In the US, there has been a lot of talk about how the retailer, JC Penney, missed the boat when they eliminated sales and stated they were offering the lowest price without coupons or sales. In fact, JC Penney reported that they missed their expected sales goals of $3.4 billion. What happened?
Overview of the JC Penney story
After Ron Johnson, architect of Apple’s retail success, joined JC Penney as CEO, a major overhaul was begun. Previously JC Penney was a stolid retailer. With the massive change plan being implemented, the stores were remodeled so that there are mini-shops or boutiques within the store. The American retailer changed their merchandise as well as their pricing strategy. They explained that it is a “fair and square” deal to have customers pay a low price any time they shop without using coupons or attending sales.
Do customers prefer the status quo?
One theory being proposed as to why JC Penney is struggling with customers is that they prefer coupons and sales to one low price. It has been a harsh lesson for this retailer and Johnson has stated a belief that “coupons were a drug; they really drove traffic.” (An interesting note-as reported on TheStreet.com on May 31, 2012, JC Penney is adding “Best Price Fridays”)
It sounds more like the thrill of the hunt as a shopper looks for the best deal at the best time. Is this unique to US consumers? Different countries have their own shopping cultures. In some countries, the price is the price and there are no sales. In other countries, it is expected that the customer will haggle with the seller for a mutually satisfactory price.
No matter where a customer is geographically, there are certain expectations about what type of merchandise is offered, how the store is laid out and what the price points will be like. For many customers, they are aware that the stores are marking up the price so when they get a “good deal”, shopping feels rewarding. (There are other psychological things going on too.)
But what if the store tries to change the status quo?
That is what JC Penney tried to do and it was received poorly. Customers either stopped going to the stores or reduced the number of purchases. It seems to be based more on habit. Take traffic flow in stores. In the US, shoppers start on the right side and go around counter-clockwise while in the UK, the preferred path is to start on the left and go around clockwise. Customers will continue with their habitual path even if stores design their layouts in the opposite direction.
But what about online shopping?
In an Internet Retailer article, customer behavior is becoming habitual as well. There are expectations about discounts and shipping costs. Price comparisons are a click away on laptops and mobile devices. There are apps and websites that simplify this so shoppers find what they want more efficiently. In fact, globally, online shopping is on the rise and there are distinct habitsabout where and when people shop. One such habit is using the shopping cart as a wish list and waiting for the best price to be posted. This is making online retailers scratch their heads on how to get people to just buy the item right there and then.
Can retailers change how customers shop?
This seems to be a tall order. There seem to be a lot of variables that could create failure for a retailer, regardless if they are online or a brick and mortar store. Certainly JC Penney bucked current trends by stating they did not want to do business as usual. They declared they were not marking up their merchandise just to give a false sense of saving money. But regardless if you are selling in a brick and mortar business or an online business, people are looking for the discounted price because the perception is that you are paying too much if you go with the stated price. Perhaps the consumer mindset is too set in habits?
How would you describe the shopping habits where you live?
What shopping habits were affected by the recession (or are still affected by a poor economy)?
What are the top variables a retailer needs to consider before altering how they sell to customers?
How do you train customers to shop “your” way?