As we all know by now, Ron Johnson's first moves at JC Penney have not gone smoothly (to say the least). He put forth a bold new pricing strategy that left customers befuddled, and those consumers simply stopped shopping at his stores. Sales dropped sharply, sending the stock tumbling. Now the company has announced a shift in pricing strategy. They've made it simpler. The firm will cut prices across the board, while moving to a two-tiered pricing structure: EDLP on most items, with sharp discounts on clearance items.
Many people have criticized Johnson's pricing maneuvers. Rather than focusing on the CONTENT of his pricing strategy, I'd like to comment on the TIMING of his moves. According to the Wall Street Journal, Johnson's longer term strategy for the retailer is to focus on creating a "department store full of vendor-branded and themed boutiques." The company launched its first such boutique yesterday in Manhattan - a jeans boutique featuring Levi's, Arizona, and iJeans by Buffalo. My question is this: Wouldn't it have been more effective to launch the boutiques FIRST and then move to a new pricing structure? Didn't the firm need to get the store layout and experience improved FIRST and then try to wean customers off of constant discounts? I think the timing issue, in a way, is a more interesting strategic question than the issue of precisely how JC Penney should price its items.