As part of what some commentators are calling the biggest reinvention in the history of US retailing, JC Penney – a century old US mid-market department store chain – is challenging some of the fundamentals of mass market retailing. A bold move that could ultimately change some of the basic rules of the industry.
Targeting consumer frustration
Generalist retailers have limited degrees of freedom to differentiate themselves on. The typical options are product range (with in some cases exclusive distribution), store environment, customer service, and price. But most retailers struggle to really set themselves apart with these and, as such, have to rely on a continual stream of tactical price-product offers and sales to drive business. Even the category killers that offer broad ranges at ‘guaranteed lowest’ everyday prices have to keep reminding consumers about their offers.
In the US, as in Australia, the frequency and variety of sales, promotions, time-limited offers, etc. have surged over the past few years as retailers have escalated their efforts to get post-GFC wary consumers to part with their money. Not surprisingly this has reportedly led to new levels of consumer frustration and exhaustion with retail pricing and sales tactics. It is this situation that JC Penney has decided to exploit.
Differentiating on pricing and sales policy
It’s ‘Fair and Square’ Pricing plan launched in February this year aims to make its pricing and sales policy the lynchpin of the brand. The approach is all about transparency and simplicity. For instance, giving customers the assurance of knowing when the best times are to get a deal on different types of products, and eliminating the irritation of buying a sale item one week just to see it further reduced the following week. This will include:
- Everyday low prices (in some case marking down merchandise 40% from their previous levels).
- A themed sale for each month on specific categories that lasts the whole month. (For example, February’s Valentine Day focus featured spring clothing, jewellery and lingerie).
- Clearance sales on the first and third Friday of each month labelled as ‘Best Price Fridays’ .
Gone are the 500+ promotional events it ran in 2011 including holiday season events, as well as the practice of specials and sales coupons so ubiquitous in the US.
Also key to the approach is:
- The elimination of 50 and 99 cent pricing. All its prices are now in straight dollar amounts.
- Price tags that list only one price rather than the standard practice of showing the original price and percentages off.
- A ‘Happy Returns’ policy that allows customers to return any item, anytime, anywhere, even without a receipt (in which case they can exchange it or get the current value of the item on a gift card).
A ‘Missionary’ challenger brand stance
Challenger brand strategies are about picking a fight for a brand to have that draws consumers to it. In this respect JC Penney has chosen to adopt a ‘Missionary’ challenger stance, which is about a brand looking to ‘put something right’ in its category or industry. In this case the profligate sales and pricing practices common to retailing.
While financial analysts have responded positively to the moves, boosting the company’s share price, retail experts are divided about its potential success. Most admire its innovativeness but some question if its abandonment of high-low pricing when consumers remain highly price-sensitive is premature, particularly as its parallel plans for invigorating the store shopping experience will take some time to execute.
For the moment, however, the retailer is fully committed to its new direction which, if successful, could change the way many other retailers play the game. First it’s ‘Enough is Enough’ teaser commercial voiced the exasperation of the average consumer with retail price practices. Then it launched a series of commercials featuring talk show host and comedian Ellen DeGeneres introducing the various aspects of its ‘Fair and Square’ plan.
Retailers in the US and around the world will be watching with mixed feelings to see if this bold initiative takes hold.