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The true cost of a $2.99 sweater

by Robert Hetu  |  February 7, 2014  |  1 Comment

I visited a JC Penney store last night to see how the assortment looked post holiday. Since I was there I thought I may find a few casual items to enhance my winter wardrobe and was not disappointed. As I moved from clearance rack to clearance rack I saw a table of nicely displayed sweaters, cotton cashmere blend (though just 5% cashmere). The ticket price was $40, the sign displayed a sale price of $21.99, yet when scanned the price returned was $17.99. I was armed with discount coupons including $10 off a purchase of $10, $15 off a purchase of $15, and $10 off a purchase of $25. Along with several other great buys I proceeded to the checkout stand where I presented the sweater with my $15 coupon. I paid just $2.99. After all the coupons and discounts I left the store with a bag full of merchandise for $35, with a receipt stating I saved over $200. For me a great bargain, but for JCP what is the true cost of a $2.99 sweater?

Now I know this is clearance season so I am not getting overly worked up about this. But on the other hand there is no way I could have walked out of a Walmart or Target with this much merchandise, of the same quality, for the same price. What is the message JCP wants the consumer to receive? The confusion created by the tumultuous reign of Ron Johnson (repeat after me, Apple is not a retailer) followed by a hasty return to heavy promotion have taken a toll on the retailer. Before being accused of piling on after the fact, here are just a couple of my tweets on the subject:

‏@Bob_Hetu 30 Jan 2013 First look at JCP “comparison” pricing via email is not promising. I hope this is not really the go forward strategy
‏@Bob_Hetu 9 Nov 2012 JCP lost in search of a future. Stores look clean and merchandise is updated but without a call to action Q4 will be a disaster
@Bob_Hetu 15 Oct 2012 Ron Johnson Really Is Destroying JC Penney
‏@Bob_Hetu 4 Sep 2012 Visited a very new free-standing JCP store near Knoxville – left confused about the messaging. Store appears more upscale than past but…

So I don’t think I can be accused of having 20/20 hindsight. But just because I could see what wouldn’t work doesn’t mean I had then nor have now the answer for JCP. While Johnson catapulted it into a loss of 1/3 of its sales volumes, the truth is it was struggling and needed a change. Now of course it is much harder to woo back those customers that were chased away, but so far all we see is a return to the previous strategy. After generating just a 2% comp-store sales increase in December I am sure there are many lengthy meetings occurring at JCP headquarters in Plano, TX. I hope they can find a successful strategy for future growth.

Success for multichannel retailers can only be found in developing a customer centric model. For a large retailer to become customer centric requires an investment in technology that will allow it to move through the four stages of analytics: Descriptive, Diagnostic, Predictive and finally to Prescriptive. A customer centric retailer would not have made the mistakes that JCP and many other retailers have made since consumerization has taken hold. Yet at Gartner we estimate that less than 2% of retailers have Prescriptive capabilities, while more than 60% are still in the Diagnostic stage (see Gartner publication “Transform the Merchandising Organization Now with Prescriptive Techniques”).

Invest wisely retailers.

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Tags: analytics  apple  assortment  bi  consumers  customer-analytics  jc-penney  jcp  merchandising  multichannel  personalization  planning  price-transparency  pricing  retail  stores  

Robert Hetu
VP, Analyst Retail
7 years at Gartner
29 years IT Industry

Bob Hetu is a Research Director with the Gartner Retail Industry Services team. His responsibilities involve tracking the technology markets and trends impacting the broad-based retail merchandising and planning areas. Mr. Hetu is an expert in the areas of brand, vendor and assortment management, merchandise planning, allocation, and replenishment. Read Full Bio

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