A few years ago I wrote what continues to be the only book published about Kohl’s Department Stores (paperback). In the chapter reviewing our business model and how our Hi-Lo pricing strategy helped create a ‘wedge’ between then discounter Target and a traditional department store like Macy’s, I spoke of how EDLP (Every Day Low Pricing) was a fool’s errand:
“We had an aversion to the notion of EDLP… Sears had tried it in the 1980’s, only to abandon the strategy after sales plummeted and market surveys revealed that their core customer thought they were no longer getting the same kind of deals. In my mind, the only time EDLP works is when the truly lowest price retailer can put a stake in the ground and claim they they will always have the lowest prices. Only one guy can do that, and their name is Wal-Mart.”
This is a no-brainer. The typical shopper at Penney’s is a Mom and often breadwinner who takes pride in searching for a deal. She enjoys coming home with a sense of satisfaction that she was successful in her quest. I can guarantee you that if you set up two tables of the same sweaters in opposite ends of the Missy apparel department in a store, and on one you have a sign that says 'Everyday Low Price $29.99’ and the other says 'Save $30.00, 50% OFF, Sale $29.99’, there will be no contest. The sale table will always win.
A couple of weeks ago I finished the Steve Jobs biography, which included the successful contributions of his Senior VP of Retail, Ron Johnson, and his valuable role in developing the concept of what has become one of the most successful retail formats in history - the Apple Store. Last year, Johnson left Apple to become CEO of Penneys (after 11 years with his former company, it’s reported he made over $400 million). He is the architect behind JCPenney’s new pricing strategy.
The idea that you can transfer the success of Apple’s pricing to a department store like Penney’s is just way too much of a leap. You’re jumping off the cliff.
I love the Ellen DeGeneres ads. I also love to make money. I sense an opportunity.