I was convinced that if a retailer would take a chance and depart from the ridiculous game of offering 50 percent off or 70 percent off merchandise (it had already marked up 80 percent) and actually offer real lower prices, it would be huge. I couldn’t have been more wrong.
Six months after J.C. Penney boldly ditched its “sales” pricing strategy and began offering “everyday lower prices,” consumers are staying away in droves. Company profits plunged 20.1 percent in the first quarter of 2012. The “everyday lower prices” campaign is the brainchild of Penney’s CEO, Ron Johnson.
Despite the poor showing, Johnson says he’s sticking with it: “We have now completed the first six months of our transformation, and while business continues to be softer than anticipated, we are confident the transformation is on track. The transition from a highly promotional business model to one based on everyday value will take time and we will stay the course.”
Why in the world are consumers not responding positively to a store that guarantees to offer the lowest possible price? It’s human nature. The overwhelming majority of scams I’ve busted over the years worked because we so desperately want to believe we can get something for nothing.
It’s not that we don’t believe J.C. Penney; it’s that we WANT to believe the competition more. Even today, with so many avenues to examine a retailer’s truth in advertising, we will pass up a verifiable everyday low price for the ridiculous promise of 80 percent off!!!
My favorite example involved my good friend David. David was a very intelligent and street-smart photographer at WSMV in Nashville. He came to work one day and could hardly speak he was so excited. He’d just bought a set of stereo speakers from a guy who was selling them out of the back of a van. The speakers had been headed to a local store for retail sale, (as the story went) but there was some confusion, and the store didn’t take them. The vendor’s bad break was David’s great fortune.
I remember him asking me if I thought the speakers were “hot, you know, stolen.” The jig was up the next day when David tried to connect the speakers. He removed the foam front and discovered his “steal” was actually an extremely cheap knock-off of some very common speakers he could have bought for a lot less – at just about any department store. David was so angry, he called the police; and discovered dozens of others had fallen for the same out-of-the-van scam.
I recently discovered another store, like J.C. Penney, that is actually selling its merchandise at really low prices. The store is called Premium Overstock Superstore on South Cobb Drive in Smyrna. Skeptical of the pitch, I asked if I could inspect the store’s invoices. True enough, I discovered the store was buying overstocked merchandise from a very reputable and well-known discounter – and marking it down even further.
The catch is, the store is at the mercy of the discounter’s math skills. When the discounter orders just enough merchandise, this store gets less. When the discounter over-orders – and runs out of space, Premium Overstock and its customers hit the jackpot. I was so impressed I put them on my website! In the meantime, I’m going to do all I can to support J.C. Penney’s CEO. I appreciate a bold move when I see one.
For great consumer advice and companies you can trust, visit www.Trustdale.com. Watch Dale on TrustDale TV, weekends on WXIA 11 Alive, and don’t miss his consumer problem-solving radio show, Sunday at 5 p.m. on WSB AM and now 95.5 FM.