It was supposed to be the way forward for JCPenney. But following a painful first quarter, progress looks like the path to ruin for the retailer.
The company’s bold new pricing strategy—in which it did away with coupons and sales for “month-long values”—is a flop, according to Morgan Stanley analyst Michelle Clark. Last week, Clark issued a note to investors (which Business Insider highlighted on Frida
y) saying the new strategy is “worse than we (and the market thought).”
This is a rebranding disaster.
Shoppers who have visited the store since Feb. 1, when the new pricing began, observed higher prices as opposed to lower. They also found the company’s branding strategy—dubbed “best prices”—difficult to understand, Clark wrote.
It gets worse. As Business Insider
points out, JCPenney’s first quarter profits dropped by 20 percent and traffic at the stores declined 10 percent. Eight out of 10 comments on its Facebook are negative. And on Monday, JCPenney issued a press release
saying its president, Michael Francis, will be leaving the company effective today. No reason was given.
This disaster is the result of a lack of research, according to PRNewser’s Tonya Garcia
“JCPenney didn’t do their research first, which is a problem for any business program. Had it gotten a sense of what customers think, the retailer would’ve discovered that sales and coupons aren’t a blight.
“But more than that, they would’ve seen that changing the customers perception about pricing is a mountain too high to climb. Economic times are tough and sales are everywhere. We feel clever, more financially savvy, when we get a deal. That feeling is part of what makes handing over our hard-earned money not just OK, but enjoyable.
The new approach to retail is the brainchild of CEO Ron Johnson, who took the helm in November 2011. Johnson is the former head of retail at Apple. Business Insider
proclaimed that Johnson is “destroying
” JCPenney. Meanwhile, an analyst at Citi Investment Research predicted
Johnson will have until August to turn the company around until he’s ousted. That’s two month away—no wonder the company is bringing back sales (and, maybe, coupons).
For the company’s sake, let’s hope it’s not too late. MSN questioned
whether JCPenney will be the next department store to fail.