J.C. Penney and the cult of false frugality

Ron Johnson is now out as the CEO of J.C. Penney. He was hired to grand fanfare 17 months ago, with a reputation as a retail master gained from turning the Apple Stores into fantastic profit machines. His vision for Penney’s, a middle-market retailer, was to end the culture where the vast majority of merchandise was sold at a “discount.” I put “discount” in quote marks because when most of your merchandise is sold at a discount, that means the first price wasn’t the real price. It’s a Moroccan bazaar without the actual haggling. The idea was to launch fresh lines of products in small in-store boutiques, and price the merchandise at the level that you would have arrived at after various discounting schemes.

A year and a half later, it’s pretty clear that Penney’s customers didn’t like the transformation. The new fashions got good reviews, but a good chunk of Penney’s shoppers turn out to like the idea of bargain hunting. They want their shopping to feature the discount game even if the resulting price paid isn’t particularly different.

I know the adage that the customer is always right, though I have to say my sympathies are with Johnson in this case. I don’t think it’s respectful to the customer to make her feel she got a steal when she didn’t — creating a false price in order to make her feel that she’s pulling one over on the store, when in fact she winds up paying what the store thought she would pay all along.

I also dislike the discount strategy because it plays into an unfortunate cultural mindset (one I wrote about in the coupon chapter of All the Money in the World). In The Feminine Mystique, Betty Friedan lamented the belief that “Women can save more money by their managerial talents inside the home than they can bring into it by outside work.” The coupon clipping mindset, and the bargain hunting mindset, isn’t just about playing a game. Video games are more fun. Bargain hunting on household items is elevated beyond video games because it’s perceived as conferring the virtue of making you a thrifty home economist — someone who’s serving her family by finding a deal. Except, of course, in Penney’s strategy, you really aren’t.

We will see what the new CEO, who is the old pre-Johnson CEO, does to revamp the retailer. It may be that the economic winds are against anyone playing to the mid- and broad market in malls. Perhaps he’ll come up with a new strategy. What Johnson’s turnaround effort revealed is that certain habits and stories run deep — certainly more than 17 months deep.

22 thoughts on “J.C. Penney and the cult of false frugality

  1. Part of me agrees with you- why I prefer to buy craft supplies at Walmart, now that our area has one, rather than Joann, which plays pricing games.

    More of me disagrees with you, because Kohl’s (which has a phenomenally complicated marketing/pricing strategy and which is my favorite store) and Old Navy/Target (which have simple strategies) are all doing well.

    Penney’s, in my experience with flawed material in boy’s T-shirts, offered store brand products of lower quality than their competitors. Their sale prices on name brand products (Carter’s, Osh Kosh, Levi’s, whatever) are/were consistently higher than Kohl’s sale prices for the same merchandise.

    We live in a climate where “winter” clothing is appropriate about 9 months out of the year, so I do most of my shopping in fall. The first weekend each December, Kohl’s has their best sale of the season. I suspect it’s to reduce inventory while keeping prices high during the popular last-two-weeks-before Christmas. This year, I bought 8 identical pairs of boys’ pants in size 4, since I have 3 sons wearing that size this year, and they shipped them to my door. Carter’s and Old Navy only had two colors (navy and gray) but I branched out with the store brand to include tan and black.

    I’ve spent more time writing this comment than I did bargain hunting/shopping. But I did have to learn to buy winter clothes in the fall. (We don’t start wearing shorts till July, but the shorts sale season starts in January. Shorts are on clearance when people start wearing shorts here.)

    1. @TG – I do think there is far more wrong with J.C. Penney than its pricing strategy. Like Cloud, the only thing I’ve bought there in the past decade was maternity clothes. But if Kohls and Old Navy do well, and Target, certainly Penney’s could figure out some strategy that would work. Joe Fresh and other in-house brands were certainly aimed at that — selling things you couldn’t get elsewhere. That was the whole problem with the Martha Stewart line that Penney’s and Macy’s are fighting over — both want to have something you can’t get elsewhere as that’s the way to distinguish yourself in a complex and segmented retail market.

  2. I know some people who really enjoy the bargain hunting game. I don’t. I prefer convenience, and know I sometimes pay more than I absolutely have to because of that. The last time I shopped at JC Penney was when I was pregnant, because they had decent maternity clothes and a good price, and there weren’t that many sources for that. I did not find the in store experience pleasant, though, so I haven’t been back. I am rather uncharacteristically bargain hunting for a new computer I want to buy, though. So maybe I’m willing to bargain hunt on big ticket items? Or maybe I’m just not really sure what I want in this computer and am using the bargain hunting as a stalling thing. I don’t know. My bargain hunting consists largely of checking a couple of different outlet sites a couple times a week to see if there is a screaming good deal.

  3. One of my summer jobs in high school involved doing a survey for the prosecution accusing a jewelry store of never selling anything at “regular price.” Apparently that’s some kind of illegal, at least in the state where I grew up.
    Historiann’s comments section in a post earlier this week delved into that idea of woman as money manager. I found them really interesting: http://www.historiann.com/2013/04/07/the-empathy-gap-for-those-hardworking-white-middle-class-men-on-top/#comment-1417654

  4. All that coupon clipping and bargain hunting costs time. (My grandma would go to two grocery stores on the same day to get the best deals.) And yet if a woman spends time on ramping up her career to earn more money, some people say that costs her too much time. A two-hour grocery run is virtuous, but a two-hour networking event is selfish? Hmmm.

    1. What a fabulous point! My mother generally went to 3-4 different groceries to find the best prices on different items. She was a SAHM of well-behaved and underscheduled school kids in a small town (so nothing was too far away) and gas prices were super-cheap when I was a kid. I think she did it as a way to spend her days!

      1. @Ana- I think that’s part of the appeal of the bargain hunting game. It fills time in a way that seems industrious. A mom wouldn’t have time for that when the kids are little, but she might when they’re in school. I’m reading Ian Frazier’s novel The Cursing Mommy’s Book of Days and while parts are strange, it is interesting to see how he thinks this blogging mother fills the time that her 8- and 12-year-old sons are out of the house.

  5. I agree with you, Laura. When J.C. Penney’s revamped their marketing program, I expected it to take off. Great graphic design, attractive products, surprisingly low pricing. I always hated their ads before that — so cluttered and hard to read, and I rarely shopped there, except for a few basics, because the inventory seemed a bit stodgy. I was suprised to hear people complain about the absences of discounts. Didn’t they look at the new pricing? Much better! I really don’t understand why this new strategy failed — except maybe it was too much change, too quickly. Obviously, Penney’s customers are set in their ways!

    1. @Leslie H – there may be the issue of doing too much too soon, but Wall Street is impatient, which is probably why Johnson tried to move quickly. As it is, he turned out only to have 17 months.

  6. I rarely clothes shop. But when my son and husband needed jeans, JCP’s advertised price was $15 cheaper than the same brand at other department stores. I’m not a browser in person or online – I just want to get in and get out with what I need and feel like I got a pretty good price. JCP worked for us most of the time.

    When I was a SAHM, I did carefully plan meals based on sale items and coupons to save money. Now that I’m working, I spend much less time on grocery planning and somewhat more money on food. (It’s hard to pinpoint, though… my teen boy is eating us out of house and home.)

    Of course, I make more money now than I saved coupon cutting. I never thought my managerial skills in the home would equal a take-home salary. I was just doing it to make ends meet while I chose to stay home with my kids when they were babies.

  7. I hate shopping for “deals” – mostly because I hate shopping to begin with and I feel like I (rarely) find what I need anyway. Even getting things like black trousers or t-shirts is difficult for me. I usually shop at stores I know I can afford and then buy what I need when I find it.

    For groceries, I look first to what I have in the cupboard/pantry and plan meals around those items first. Then I take a look at the store flyer, and then fill in around the edges. If I happen to find a good deal on our basics (tuna, chicken broth, olive oil, etc) I might stock up a little bit but not much. Trying to clip coupons and match sales is just too complicated and annoying for me. Plus we tend to eat meat/fish, veggies/fruit, and fancy cheese, and there are rarely good coupons for things like salmon or brie. We do buy my husband’s breakfast cereal at Target, since we go there anyway and they have lower prices than our grocery store, but that’s as complicated as we get.

    A year or so ago, we did do an interesting experiment – we made a list of 25 or so staple grocery items that we buy regularly, and then went to 4 or 5 grocery stores and we wrote down the prices of those 25 items and compared them. Our research confirmed that our regular store is (usually) the best deal for the items that we buy. It was a fairly quick way for us to confirm that we’re shopping at the place that best suits our needs.

    1. @Pamela – this is basically my philosophy. Shop at stores you can afford and get what you need and be done with it. E.g. any kids’ clothes at Old Navy are fine. Since I shop online (mostly) I can give one frugal tip: I Google “Old Navy coupon code” before I buy and generally find one for at least 15% off, usually through RetailMeNot. That’s like free money, since I chose what I wanted based on a price I would pay, and then made a 5-second Google search at the end.

      1. I follow that “frugal tip” too!! Sometimes it works and sometimes it doesn’t. Usually I’m able to at least find a code for free shipping. I guess that’s really the only time I’m excited about a “deal”.

  8. I think there is a bargain-hunting mindset that is hard to get out of…the thrill of “scoring a deal” when you think you got x% off (“i got a $30 shirt for $10!!!” sounds/feels better than “i got a $10 shirt!”). Yes, it is flawed (if you got the $30 shirt for even $11, you lost $1, not to mention the time you probably lost hunting through sales racks) but I can understand the satisfaction of finding a bargain.
    I don’t have time or energy for that kind of thing, I do 90% of my shopping online, and there is nothing JCP has that I would want to buy, so I’m not really the demographic they have in mind (or maybe I AM, and their marketing really does suck).

  9. I know a lot of households where internal reporting on the household spending revolves around “it was on sale” to support, defend, justify, or brag about a purchase. Even better: “it was on sale AND I had a coupon AND I got ‘loyalty points’ or a gift card”

    1. @’nother Barb – very true. I don’t know why we think that makes it good — if it’s something you didn’t need, then it’s not saving money.

  10. Before the change JC Penny had a number of brands that were good quality basic clothes — yes they were stodgy but my 90 year old grandmother isn’t exactly looking to wear the latest fad — and sometimes I just wanted a plain dress shirt for my husband and a dress for my pre-teen that was appropriate for church. When JC Penny changed their prices they got rid of all those types of clothes. If I can’t find something to buy it doesn’t matter what the price is or if I got a bargain.

  11. It’s no longer your grandmama’s JCP – it has some amazing merchandise right now, especially for the home. I agree with the poster above who said this change was far too much, too soon – wrong demographic.

    One of my best friends is a prominent interior designer and she and her well-heeled clients are going mad for the Jonathan Adler collaboration. They’re shocked that it’s coming from JCP, and compared to Adler’s other lines this is a steal. I think JCP is trying to emulate Target – loads of designer collaborations, that don’t always work out.

    I’m a style snob, not a brand snob. I shop for myself exactly two weekends a year, and I have no shame about hitting JCP or a thrift store. But I don’t really do the coupon thing unless it takes 5 seconds like Laura’s online example. I’m with you on the time vs. money problem. My time is worth more than your crappy coupon!

  12. i have stopped buying things on sale (or even really looking much at prices when i shop) because one day i realized that all of the truly well-loved items in my closet were bought at full price because they fit perfectly and REALLY wanted them. i’m not saying i’ll never look at a sale rack again, but in general i’d rather have fewer more expensive things that are truly what i wanted than a rack of mismatched items that ended up in my closet because they happened to be 30% off.

    1. @sarah – exactly. A shirt that’s 50% off but you never wear is just money wasted. I went shopping with my husband for a suit the other day and realized that I wish women’s clothing was made like that — with the idea that you’ll wear the same suit weekly for years. With women it’s assumed the style will change every year and you’ll want new things. I’d rather pay more and get something very well made I can wear for a long time.

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