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Value Chain

By | Jan. 2013
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J.C. Penney gets rid of hundreds of sales
Penney's new CEO unveils new pricing strategy to investors, borrowing from Wal-Mart's playbook By Anne d'Innocenzio, AP Retail Writer | Associated Press – Wed, Jan 25, 2012 6:00 PM EST

NEW YORK (AP) -- J.C. Penney is permanently marking down all of its merchandise by at least 40 percent so shoppers no longer have to wait for sales to get bargains. Penney said Wednesday that it is getting rid of the hundreds of sales it offers each year in favour of a simpler approach to pricing. Starting on Feb. 1, the retailer is rolling out an "Every Day" pricing strategy with much fewer sales throughout the year. The plan, the first major move by Apple executive Ron Johnson since he became Penney's CEO in November, is different from Wal-Mart's iconic everyday low pricing. Unlike Wal-Mart, Penney's goal isn't to undercut competitors, but rather to offer customers more predictable pricing. "Pricing is actually a pretty simple and straightforward thing," Johnson told the Associated Press during an interview ahead of the announcement at the company's Plano, Tex. headquarters. "Customers will not pay literally a penny more than the true value of the product." Penney's plan comes as stores are struggling to wean Americans off of the profit-busting bargains that they have come to expect in the weak economy. The move is risky, though, because shoppers who love to bargain-hunt may be turned off by the absence of sales. "The big question on investors' minds will be: 'How customers will react to a single price point versus a perceived discount under the old strategy?'" says Citi Investment Research analyst Deborah L. Weinswig. Here's how Penney's pricing strategy will work: — Sale prices become everyday prices. The company will use sales data from last year to slash prices on all merchandise at least 40 percent or lower than the previous year's prices. So, a woman's St. John's Bay blouse regularly priced at $14.99 could have the "Every Day"...

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