JC Penney Jacks Up Prices Before Giving Discounts

August 2, 2013
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At J.C. Penney stores around the country workers have been busy for months boosting the prices of all their merchandise by as much as 100 percent.JCPenney_2012_logo.svg

Why? So they can then give their shoppers discounts and coupons for more discounts.

J.C. Penney calls it “re-ticketing.” Some of their customers call it a scam.

It’s the latest marketing plan by a company that for years has been losing customers and sales to Wal-Mart, Kohl’s, Target and warehouse clubs like Costco.

The company is betting that more people want to feel as if they got a “bargain” even if it’s not really a bargain.

J.C. Penney’s experimentation with pricing began about two years ago when it hired retail marketing guru Ron Johnson away from Apple and made him the company’s chief executive officer. At the time it was bleeding red ink and needed to do something quickly to turn its business around.

By the end of 2011 it was running more than 500 sales a year.

Under Johnson’s leadership, J.C. Penney largely did away with coupons and mass sales and instituted an “everyday low pricing structure.”

It created advertising under the logo of “Do the Math” and showed how a $70 dress at “retail” ended up on sale for $39.99.

But under the everyday price, J.C. Penney touted, the dress would cost $35 all the time.

The new campaign did not have the desired effect.

“Customers love bargain hunting,” one J.C. Penney official said. “It took away all the fun.”
So after a few months J.C. Penney started running a few sales again.

Some of the sales were allegedly phony. The New York Post ran a story last January saying that manufacturers were pressured to come up with fake retail prices so J.C. Penny could mark them down.

Johnson was fired in April and J.C. Penney decide to go back to regular sales and discounts.

While trumpeting its return to bargains and regular sales, J.C. Penney did not announce that it first had to hike the prices before it could mark them down.

The failure to clearly explain the new pricing strategy led to several media stories questioning the validity of its discounts.

For instance, NBC Today show ran a segment July 24 attributed to one J.C. Penney employee and a former employee where they claimed to be exposing the fake bargains.

“A warning for bargain shoppers: is your favorite retailer misleading you with those big sales?” ran the teaser for the segment.

As the result of the program, J.C. Penney put out its first formal statement sort of acknowledging how its new pricing plan actually works. It also conceded that changing the price structure has again confused shoppers.

“We learned that our customers are motivated by promotions and prefer to receive discounts through sales and coupons applied at checkout,” said the company.

“As such,  we have returned to the promotional pricing model employed often in the retail industry. This shift requires us to make pricing changes on much of the merchandise to remain competitive.”

“While we understand this transition back to promotional pricing may cause some temporary confusion, the company remains committed to delivering the quality, price and value that customers expect from J.C. Penney.”

It is too early to tell whether the new pricing strategy will help save the company. Some JCPENNEY Facebook members love the bargains and the sales. But others, like  Kristie Wicker wrote a post Aug. 1 that she thought it was a “scam.”

Priya Raghubir, research professor of marketing at the Stern School of Business at New York University, says J.C. Penney’s pricing strategy may work short-term because shoppers emotionally feel good if they think they got a bargain.

But, she said in a telephone interview, that long term she is doubtful.

“In the long run it could damage brand,” she said.

Another danger is that customers are trained to only buy an item when it goes on sale.

“Why is Wal-Mart so successful – it doesn’t do that – Costco doesn’t do it, Tiffany doesn’t do it. Target doesn’t do it and people love it,” she said.

“Between going to Macy’s or Target I would rather go to Target,” she said. “I know I am not going to get ripped off.”

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10 Responses to JC Penney Jacks Up Prices Before Giving Discounts

  1. Barry on August 2, 2013 at 12:51 pm

    Bob’s, the clothing store, does the same thing. They have “Everyday Low Prices”, which get raised back to list, then marked down for sales.

    The practice became so common and so obvious on items I purchased on a regular basis, I ditched them for Zappos and Amazon.

  2. sherri on August 3, 2013 at 11:34 am

    i find this article about jc penney just as confusing as jc penney.

  3. Ed P on August 3, 2013 at 11:49 am

    Common practice that the big retailers have used for years. As people get smarter they go elsewhere and know they are getting a fair price every day. I’ve not bought from Sears or JCP for over 20 years now.

  4. Jacquie Dagenais on August 3, 2013 at 12:29 pm

    I never understood Kohl’s. Last month I shopped and had a checkout slip that said $157.00 total paid and $151.00 saved on 6 items. So this would indicate everything was overpriced to begin with and then marked down to say it is on sale or maybe they are getting much too much profit.

  5. Doug on August 3, 2013 at 12:42 pm

    FiIene’s (Macy’s) used to do the same thing. My wife wanted to buy an Irish cape, which sold for $69.99. A sales clerk told us to wait until the following week when it would be on sale for 30 percent off. When we went back we were surprised to find the same cape now marked up to $129.99 with 30 percent off, making the cape on sale for 90.99, an increase of $21.00 over the regular price. This was not a savings of any kind, but rather a big increase to make more profit for the store. Needless to say, we did not purchase the cape ” on sale.” We waited another week and went back after the sale for the original price.

  6. A Concerned Senior on August 3, 2013 at 2:43 pm

    All of the “retailers”have fake sales of stuff that they can’t sell for various reasons, mostly the huge pricetag and also some of the styles are only “trends” or “seasonal” so they have to sell them before they go “out” of style or season. Very seldom will you find a real sale on new and seasonal merchandise beyond a few percent off an inflated price to begin with. I never can understand the concept of the large markup and then the discount…wouldn’t it make sense to sell more at a lower price than a few at inflated prices and have lots more on the “sale” rack at the end of the season? It all comes down to trying to be an informed and smart consumer.

  7. E Dziadowicz on August 3, 2013 at 11:48 pm

    This is also what they do when a store is going out of business and has their liquidation ‘sale. Store closing sales are no bargain.

  8. Harriet Barone on August 4, 2013 at 10:21 pm

    Read with interest your article about JC Penney. Unfortunately not only did they try the “no sale” plan which fizzled but they have forgotten the primary purpose of shopping in a store like Penney’s. It used to be called “service”. Now there are few if any clerks to help a customer and there are some who have no knowledge at all of the stock and just say, “go on line.” Well, what I am looking for is service to find an article, not to go on line.

    Most times I can still get service at Macy’s, but even there it is scarce.

    When I shop Walmart, Costco or even Target I do not expect the same level of service that I expect at a Macy’s or Penney’s. I understand that they are big “box” stores that have limited clerks and stock.

    I often walk through the Penney’s store at the Meriden Mall on my way to other stores, or just walking, and find very few people shopping. It is too bad that service in our stores has become so scarce.

    Thanks for keeping an eye out for scams.

    Harriet Barone

  9. Ed Bader on August 6, 2013 at 9:33 am

    This article was informative. But to be fair ins’t this what Kohl’s does with its regular monthly flyers that have stickers with a hidden discount coupon of 10,20 or 30%? In addition,when you buy so much you get KOHL’s cash vouchers. When I look at the regular KOHL’s prices, it appears that they are inflated. Aftr all the discounting and I’ve checked out, I review the register receipt. I don’t think I saved much at all over going to Wal-mart or Target. But for many shoppers the thought that they got a “discount” keeps them coming back to Kohl’s on a regular basis. A neat strategy without explicitly inflating their regular prices. maybe yes-maybe no.

  10. Leslie on August 8, 2013 at 12:29 pm

    What is this article about? Like bargain hunting and new stuff? Shop at Savers , Goodwill, Sal’s (aka Salvation Army).also. You won’t miss the customer service b/c you are the customer service.Really this day in age, who needs a $100. Irish cape. No one has any money– except maybe the owners of Macy’s. With all the money you save at these consignment shops you could go to to Ireland and get a cape. which would be way classier than buying it at Macy’s.And you might be supporting some real starving Irish not wealthy Macy’s executives.

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