Last week in class we discussed the importance of managing inventory and managing suppliers. It has been stated in class many times that a company is only as strong as its weakest supplier. Simply stated, suppliers can make or break your business.
An interesting article on MSNBC (click here) discusses how J.C. Penney is revamping its inventory’s pricing with discounts of at least 40%. What exactly does this mean? As the title of the article simply points out, lower prices and fewer sales.
The article discusses how many Penney shoppers usually capitalize off the many sales the store offers, however, the frequency of the sales were confusing many consumers. Now, instead of all the sales, Penney will just have drastically cheaper products. The company is trying to make itself more like WalMart and Target.
The article doesn’t explain how exactly Penney plans on cutting the prices, but if it is adopting methods used by the likes of WalMart, it can be assumed that they’ll be cutting costs directly through suppliers. WalMart is the leader of supply chain management, which is how it has managed to keep prices so low.
One of the issues that the article mentions that may backfire against Penney is the loss of the customer who enjoys sales. Personally, I think it could be a very interesting psychology essay to go on and research how consumers think when it comes to sales. Personally, I don’t necessarily go out and look for sales, but when I do find out I’ve saved money due to being at the right store at the right time it makes me happy.
What do you all think? Is J.C. Penney making the right decision? Can it begin to compete with the likes of WalMart and Target, or is the company just a liability?
I think that the new strategy is highly beneficial to JC Penney in many different ways–one of them being traightforward in their marketing schemes to various customers. However, this strategy may hur JC Penney in the longer run due to their suppliers unwilling to supply them with materials which begat revenue. Since Wal Mart is the reigning queen over such supply chain management and
low-price strategy, it will be hard for JC Penney to influence the market into its corner.
I have been keeping up with all the news surrounding j.c. Penny’s and have found their new strategy very interesting. J.C. Penny’s has said that they are guilty of increasing their prices more than 40% from what they paid to purchase the items, which is probably why they always had sales and gave out ridiculous coupons all the time. Because of the economy they seem to think that by lowering the cost of everything in the store that people will be more likely to shop there. They have also said that they plan in changing the format of the store to be more ’boutique-like’ and having stores within J.C. Penny’s based on brands. I think that they are being quite honest with consumers and are really trying to make the store better. Until consumers can see how the prices really are and how the store manages to run that consumers will be skeptical of the changes. From my own personal standpoint, I think this could mean J.C. Penny’s has a lot more success.
It is interesting that you bring up J.C. Penney’s because last quarter I studied the company and the department store industry. It seems to me that J.C. Penney is trying too much to be like the other big retailers. Customers have grown so accustomed to Wal-Mart being the cost leader, that I don’t think they will readily switch over to Penney’s just because they are lowering prices. That being said, there are still quite a few people who shop at Penney’s, and I think they could attract more people by appealing to the younger generation.
The company has over 3,000 suppliers for their many department stores, home decorating and furniture units, outlets, etc. Perhaps they could try to consolidate the amount of merchandise they offer? It may reduce costs by helping operations move more efficiently. I believe they should try to compete based on other attributes than price because I highly doubt they will ever achieve the supply chain efficiency that Wal-Mart has. Unfortunately, the solution is more a combination of things they need to change, and as we know, changes are costly. They are still generating revenue, but I’m not sure for how long it will last.
I don’t think this is a good move on J.C. Penney’s part in that they haven’t established an image as WalMart and Target have. People KNOW WalMart as a place to get deep discounts. J.C. Penney is known for its sales. These may have two separate target markets, which would cause J.C. Penney to lose its customers. J.C. Penney needs to establish WHO they are trying to sell to, and what type of products they will be selling.
It will be interesting to see what how JC Penny results will be because of this change. I believe Sears still uses that sales strategy. I once worked of sears as a appliance salesman, and I remember how we had to always change the prices on our appliances stating that they where all on sale. But the reality was that the price was usually around the same throughout the year, its just that the tag said they were on sale. It would be very interesting to see how consumers think when it comes to sales, and if it changes their shopping decisions.
I have been hearing a lot about JC Penny’s new business model as well (their adds are on TV every five minutes). For me, the biggest question is if JC Penny will be able to overcome its image as a more low-end retail store and instead be perceived as a discount focus store like TJ Maxx. Thus far, I have not been very impressed by the marketing campaigns (hearing people screaming for 30 seconds gets my attention, but doesn’t make me want to go in the store). I think on clothing retail it will certainly compete with Walmart, but with Target or TJ Maxx, the competition will be steep.
This is a poignant real world application of what we discussed on the first day of class in regards to cutting costs and eventually prices, as it illustrates just how crucial operations management and supply chain are to a business, and how tremendous of a competitive advantage they can be in today’s corporate climate. It would be near impossible for J.C. Penny to cut costs and prices so dramatically in any other are other that operations management. I also like the observation that a company is only as strong as their weakest supplier, as this seems to be a macrocosm of the bottleneck in an assembly line. Understanding this connection illuminated both ideas for me, and made them a lot more clear. That said, I do think this will pay off for the company. When shoppers see that they are paying less than what they expected, and more importantly they have more free money to spend, I think they’ll want to spend it (this is America after all). And where better to start than the store your already in?
Your post was very interesting, and I was very surprised to hear this. I personally do not think that what they are doing is a good idea because making this drastic change will not be easy. Not only that, but creating this perception in the minds of consumers is going to take a while. They will literally be a completely new store, but at the same time, I guess it’s time that they make change. If they feel that nothing is working right now, and that this extreme makeover will, then we’ll just have to wait and see what happens.
I agree that it would be interesting to do some further research on this topic to see what the consumers think about discounting the products and how the discounts are affecting overall store sales. I do not think JC Penny is making a good move at all by doing this, because it is sending a message to consumers that the product is not as high of quality and groups the store with others like Walmart and Target. Although, with the current economic conditions, it may be the only option for stores like JC Penny if store sales are low and they need a way to drive in more customers. I do not think JC Penny would get rid of sales all together, so those types of consumers that you mentioned who love sales will probably still shop there regardless of what the initial price is.
I have been following this story for a little while and was very excited by the changes that will follow pretty soon with JC Penny. I have been Penny’s customer for at least ten years and over the years became disappointed with their stores. However I think that someone like Johnson who is the new CEO of Penny’s with great background working for Apple can really turn this department store around, I think everyone knows it needs it. I’m not sure what the consumer reaction was on February 1st when the change of the stores took effect however the Wall Street gave its approval of the change spurring a 17% rise in the stock making it hit 52 weeks high according to the wall street journal
This is a smart move for companies. people are bombarded with so many advertisements that they do not even work for the most part. we have all developed the ability to block out these media messages which hurts companies which causes them to increase prices just to make them down with a “better” sale. This marketing decision might work in the short run, but to build long lasting relationships with customers you have to have an established price for your product or they will just go somewhere that has a better sale then what you are currently offering. The J.C. Penny commercial that really makes this clear is the one where people open their mail box to see it flooded with flyers and coupons. I think that the message really got out to the people what J.C. Penny is trying to do.
I think that we won’t know how this move is going to affect J.C. Penny until sometime afterwards where we can see how they are doing revenue wise. With that J.C. Penny needs to get its name out and try to have the image of always discounted places such as Target, Walmart, or TJ Maxx. Without the customers knowing and believing that these are always the lowest prices that they can get them at, I feel like they will lose more revenue by not having their usual sales. This brings me to the question if they are still going to sometimes do sales on top of their already lowest price option? Or if they are always just going to be the same and never ever have a sale or clearance.
In my opinion, this will either be the best thing that ever happened to J.C. Penny or the worst thing that could have ever happened to them. It all depends on how the consumer begins to view the new strategy. When I first read the article, I immediately became concerned and thought “well that’s the end of J.C. Penny.” Consumers have an image to keep and I feel that some consumers will stop purchasing from J.C. Penny based on the mere fact that J.C. Penny will now be considered a discount store. However on the other side of the coin, consumers want innovation and J.C. Penny is offering this as well by providing a shopping experience that is different from most other retailers. So I’m kind of stuck in the middle on this particular subject, not really sure what to think about the new strategy. One thing is for sure, this will be very interesting to follow.