JCPenney Is Raising Prices So That It Can Mark Them Down

Business Insider

JCPenney is raising its prices in order to mark them down again, James Covert at The New York Post reported.

CEO Ron Johnson is trying to restore traditional sales at the struggling department store chain. Last year, he vowed to wean customers off coupons, but the strategy failed and traffic plunged, leading to painfully low sales numbers.

"Somewhat oddly, this shows that JC Penney's products were priced pretty fairly," Brian Sozzi, chief equities analyst at NBG Productions, told us. "However, it was the marketing and entrenched mindset of the consumer that led to an epic failure of the strategy."

JCPenney said that the move gives customers more motivation to come into stores.

"While our prices continue to represent a tremendous value every day, we now understand that customers are motivated by promotions and prefer to receive discounts through sales and coupons applied at the register," JCPenney spokeswoman Daphne Avila told Reuters.

For example, a t-shirt that had an "everyday" price of $5 is now $6, which allows JCPenney to offer a bigger discount.

It's a very common tactic in retail.

"Mark-up to mark-down is a pricing strategy whereby retailers set regular merchandise prices high and then turn around to offer customers discounts," explained Panos Mourdoukoutas at Forbes. "The policy has been working well for retailers, as it hypes consumer emotions, making them feel smart and talk to other consumers about it."

The Post's sources explained that the prices were taken from old lists. One JCPenney insider said that a JCPenney department exec "just pulled that spreadsheet and went off those prices."

The move goes against a lot of Johnson's previous rhetoric.

Natalie Zmuda at AdAge points out that Johnson said in early 2012 that his former boss Steve Jobs would've called JCPenney's promotions "insanity."

"At some point you, as a brand, just look desperate," Johnson said last year.

Well, there you go.



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