Penney to Switch to EDLP?
By Tom Ryan
January 23, 2012
According to reports, J.C. Penney will shift from a high-low pricing model to something closer to everyday low pricing (EDLP) as a central thrust of its reinvention under new CEO Ron Johnson.
Discount signs for in-season merchandise will be eliminated, staff at some of Penney’s New York stores told Dow Jones Newswires. Instead, price reductions will have been made before the items are placed on the floor. Also, the department store operator is expected to shift away from cents on price tickets in certain cases as part an overall push to provide a simpler way for customers to determine exactly how much each product costs. For example, an item that cost $19.99 under the old system will now be $20. Clearance items are still expected to carry J.C. Penney’s “Red Zone” designation and will have signs on top of the racks clearly highlighting the percentage off, staff told Dow Jones.
Mr. Johnson, who formerly led Apple’s retail division, is expected to announce the program to investors at a meeting Jan. 25. The pricing method is said to be similar to the one used by Target, where Mr. Johnson was vice president of merchandising before joining Apple. In October, Michael Francis, Target’s marketing chief, was appointed president of Penney.
Retail observers told the Chicago Tribune that Penney will have to make its shopping experience more exciting and further increase its portion of exclusive merchandise or continually face price wars against its high-low pricing rivals such as Macy’s and Kohl’s. Its recently-announced deal to build boutiques for Martha Stewart was seen as one step in this direction. Penney may also alienate its core clientele of price-conscious shoppers who expect mark-downs, observers said.
“If Penney moves to an everyday low price concept, they’ll lose a portion of those customers who only respond to price,” said Roger Goddu, a former Target executive, told the Trib.
Charles Grom, an analyst at Deutsche Bank, called the move “radical,” but necessary. He told Dow Jones, “Today’s shopper is more savvy than ever and retailers need to transform in order to compete more effectively — potentially discarding old habits to drive traffic.”
- Merchandise Pricing Changes By JC Penney Could Be Radical – Dow Jones Newswires/Morningstar
- J.C. Penney to unveil new pricing strategy next week – Chicago Tribune