J. C. Penney today announced they are bringing back the weekly ad after just one year of attempting to duplicate Walmart’s everyday low pricing strategy. But a try to replicate Walmart’s success by the century old mid-priced competitor was not the slam-dunk for at least one very good reason.
It was last February when the mall anchor chain dropped prices by approximately 40 percent across all categories. The intent of any retailer in eliminating the number of reduced prices each week is purely one of productivity. The fewer the ad items the fewer the number of hours spent signing the ad and downloading prices into the store’s register system.
But without the multiple weekly reminders by email and through newspaper inserts sales at the chain tumbled in a similar fashion to the tumble at Walmart when they moved to everyday low prices.
Stockholders rebelled and their yells magnified upon each subsequent earnings report. But this too happened at Walmart.
The difference? Sam Walton!
Walmart’s stockholders stuck with Walton because by the time he decided to eliminate weekly sales he had proven himself an effective retailer – after all, he had shown tremendous resilience and determination in taking on the then top discounting prowess of Kmart.
Jason Cash Penney had once demonstrated the ability to connect stockholders to a vision of success but that luster has long vanished. Today’s stockholders just do not have the confidence in the JCP management team that stockholders of Walmart had.
Unfortunately Penney is giving up a little too early. On the eve of moving into the second year without ads the stockholder complaint could no longer be overlooked. Comp sales would have shown a turnaround but with ads returning, the comps will even be better – verifying to stockholders
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