The market was initially impressed that J.C. Penney Co. Inc. (JCP) announced a tiny tick up in October same-store sales, a mere 0.9%. The retailer's stock moved up, but dropped back and closed no better than it traded a few days earlier. What investors understand is that J.C. Penney is about to hit the brutally competitive holiday season, and it still does not have the marketing muscle or store traffic to exceed the industry's pace of same-store growth. J.C. Penney has little left to do other than something desperate. The something could be a giveaway like the one Old Navy has set for Thanksgiving: pay for customer traffic with a huge prize.
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J.C. Penney already has kicked off its "Biggest Sale of Them All." It is not clear why the retailer can claim that. It has marked down women's boots, bras and small appliances. However, a look at Wal-Mart Stores Inc. (WMT) promotions show it has a large number of "early bird" specials. And several other retailers have aggressive plans of their own. Most will open stores earlier than last year over the Thanksgiving weekend. Kmart will open early enough that there are protests over how its workers are treated.
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The playing field among the largest retailers for "free shipping" is fairly even. Each believes it has to match Amazon.com Inc. (AMZN), which has been the leader in free shipping for years. And free shipping is complicated for consumers because it comes with a number of conditions, particularly how many dollars customers spend on merchandise before they qualify.
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The only revolutionary promotion of the holiday so far is the decision of the Gap Inc. (GPS) division of Old Navy to give some lucky shopper who comes to its stores on Black Friday a $1 million prize. That is on top of Old Navy's free shipping, "free returns" and merchandise that is 30% to 35% off.
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Among this litter of offers, J.C. Penney cannot stand out on its own. There are too many free things and tremendous discounts.
Old Navy is gambling $1 million, which is not much by the standards of its parent Gap, to gain the attention of the holiday consumer. If the ploy works. Old Navy may get a larger stream of customers than in years past, and it may pick up market share as well. There is a lesson in the gamble for J.C. Penney. A single offer well beyond what its competition has may be enough to gain the consumer's attention, at least for a day or two. If those days are Thanksgiving and Black Friday, the additional attention could mean a great deal.
J.C. Penney has raised enough money recently to fund its operations into next year. The pool is certainly enough for J.C. Penney to follow Old Navy's lead. J.C. Penney operates in the realm of huge retailers for which $1 million may not be adequate to draw attention. However, $10 million would likely catch the public's eye. J.C. Penney cannot afford to have a bad or even mediocre holiday shopping season. Ten million, balanced against that problem, is not very much to pay.