About J.C. Penney
J. C. Penney Company Inc, also known as JCP, is one of the mid-tier departmental stores in the United States. JCP’s headquarters are located in Plano, Texas. It operates more than 1,110 stores distributed among all the 50 states of the USA, as well as in Puerto Rico (JCP, 2012). In addition, JCP has merchant offices spread across the USA, where it operates catalog sales. James Cash Penney and William Henry McManus founded the company in 1902. Its operations were not vibrant in the early 1900s. However, in the 1950, the store started gaining popularity when it opened quite a number of branches in the downtown areas of the cities within the US. Towards the last quarter of the 20th century, shopping malls became a trend in the retail market and JVP followed the trend by relocating most of its stores to big shopping malls located in the uptown areas of the US cities.
In recent years, more trends have evolved, as retail stores embark on operating in standalone stores. Again, JCP has followed this trend by opening standalone stores, such as its Texas and Indiana stores (JCP, 2012). In addition, the company has a big-box store (a departmental store located in central business areas of big cities and attracts a big number of customers) in Houston (JCP, 2012). Since 1998, JCP has also been offering retail internet services to a variety of customers. Apart from the catalogue sales, retail internet, and conventional merchandise (footwear, house ware, clothing, beauty products, furniture, electronics and jewelry) JCP also offers services, such as portrait studios, jewelry and watch repair, fast food, optical and Sephora. JCP has a number of discount stores as well.
Currently, the company employs approximately 150,000 employees in all its stores. Some of its private brands include Decree, Rusty, RS and 3rd Rail. In the year 2007, JCP launched its biggest label in its history: the Ambrielle lingerie. It was the company’s first private label, and it has been doing so well since its launch. The company’s slogan is “Every Day Matters”, which the company launched early in the year 2007. Initially, it operated under “It’s All Inside” slogan.
The Change and the Reasons for the Change
Recently, JCP changed its pricing style by introducing a new pricing strategy. The company introduced a flat price and removed the sales from all its products. That is, instead of having prices such as $15.99 and so forth, the company now fixes flat price such as $16 so forth. Both external and internal forces drove the change in JCP (Heller, 2012).
One of the external forces behind this change is the market changes. The market where JCP operate has become very competitive. The numbers of departmental stores owned by different retailers are increasing every day. The major competitors in the middle-tier department store segment include Kohl’s, Sears and Macy’s. As the numbers of mid-tier stores continue to increase, the customers are increasingly becoming selective.
JCP change in its pricing style is one of the methods of attaining a competitive edge in the market. Instead of fixing prices, such as $39.99 for a given item like its competitors, JCP is now offering such item at $39 or $38. This is a way of differentiating its products and services from those of its competitors. The price differences between JCP’s products and those of its competitors will help the company attract the heavy traffic in its stores. Consequently, the number of sales made by the company will increase, resulting into the increased revenues, as well as increased market share compared to its competitors.
Demographics, is also another external force, which contributed to the change. In the recent past, the cost of living across the globe has increased substantially. This is due to the increased energy cost, and the global economic crisis, which many countries of the world are still struggling to overcome. The US consumers have been affected by these occurrences. The amount of disposable income available to the consumers has reduced. What the consumers used to purchase with $1 in 2007 is now worth $1.5 or even more. Due to the high cost of essential goods, the amount of disposable income among the consumers has reduced. Based on this reason, JCP adopted the new pricing strategy where all its products and services have fixed price through a given period, in order to create savings for the customers. By removing the fractions of dollars that used to exist in the prices of different products and services, the customers will be able to shop more with relatively less money, due to the savings reaped from the new pricing strategy.
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The internal force that contributed to the change is change in management. Late last year, JCP changed its management, as a part of the larger strategy of building a dream team (Heller, 2012). Ron Johnson, the founder of Apple’s retail stores, was appointed the CEO of JCP. After his appointment, Johnson appointed Michael Francis, former marketing and branding manager at Target, as the new JCP’s president. As part of the new management’s strategy to take JCP to make JCP the favorite mid-tier store, the new management introduced a new pricing strategy within the first two months of its term at JCP.
Objectives of the Change
According to Johnson, the new CEO, JCP introduced a new pricing strategy to enable customers shop on their terms, but not on JCP terms (Heller, 2012). In the new pricing strategy, JCP slashed prices of its products and services by 40 percent. JCP intends to keep the slashed prices throughout the year. Johnson states that JCP plans to have its prices remain constant throughout specific period such as a month or a year (Heller, 2012). The objectives of the new pricing strategy by JCP include enabling the existing and potential customers shop at their convenient time. Johnsons adds that by setting monthly or yearly prices in its products and service, the customers will be able to shop at their convenient time, as opposed to the time when shopping is expedient for JCP (Heller, 2012).
The other objective of introducing a new pricing strategy is to attract more customers (Heller, 2012). By maintaining the low prices throughout the year, JCP will be able to attract frequent shoppers. This way, JCP will be able to increase its sales volume, as well as the market share, due to the increase number of shoppers visiting its stores throughout the year. In addition, the objective of the new pricing strategy is to enable JCP introduce new merchandise in its stores, but on a routine schedule (Heller, 2012). This is an easier method of introducing new products and services, because as the customers visit the stores frequently, they will have a chance to see the merchandise.
Furthermore, since the new merchandise will also bear low prices, the shoppers will be attracted to buy them, as opposed to purchasing them in places where their prices are high (Heller, 2012). It is evident that JCP introduced the new pricing strategy in order to take advantage of the growing popularity of the departmental stores in the US retail market. The number of individuals shopping departmental stores has increased substantially over the last few years. Shoppers are looking for convenience, while conducting their shopping activities. This is by undertaking all their shopping activities from one location, as opposed to shopping different items from different locations. Due to this emerging trend, JCP hopes that the new pricing strategy will enable it to attain a competitive edge in the mid-tier retail market: attracting and retaining many customers than any other players in the mid-tier retail market.
Implementation of Change
As earlier mentioned, the management introduced the change in JCP’s pricing style. When Johnson took over the top position at JCP, his goal was to ensure that JCP became the preferred mid-tier retail store in the entire of the US. Johnson, therefore, introduced the new pricing strategy as part of the larger efforts of JCP to become the preferred store in the mid-tier market. Implementation of the change, which is still ongoing, is being conducted in all levels at JCP. This means that JCP is implementing the new pricing strategy in all regional stores, despite their sizes or volume of annual sales. In fact, when the new CEO announced the new pricing strategy, the 40 percent price slash was reflected in all products and services offered by JCP in all its stores within a few weeks. The employees in all the 1,110 JCP stores were involved in adjusting the prices of the products in their respective stores, in order to reflect the new pricing strategy. The JCP inventory system was updated, in order to reflect the new pricing strategy as well. Both the management and the employees participated in implementation of the new pricing strategy.
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New leadership accompanied the change that took place at JCP. In fact, the new leadership, a new CEO and new president, was the one that suggested the change at JCP. According to Heller (2012), resistance from the employees did not accompany the change, both in leadership and pricing strategy. It appears that the changes that took place at JCP came at the right time, when the entire organization was in need of change. JCP is also undergoing other forms of changes, in order to complement the change in pricing strategy. These changes include system and process changes. Heller states that Johnson announced that by the month of August this year, JCP will have introduced a new inventory system in all its stores (2012). The new inventory system will allow JCP to update its inventory automatically whenever new fixed prices are introduced.
Process changes entail change in the way selling prices are determined. Instead of fixing selling price of various products and services based on profit margin analysis, the process of determining the sales price will entail analyzing the best period to fix a certain price. For example, the process of determining the sales price of clothes will entail determining the time of the year when shoppers shop more for clothes. After identifying the period(s), the best price of the clothes during that period is then fixed. This is determined by the prices offered by the competitors in the mid-tier retail market. Since JCP wants to maintain a low pricing strategy, all its prices must be below all the prices offered by the competitors in the market for all goods and services.
In implementing the new pricing strategy, JCP has developed a plan in terms of timing. According to the new CEO, Ron Johnson, JCP hopes to undertake the implementation of the new pricing strategy within a period of seven months, beginning on February 1, 2012 (Heller, 2012). Although the 40 percent slash of prices has been reflected in all its stores, JCP will require time to ensure that the new strategy is implemented effectively. The duration of seven months is to allow JCP to monitor the market response, and make changes as desired. In addition, the seven months duration is to allow JCP to make appropriate adjustments in its inventory system. After the end of the seven months period, JCP will start implementing other changes, such as introduction of new merchandise and new presentation methods in its stores (Heller, 2012).
Currently, it is hard to predict, if the strategy will be successful or not, because only two months have elapsed, since JCP started implementing the strategy. However, experts predict that this strategy is likely to be successful. According to Haim Mano, a marketing professor at the University of Missouri, the idea of no sales is a big idea. He states that although the idea is going to take time to succeed, JCP will eventually emerge the winner in the mid-tier retail market (Marketing Expert Talks New J.C. Penney Pricing Strategy, Future of Retail, 2012). Mano adds that the concept of flat and simple prices such as $10, $15, or $20 is more appealing to shoppers than prices such as $19.99 or $14.99. This indicates that JCP is likely to get positive response from the market.
Nonetheless, JCP has not yet experienced any form of resistance from the change. The employees have responded well to the change by cooperating with the management in the implementation process. The customers have also not exhibited any form of resistance. In fact, according to experts’ analysis, many shoppers think that the concept of flat prices and not sales is a great idea (Marketing Expert Talks New J.C. Penney Pricing Strategy, Future of Retail, 2012). Based on the information available about the implementation process of the new pricing strategy, and shoppers and experts’ attitude, JCP stands high chances of accomplishing its business goals associated with the change.
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In my opinion, the change at JCP has been handled well. This is because there has been no form of resistance that has been reported so far. Besides, the management has a well defined plan for the implementation of the change, as well as business objectives that JCP hopes to achieve from the change. This is an indication that the change has been planned adequately, and the entire organization is ready for the change. This strategy is likely to set apart JCP from its competitors, such as Sears and Macy’s, thus, making it the leading company in the mid-tier retail market. JCP approach to change has helped me to learn that for change to happen there must be a lead person who provides direction and guidance to the rest of organizational members. In the case of JCP, Ron Johnson has been the lead person.