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Published: Monday, March 18, 2013, 12:01 a.m.

Penney unwise to disrupt traditional pricing

When J.C. Penney made a bold pricing move to create a shift in major department-store retailing over a year ago, many experts had their doubts. The economy had been sputtering for some time, and introducing a concept of "fair and square" pricing seemed a bit dramatic.
What's most important to consumers: Keep your pricing simple.
The re-branding efforts of the chain and the fallout from continued economic pressures have wreaked havoc on the company, not to mention a current battle with Macy's and Martha Stewart in a New York courtroom.
What many consumers look for today is a great price for something they really need. Armed with easy access to information, they'll search the Internet, use their smart phones and make product comparisons.
Perhaps you recall Penney's three-tier pricing strategy unveiled in 2012. The "fair and square" level amounted to their new everyday low prices.
Rather than having traditional weekend and seasonal sales, Penney's moved to a monthly catalog, with monthlong pricing that promoted "better" pricing; this represented the middle tier. This tier features red color-coded in-store signage to draw customers to their "it's not a sale" displays.
And finally, the third tier with blue color-coded signage featured the "best" pricing category. This replaced the traditional clearance racks to which many customers have over time become quite attached.
In a nutshell, Penney's moved toward a discounter strategy by promising lower prices. There was no more need for sales, and the message to their customers was, "Get used to it." The language of "clearance" was removed from the shelf entirely.
I visited a local Penney's recently and behold, the clearance signs are back! The yellow signage with bold black lettering was something you couldn't miss.
When I looked at some of the clothing on clearance I was quite annoyed. I found the clearance display rack with dress slacks priced at $10 "or more." Of course, the emphasis was on the $10 and the fine print could only be seen when I arrived at the rack.
I started with the pant size I normally wear. None of these were even close to the $10 price point. So I moved over to the sizes I only wish I could be wearing and -- you guessed it -- still no trousers available for $10. I searched the entire rack and found nothing at $10!
I realize that there may have been some product earlier in the clearance sale on the display that justified the $10 signage, but surely with many sales associates working the floor, and few customers on this particular day, the best thing the store could have done was to make the signage accurately reflect what was on display.
Don't get me wrong; I am an avid Penney's customer and have been a fan of their blue-collar-friendly pricing for years. Like many customers, I thought their prices were fair before the change. And I've been very satisfied with their service overall. The chain had built a strong reputation and brand that today is sadly taking a beating.
Nothing is more frustrating from a consumer's perspective than to feel as though there is a pattern of bait and switch, which is a far cry from "fair and square" pricing.
On this particular trip I not only walked out of the store empty-handed, I was disappointed by the shift that has taken place at Penney's. From the outside looking in, it appears to me that the retailer is in an identity crisis and needs to reestablish its bearings.
I hope Penney's is able to recover from this season of pricing chaos and confusion. The retail marketplace is better for all consumers when we have competitors who are committed to serving their customers well. My unsolicited advice: Get back to the drawing board and return to a simpler, more traditional pricing ethic.
Whether a business is large or small, consumers in our economy vote with their dollars; simple and transparent pricing will always garner a following.
Juergen Kneifel is a senior associate faculty member in the Everett Community College business program. Send your comments to entrepreneurship@ everettcc.edu.
Story tags » ClothingDepartment storesRetailSmall business

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