?sa=t&rct=j&q=&esrc=s&#...</a><p>Basically it's
"just-in-time" production coupled with "agile"-type response with regards to
fashion trends and customer wants.

~~~
hammock
Not sure if that's entirely accurate. JCP is a mall anchor/dept store, not an
H&M or a Zara. They sell other makers' labels. And this announcement seems
relegated to the pricing domain, haven't read anything about them changing
their production/distribution model.

~~~
matsiyatzy
I wasn't aware of that. That probably means the ideas behind this is a bit
different, yes.

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technoslut
I could see this being hugely successful. The only question is whether people
have been conditioned for the sale season. Growing up in a household full of
women who buy clothing and accessories all the time, they particularly save up
for when holidays approach.

~~~
MrFoof
Johnson made no mentioning of eliminating popular sales seasons like Black
Friday.

This New York Times article (yes, login may be required) is much more
informative in regards to his plans:
[http://www.nytimes.com/2012/01/26/business/jc-penneys-
chief-...](http://www.nytimes.com/2012/01/26/business/jc-penneys-chief-ron-
johnson-announces-plans-to-revamp-stores.html?_r=1)

Johnson pointed out that last year, JC Penney had 590 promotions, which made
it seem that everyone was always on sale in some form or another. Honestly,
_that_ 's tremendously confusing for consumers, as you basically can't keep
track of what's on sale. The net result is they were selling everything at
such a low price, that a 40% cut puts it only higher than the average sale
price with those near-600 promotions.

 _"“So customers ignored us 99 percent of the time,” he said. “At some point,
you, as a brand, look desperate if you have to market that much.” He will move
to monthlong promotions, on which Penney will spend $80 million a month, he
said, which is a decrease from Penney’s current marketing spending level,
which is more than $1 billion a year. And instead of mailed fliers, the
company will send shoppers a 96-page catalog each month with a more
magazinelike presentation."_

72% of JC Penney's revenue came form products sold at a 50% or higher
discount. So a 40% across the board reduction on SKU prices still increases
their ASP. Apparently from between 2002 the 2011, their average cost per item
sold stood around the same, yet even as the average price tag rose from $27 to
$36, JC Penney's margin never increased due to the 590 promotions a year.
_"Now most things are on 60 percent markdown, and every time we do that, we're
discounting Penney's brand"._

So less trickery around pricing, far fewer promotions at regular schedules
with long intervals that consumers can actually respond to, and an attempt to
increase the overall ASP of products. Sounds like a good change from their
promotion-driven, brand-devaluing death spiral.

~~~
ajays
_Johnson pointed out that last year, JC Penney had 590 promotions, which made
it seem that everyone was always on sale in some form or another. Honestly,
that's tremendously confusing for consumers, as you basically can't keep track
of what's on sale._

I agree. I wanted to buy a sports jacket at Macy's, but their continuous sales
made me wait for a long time. Every time I would just peek into the store; and
then convince myself to wait till the next big "sale" came along.

In a sense, it's like the "secretary problem".

~~~
rictic
Apt analogy: <http://en.wikipedia.org/wiki/Secretary_problem>

------
yarone
Also, new JC Penney logo and branding:
[http://www.underconsideration.com/brandnew/archives/jcpenney...](http://www.underconsideration.com/brandnew/archives/jcpenney_nails_the_american_look.php)

~~~
josefresco
"The new jcpenney logo, which combines the elements that have made jcpenney an
enduring American brand, by evoking the nation’s flag and jcpenney’s
commitment to treating customers Fair and Square."

Soo.. they made it look almost exactly like the US flag and made is square.
Design genius. Personally I think the new logo is pretty crappy, wouldn't
scale well and would lose most of it's appeal printed in B&W. Alas this debate
should be saved for another thread.

~~~
maxharris
"printed in B&W"

I haven't read a printed newspaper in years. Having said that, it's true that
a good logo should still be recognizable without color. The new logo passes
that test.

------
benjohnson
Knowing that I can pop in at any time and get a fair price is much better for
than wondering if I'm getting screwed that particular day. Maybe it's an
American thing - it seems that the rest of the world loves to haggle.

~~~
pyre
When was the last time that someone haggled at JCPenny?

------
troymc
Is there a website where I can go to see when normal retailers have had sales
in the past, so that I might predict the arrival of the next one?

Better yet, imagine this data set: the price of every consumer good sold in
retail stores, as a function of store and time.

What would be the impact of such a database, if it became widely available,
say, from a company whose mission is to organize the world‘s information and
make it universally accessible and useful?

~~~
a_a_r_o_n
"What would be the impact of such a database, if it became widely available,
say, from a company whose mission is to organize the world‘s information and
make it universally accessible and useful?"

More ad buys from the covered companies.

------
eps
One thing to keep in mind is that this cheapens the brand. It's one thing to
buy a $10 t-shirt at Gap and another - a $30 T at 60% discount at Banana
Republic. They might be identical, but the perceived value of latter is
higher.

This is a very ballsy move for the company. Must be desperate times.

~~~
jaredmck
I think the JC Penney brand has already been placed into this cheaper segment.
They are squarely aimed at the mass market.

~~~
ams6110
Agreed. Most of the retail JCP outlets near me have closed. They are grasping
at straws.

------
JeremyStein
Thank you OP (kennethologist) for fixing the title of this article. The nymag
title is "JCPenney Permanently Cuts All Prices by 40 Percent" which is
certainly not true. Copy editor Bill Walsh writes:

 _The company meant "permanent" in the sense of regular prices as opposed to
sale prices. It’s lowering regular prices and cutting back on sales in a
strategy that may or may not work. If the strategy doesn’t work, the company
has every right to change course -- and if it does, a bunch of news outlets
will be revealed as big, fat liars._

Bill goes on to criticize lazy journalists who just write what they're told:
<http://theslot.blogspot.com/2012/01/penney-want-cracker.html>

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brd529
For a really good explanation of what is going on, I highly recommend Brian
Roemmele's quora post: [http://www.quora.com/JCPenney/Why-did-Ron-Johnson-
leave-Appl...](http://www.quora.com/JCPenney/Why-did-Ron-Johnson-leave-Apple-
to-become-JCPenneys-CEO)

Not sure if he was at Johnson's press event or not, but he has pictures from
it and explains in detail Johnson's new strategy for JCPenny. Looks like a
good bet to me.

------
prewett
A long time ago I read a book called "The 22 Immutable Laws of Marketing" [1]
and one of them was don't get caught up with couponing (i.e. sales). They are
like drugs: they quickly increase revenue, but now you are dependent on them
to get revenue. I like how this exec thinks. (I also like how they'll round up
prices to the nearest dollar)

[1] [http://www.amazon.com/22-Immutable-Laws-Marketing-
Violate/dp...](http://www.amazon.com/22-Immutable-Laws-Marketing-
Violate/dp/0887306667) (not an affiliate link)

------
mseebach
It doesn't appear terribly novel to me, hasn't big box retailers done this for
a long time? I don't recall IKEA doing out-right sales for an example (they
have continuous clearances and promotions, of course, but not an "everything
is cheaper in January" type sale).

 _For instance, jewelry and Valentine's Day gifts would go on sale in
February, while Christmas decorations would be discounted in November._

Isn't the point of "seasonal sales" to clear stock? So Christmas stock goes on
sale in January, Valentines stock goes on sale 15 Feb?

~~~
pbreit
True, except Ikea (and H&M, Zara and Forever 21) only sell their own
merchandise. Slashing markups on branded items on his scale is fairly novel.

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Corrado
Just informally talking with the women in my household, they all seem to hate
the idea of not having sales. I told them that JCP will still have sales
(Christmas, Valentines Day, etc.) but they were nonplussed on the whole idea.
The first thing my wife did when she got her new JCP catalog was look for
coupons and she was sorely disappointed.

I think it's hard-wired into some people's (read: women's) brains to not
purchase anything unless its on sale. Every single one of them said it was a
bad idea.

~~~
skylan_q
I agree with this fully. I know many people who wouldn't buy a pair of boots
for $100, but would buy the same boots if labeled "Uusually $400, but on sale
for $200!"

People don't understand the shopping experience. It's about going there,
trying the clothes, getting good deals. The whole shopping experience starts
at the parking lot: find the spot closest to the main entrance.

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buu700
For some reason I read the headline as saying that an Apple exec got pissed
and drunk after being fired then stumbled into a random JC Penney and demanded
that all prices be slashed 40%.

The actual news is _much_ more interesting.

