**Disclaimer: My wife currently works for J.C. Penney and I was previously employed by the company.
J.C. Penney has a new CEO, Ron Johnson. Johnson arrived at JCP after being the driving force for Apple stores and the Genius Bar in those stores. He is wasting little time in making over the giant retailer.
I love the Apple stores and the Genius Bar. I think I am going to love the new changes at JCP.
What can online sellers learn from Johnson’s moves at his new job?
1. Price merchandise to reflect actual value rather than a starting point to offer discounts.
Hopefully you have not been guilty of paying sticker price for items at JCP. This has been the story of shopping at JCP: Either the item is on sale or a coupon will give you a discount or the item will be discounted in a couple of days.
When I worked for Penney’s, I sold furniture. If people happened to shop in between sales, it only seemed ethical to inform the customer that they could save significantly by buying tomorrow. I know that sales manuals all say to push for the sale today. But if a person could save hundreds of dollars by waiting 24 hours, I felt the need to inform the customer.
Johnson is doing away with the countless coupons and sales days by replacing price tags with a price that reflects the true value of the item. I applaud this.
As an online retailer, I typically only offer sales when I have overestimated the actual value of an item. Selling the items that we do at Fruzies, it is not always easy to determine the actual value of an item. We gather the information available to us and make a judgement call. Many times we are right on.
Some times we undervalue an item. We know this is probably the case when the item is scooped up within minutes of our listing it.
Some times we overvalue an item. Unless an item is seasonal in nature or appeals to an exclusive number of people, we will reduce our prices on items that go unpurchased over time.
2. Use simple pricing.
JCP will do away with the .99 pricing. For example, instead of an item being $19.99, it will now by $19 or $20. Recently we began implementing this in our Fruzies store. In my past history as a hotel manager, I often had to defend against adding .95 or .99 cents to the price of booking a room. When you see $19.99, doesn’t your brain automatically read that as $20?
I was born on January 11, 1960. To the person born on December 31, 1959, I am only 11 days younger. But they are from the 50′s and I am from the 60′s. But we both know that we are basically the same age. Customers know the same thing. $19.99 and $20 are basically the same.
3. Make promotions special for retailer and customer alike.
JCP will offer month long sales that correlate with seasonal calendars. We recently posted about doing this as an online retailer. See the article What’s Going on? Our promotions may not necessarily be about lower prices. In demand topics or events may actually allow for higher pricing based on the supply and demand principle.
4. Feature quality item groupings that offer value to the customer.
JCP will be offering more “Main Street” sections which highlight particular name brands. At Fruzies, we are working on some ways to make this happen. We do have some limitations since we are bound to formats determined by our partners eBay and Amazon. However, some possibilities still exist. Once we roll these out, I will share them here.
A word about psychology
Some analysts are wondering how these changes will go over with JCP’s customers. Some have noted that customers like sales. I hope they are successful. The wise shopper will appreciate these new steps.
When you hear the arguments for .99 prices and coupons, they usually are psychological arguments. They go something like this, “The customer perceives $19.99 as much cheaper than $20.” It’s in a whole different digit of pricing.
Do you realize what a “psychological” ploy is? It is an attempt to trick the customer. Please don’t be guilty of that.
