J C Penney “Keeps it Real” – Will They Survive?

J. C. Penney’s decision to forego “sales” in favor of “fair and square” everyday low pricing is a bold move.  But can J C Penney or any retailer buck Americans’ tendency to get starry eyed when they see “% off” signs?

Comparative pricing claims continue to serve as clever (if sometimes misleading) inducements to consumers.  How many times did we hear holiday shoppers tell TV reporters that they don’t buy anything “unless it’s at least 50% off.”

Let’s start with the fact that many purported deep discounts are off sky high prices.  Retailers are essentially permitted by law to advertise a discount of a previous offering price even if few or no sales were ever made at that price.  (Check out the small print at the bottom of most department store ads.)  So the merchandise is offered for sale for a short time at a price that only Michael Jackson (during one of his famous buying sprees) would pay.  But as long as it’s offered at that price, subsequent “discounts” can be offered.  The vast majority of most retailers’ sales take place at the discounted prices.

As a practical (albeit not legal) matter, the true “regular price” of many items is really the “30-50% off” price.  That’s the price at which most sales will be made.  The real discounts only start to happen when the percentages climb even higher.

I’m not sure how many consumers truly understand the rules of the comparative pricing game and how many simply respond to the alleged big discounts in Pavlovian fashion.  It’s the latter that should concern J C Penney the most.  Mesmerized by “% off” claims, and conditioned to wait for them, will these folks realize that Penney’s “fair and square” price is likely the equivalent of the other guy’s “40% off” price?  I’m not sure a billion dollar ad campaign could flip the perception cultivated by zillions of previous ad dollars.

 The savvy shoppers are a problem too.  They know how to play the game, and may wait for the truly deep discount on non-essential items knowing it will beat Penney’s everyday price.   I suspect Penney’s knows this and will go lower than the “fair and square” price, especially on items that aren’t moving.   Heck, everyone needs a clearance sale now and then.

 I don’t have high hopes for Penney’s plan, but I admire and commend the effort, and wish it success.  American shoppers are stuck in a “pricing warp” of largely illusory discount claims.   Offering products at a price you actually expect to sell them for beats inflating prices so you can offer them later at a “discount.”   

 I hope I’m wrong.  It’s not healthy for a culture to have to do arithmetic gymnastics to get around a practice many know is gimmicky at best and misleading at its worst.  If Penney’s can truly place consumer emphasis on “price” and not so-called “discounts” we’ll all win.


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