Apple Guy’s Pricing Strategy at J.C. Penney: A Replay of Sears Debacle, Circa 1988?
Ron Johnson, the former Apple (AAPL) executive now running J.C. Penney (JCP), was understandably aghast at all the promotions the old-line department store runs to entice shoppers into its more than 1,000 stores.
As the Wall Street Journal reported last week:
“(Johnson) and his team counted 590 separate sales last year. They didn't bring in shoppers—Mr. Johnson's team found the average customer purchased only four times a year—but they did crush prices. Alarmingly, he learned nearly three-quarters of Penney's products sold at discounts of 50% or more.”
Thus, Penney has some rotten margins:
And Penney has been shrinking, seldom a good sign:
Like many an outsider -- and likely an admirer of Wal-Mart, which promises low prices everyday and thus doesn’t waste huge sums on advertising and promotions – Johnson figures consistently low prices is a smarter strategy.
Of course, there are no new retail strategies, to borrow a cliché from journalism, only new retail CEOs. Sears (SHLD) tried abandoning its heavily-promoted sales approach some 23 years ago, seemingly failed at it, and went back to shrieking at shoppers in newspaper stuffers and the like. Once shoppers think of your store as a place to go when things are on sale – and to avoid otherwise – it’s damned hard to change the perception.
Of course, Sears has rarely executed a strategy well, so we’ll hope Johnson and J.C. Penney show us all how it’s done.