Penney CEO Ron Johnson gets lesson in pricing-spun

Penney CEO Ron Johnson gets lesson in pricing
NORTH RIVERSIDE, IL - FEBRUARY 01: Lisette Barraza (R) hands a shopper her merchadise in a bag displaying the new store logo at a JCPenney store in the North Riverside Park Mall February 1, 2012 in North Riverside, Illinois. Penney Company Inc., the parent company of JCPenney, today presented a major transformation of its JCPenney stores which included a brand new pricing structure that offers fewer sales, monthly specials, and more predictable pricing. The stores will even add new merchandise brands to their existing lines and display the brand new store logo. Penney. Johnson developed Target's "cheap chic" persona before moving to Apple,[link widoczny dla zalogowanych], where he created the world's most profitable stores. Now he wants to wean Penney's middle-market customers from the steady diet of coupons and almost constant discounting.
So far,[link widoczny dla zalogowanych], they are not buying.
"The transition has been tougher than we anticipated," Johnson said throughout a May 15 presentation to investors.
The first results happen to be dismal. stores, had overall revenue of $3.2 billion within the first quarter, and lost $163 million during that time. Sales at stores open more than a year fell a typical 19 percent. The number of people coming into Penney stores dropped by 10 %, and also the quantity of people who bought something fell, too, by 5 percent.
Before Johnson's arrival, a set of sandals at Penney might have been priced at $39.99 and, after all the coupons and discounts,[link widoczny dla zalogowanych], sold for $29.99. Now the footwear is readily available for a day to day price of $30 from the start. Johnson's setup allows special monthlong values for some items; in May, for example, the sandals could go for $22. And when some continue to be available, they would later be discounted to the so-called best cost of $15 on the first or third Friday of the month (when most shoppers obtain paychecks).
Couldn't decipher it out"I went right into a store a couple of weeks ago,[link widoczny dla zalogowanych], and that i couldn't figure out what was what," said ,[link widoczny dla zalogowanych], an old executive at Limited Brands.
Johnson was recruited to Penney by , whose hedge fund, , owns 18 percent from the 110-year-old retailer.
In January, Johnson unveiled his four-year intend to transform Penney into America's favorite store. Inside a presentation to investors and suppliers,[link widoczny dla zalogowanych], he described a department store built around a so-called town square,[link widoczny dla zalogowanych], with as many as 100 boutiques carrying items made by well-known brands specifically for Penney. The first store-within-a-store will sell home goods by .
But Johnson said first he'd to fix the pricing. "We wouldn't have had use of a number of our new brands and design partners without implementing a new pricing model," he said by e-mail.
Less than 1 percent of Penney merchandise was sold at top dollar prior to his arrival. The organization offered 590 promotions a year, the average customer made only four visits during that time.
"That means the client ignored us 99 percent of the time," Johnson said in January. "Steve (Jobs) would have called this insanity. Penney spent $1 billion (on promotions), and the customer ignored us. It's like in junior senior high school,[link widoczny dla zalogowanych], should you keep calling a girl and she doesn't call back, you seem desperate."
Although Johnson said future ads is going to do more to describe the brand new pricing scheme, that may not help around he hopes.
Many shoppers might need to begin to see the markdowns to believe they're getting a great deal,[link widoczny dla zalogowanych], said , a professor of marketing at the . That's especially true when it comes to the basic items - from underwear to dinner plates - that Penney mostly sells.
He first got it backwardJohnson said in the January presentation that shoppers distrusted the shop because it offered so many discounts it had been impossible to understand the actual price,[link widoczny dla zalogowanych]. Yet he may have gotten it backward.
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