The Perception of Value

While gift shopping this holiday season, I found myself in a local JC Penney partially for gift shopping and partially out of curiosity. There has been much in the news about JC Penney's change in leadership in the past year as well as the attempt to transition their image and business style.

Their new CEO came from a hard goods industry with a brand that was unique from inception as well as a pioneering influence in a burgeoning field. What he has now is a mid-range retailer with a sizable soft goods offering. Its history of affordable goods has long had an appeal to the everyday, mainstream shopper. The company’s new goal is to rebrand and up-style JCP into a trendsetting, fashionable retail destination.

What makes a shopper shop?
What makes a shopper shop?

The store I visited has benefitted with a new look. Cleaner designs, in-store boutiques and brighter lighting gave an optimistic feel to the store. Atmosphere to the higher-end shopper is pretty important, and shopping where there is care, cleanliness and organization makes for a pleasant experience. Snazzy graphics and a modern motif subtly suggests higher quality and that the products therein may be worth a few dollars more.

Entering a ladies clothing section, I noticed JCP branded items. They were quite colorful, trendy and youthful. Intrigued, I felt the material, checked the stitching and then the price tag of a particular garment. The price ended in a .00-dollar amount. As a seasoned American shopper, this sends an immediate signal to me that the item must be newly received and that most likely it would be marked down within a few weeks. The quality of the item itself did not do much for its case. It was certainly cute, but seemed inexpensive. Having read that JCP is trying to offer fair prices from the onset and to no longer offer sales per se, I thought further about this fairly attractive item. But then I walked away. The price of the item was not outrageously expensive, but the quality of the material suggested a similar purchase could possibly be made for roughly half price at Target.

Moving on in search of a gift item, I approached the Ladies Accessories department. Instead of store branded items, there were Isotoner products also offered at full price. Being fairly familiar with this brand I knew a similar style, even if the ones on display at JCP were exclusive, could be obtained at nearby Kohls for at least a 20% discount. This shopper passed on these as well, even though it would have been convenient to purchase there instead of traveling a little further to Kohls.

In these examples, JCP is fighting the perception of value. Their ready to wear items may be unique or exclusives, but as a shopper we are long-trained to never pay full price and to suspect a .00 price. There was nothing about either item that would lead the consumer to believe the product was worth the offer price or suggested it was a deal that could not be obtained elsewhere. Their contention is that the mark down process essentially starts with an inflated price in order to offer an item on sale to get the margin they need to remain profitable. They are of course, absolutely correct. But with the ability to quickly price check via the Internet and having a fairly decent working knowledge of quality and price at competing retailers, consumers won’t be easily dissuaded from the illusion of a mark down – especially in a long recession.

Can it be done? Can consumers be retrained to accept full retail offer price as fair? In order to do so, the retailer has to offer something unique, desirable and experiential to make it work. JCP will have to alienate their long time value conscious customer and attract a new, shiny, deeper-pocketed client. The former will be easy, but can they convince their new client of choice to accept their goods in the shadow of their former persona?

Most of us in the tea world do at least some retailing, so this is a very interesting case to observe. If JCP is successful, it will be beneficial to learn from their victory. Business naysayers have already predicted their demise, but we should wait and see what transpires in the next few months. JCP needs to offer something of quality and without comparison, I believe, in order to pull this off. I hope they are successful!

To our good fortune, most of us fought a somewhat similar battle a decade or so ago product wise, when we had to continuously explain the difference between run of the mill teabag dust and our fabulous full leaves. For us, we knew we had a truly higher quality product. One taste and most consumers understood as well. Some of us have even been challenged when our pricing is slightly lower (happily, due to a streamlined supply chain and in-house blending,) but what a great position compared to JCP’s. We were already new and didn’t have to reinvent our businesses while we had to change the tea status quo.