Kudos to Penney’s Ron Johnson for trying to restore the sanity to retail pricing! Reality check: Penney’s regular price on an item that costs $10 to make has risen 43 percent in the past few years: from $28 in 2002 to $40 in 2011. But due to the ridiculous cadence of non-stop sales and promotions that permeates our entire industry, their actual out-the-door retail rose only 15 cents, from $15.80 to $15.95, during that same period. (See yesterday’s story, Ron Johnson discusses JCPenney’s new strategy.)
Can Johnson’s everyday low price strategy prove successful? My feeling is that it can, depending mostly on the merchandise. The right designs from the right names (whether brands, exclusives or collaborations) at realistic and stable pricepoints are indeed likely to excite consumers. Also needed: aggressive marketing, upgraded selling floors and a strong online component. Obviously, getting all this right at once is no simple matter, especially since Johnson is under tremendous pressure to slash expenses.
How will competing stores respond? Can branded vendors work within these new parameters? Are new designers able to produce goods at Penney’s asking price? Time will tell, but how refreshing to have a retail exec with enough courage to defy an extant system that is clearly broken.