25099 Sun, 06/10/2012 - 4:36pm
“An educated consumer is our best customer,” was the well-known slogan for Syms, the now-defunct apparel retailer. J.C. Penney appears to be counting on that same philosophy as it amps up its “simplified pricing” strategy.
One of CEO Ron Johnson’s first acts as the head of J.C. Penney was to decry the retailer’s dependence on price-cutting coupons and oodles of annual sales events. In favor of everyday low prices, the new J.C. Penney said it would educate consumers and wean them off coupons.
“Coupons were a drug,” Johnson was quoted as saying.
Apparently quite a few of JCP’s customers were, indeed, addicted to the gnarly price busters. Forced by the new version of the chain to do without, coupon-addicted shoppers took their withdrawal shakes to other stores.
Last month, J.C. Penney posted a nearly 19 percent drop in same-store-sales; total sales decreased 20 percent; and it reported a $55 million loss for the quarter. Put simply, the chain’s first quarter was a financial disaster.
J.C. Penney execs said they were surprised regarding their customers’ deep love for coupons.
It can be debated whether or not consumers save money overall with coupons. But there’s no argument that a certain segment of consumers—apparently around 20 percent of JCP’s old customers—rely on coupons to spark them to shop and actually make purchases.
To be honest, I can’t recall ever using a coupon. My wallet’s already fat enough—not with dollars, but with travel receipts and business cards to add more paper to the billfold-busting mix.
Coupons, however, are heavily entrenched in the American consumer psyche. Coupons have been around for more than 120 years, according to the blog Savings.com, starting with handwritten tickets handed out in Atlanta for free glasses of Coca-Cola in 1887. Much more recently, coupons have made a successful transition into the modern age with cyber-coupons sent to mobile devices.
J.C. Penney introduced its “no coupons” philosophy earlier in the year via an ad campaign that referred to coupon discounts as “fake prices.” Damn those lying, good-for-nothing coupons, the ads intimated. The new J.C. Penney would reflect a more “fair and square” price structure.
J.C. Penney’s first quarter results reveal that its “coupons suck” strategy is an example of a tail being overly confident in its ability to wag a fairly large dog—in this case, coupon-loving customers.
If J.C. Penney plans to continue to emphasize simplified pricing, the company will have to keep spending big marketing bucks to re-educate its shoppers. That’s marketing dollars that could be—and should be—spent on something else, such as heralding its new partnerships with Jonathan Adler, Michael Graves, Bodum and Terence Conran.