If you’ve paid any attention to news lately (and I’m not talking about politics because you don’t want me going on a rant about that one!), you will have heard that JCPenney has launched a new marketing strategy that will begin on February 1st. No longer will they have a million different sales each week. Instead they are going to take a giant light sabre and will slash all prices by 40%. After that they will have special month long prices on certain items, and every first and third Friday of the month they will reduce some prices even further to move their Clearance items. Along with slashing prices they will also implement a new pricing strategy. You won’t be able to find a price tag marked $9.99. Instead it will be either $10 or $9. If an item is marked down and will be part of the clearance sale, the old tag will be removed and a new one put on the item. They will no longer place price stickers with the new marked-down price on the original tag.
Besides the prices of items, they are also going to redesign the store. No longer will you have many different brands from which to choose. Instead they will only have a select number of name brands and the brands will be all grouped together. You will find The Original Arizona Jean Company in one area and Liz Claiborne in another area. On top of this there will be a ‘Town Square’ place in the center where they can showcase various brands and give the consumers a more hands-on experience. All of this was modeled after Apple’s retail store designs where they have pods of products and then the ‘Genius bar’ area. Now, having never been in an Apple store I can only take their word on it from the articles that I have read.
You see, the new CEO of JCPenney, Ron Johnson, used to be an executive at Apple and was the one who designed their retail stores. I have nothing against Penney’s, or Apple, even though I used to technically be a Penney employee when I was in high school. Even though I’m an accountant I did have to take some marketing classes in college and I have a slight problem with the new marketing strategy that Mr. Johnson has unveiled. My criticism is based on my business background, plus the fact that I am a consumer as well. I don’t claim to be an expert on anything in particular, but I just wanted to share some doubts that I have with this new strategy. Perhaps I should be concentrating my efforts somewhere else and in pursuit of more relevant projects, but this is all really bothering me so I just have to get it out.
First off, what makes Apple so successful is the product itself. You don’t need gimmicks or special promotions because the product sells itself. Think of how many times you’ve heard about people lining up outside of the stores for days before the latest version of the iPhone is released. Or about the iPads were almost instantly out of stock after they were released for sale. Did Apple have a huge promotion going on for these products? If they did, I didn’t hear any of them. All it took was Apple saying that they were going to release their new product on a certain day and BAM… they were sold out. I realize that Mr. Johnson used to also be an executive at Target, but he has to realize that retail doesn’t work the same when you are trying to convince the consumer to buy the clothes at your store and not at Kohl’s. You do need gimmicks and special promotions to convince the average consumer to spend money in your store and not your competitor’s.
Which brings me to the slashing of all prices by 40%. Now, considering that I’m a cost accountant and my company sells our product to other manufacturers I’m very aware that we have a certain gross margin built into the cost of our product. There are many of our items that we sell at a much higher price above the actual cost to make the product. Why? Because we are a business that takes into consideration that somebody in purchasing had to take time to find the most cost effective component, then somebody in marketing had to spend time figuring out how to showcase our product’s abilities to best fit the needs of our customer, not to mention all of the time that goes into research and testing of all new products. These R&D costs are built into the margin that we get back as profit on the final selling cost. So, when a company says that they are going to slash 40% off of the cost of their product my brain instantly screams, “If they can afford to do that and still make a profit, then just how badly were they scamming us before??”
Again, I realize that all retailers do this. Which is a part of the reason why I try very hard to not buy anything at full cost. Unless it’s a necessity (your basic cotton undergarments and the like), I don’t buy clothes, shoes or books at full price. If I don’t feel like I’m getting a good deal then I don’t buy it. As a consumer I like seeing the mark-down stickers on the original price tag. That shows me what the product originally cost and what the new price is now. It’s all a mind game, I know. Without that visual, though, I will be more likely to leave it sitting on the rack than buy it. I’m a horrible judge of what clothes actually cost. You will NEVER see me paying $30 for a blouse. If I see a blouse with the original tag of $30 and it now has a marked-down tag of $20, it’s still sitting on the shelf. A week later I walk in and it has been marked down to $10 then I might take a second look at it and decide if I want to purchase it. However, if I walked in and saw the same blouse with a tag that says $10 and I know that it’s marked down, but I don’t know what the original price was because they are using their new policy of putting new tags on the clothes, then I’m more than likely going to let it sit there. It’s all a mind set with me. How do I know that the original price wasn’t $12 and they are just making it seem like this is a great deal at $10? I’m not saying that I would purchase it if I knew that it had originally been $30, but at least I would know that it truly was marked down and they weren’t just playing games with me. Maybe it’s an accoutant thing, I don’t know.
The new strategy of not having any big sales will probably back-fire on them, too. Consumers want to think that they are getting a spectacular price on a product. Take a look at Black Friday, for instance. How many people line up because there are HUGE sales and they know that they don’t need another TV, but they can’t pass up the great deal on the 40″ plasma at Wal-Mart? This is why every company has a marketing department. They know all of the gimmicks and ways to trick consumers into thinking that they need to buy this particular product. They know the way in which something is worded will have a big effect on whether or not consumers will buy the product. How many of you have been suckered into buying more of something that you don’t need just because it says 10 for $10! If it said $1 per item would you be as likely to buy ten of them? Probably not.
I could go on and on, but I’m sure you’re tired of reading my drivel. I probably will not shop at Penney’s very much anymore (not that I really shopped there a lot before). Knowing that this Johnson guy is trying to foist some trendy liberal-type of preppy retailing on me completely turns me off. I like Apple products, but not because of their stores. I hate shopping at Target, at which he used to be an executive. I can’t tell you exactly why I don’t like Target. It’s just a creepy feeling that I get when I walk in there. It’s very preppy and trendy and brand names matter in that store. I’m not a brand name type of person. I feel way more comfortable in the aisles of Wal-Mart, with the other grits and white trash, than I ever do at Target. Also, it might just be my perception, but Target tends to be pricier than Wal-Mart. Just an observation on a few things that I’ve noticed there. Finally, Penney’s is already talking about showcasing Martha Stewart and I hate her. I boycott her all of the time. If I needed something and the only way that I could get it was by purchasing it with her name on it… I would go without. After the insider trading thing that went on, and yes I know that she did do her time for that, I don’t trust her and I won’t spend any of my hard earned money on her products. I refuse.
Thanks for letting me go on about nothing. Enjoy the rest of your day!