"No one really understood [month-long value]. What we intend to
do is a sale; we run 12 a year," Mr. Johnson said. "That's a
messaging change within our vision for how we want to compete. ...
The back half will be better, the customer will understand, and
there will be a lot of purchasing."
Mr. Johnson continues to stand firm that JC Penney's new pricing
strategy is the right approach for the retailer, even as he admits
consumers have been confused. But based on Mr. Johnson's remarks,
it's clear he's looking for a middle ground. He didn't shy away
from the word sale or the word clearance, using both repeatedly.
It's a notable shift for the retailer that annoyed consumers with
its "No!" campaign, which
derided sales, just a few months ago.
Some have questioned why JC Penney didn't
bother to test its new
pricing model before rolling it out nationwide, a criticism Mr.
Johnson responded to. "We did not believe to increase our cost
structure to run a test , which is going to take time, was a
prudent decision," he said. "We just decided let's get on with our
future, which means let's get the pricing right; let's get our
expense rate right; let's get our brands there, so we can go
Despite soft sales and slow traffic, Mr. Johnson said vendors
are still onboard with the plan. He said JC Penney now has access
to every appliance and cookware manufacturer, because it has "price
integrity," something that had been absent. He said that between
2002 and 2012, JC Penney's average retail prices rose 40%, from $27
to $36 , even as
the revenue from each item fell to $14 from $15. The average
discount it took to entice customers went from 38% to 60% during
the same period.
"For a vendor, they like a much more steady business model they
can optimize," Mr. Johnson said. "[Vendors] are focused on
presenting their brands and marketing their brands with integrity.
They don't love a year where the sales are going down, because they
ship less, and that 's hard for them. But they see the future, and
they're very excited about it."
Mr. Johnson also reiterated that advertising expenses would be
down by "a couple hundred million dollars" for the year, as the
company moved from 590 events a year to 12. Bigger budgets will be
allocated to back-to-school and holiday seasons, however.
Mr. Johnson says the retailer will continue to spend to "get the
pricing message across." But looking to 2013 and beyond, he
believes JC Penney could advertise less. "We've got a model that
isn't as advertising dependent," he said.
According to the most recent ad-spending figures from Ad Age 's DataCenter, JC Penney was the 25th-largest
national advertiser, with $1.32 billion devoted to U.S. marketing.
The retailer parted with longtime agency Saatchi &
Saatchi in December and is now working with a variety of smaller
agencies like Peterson Milla Hooks and Mother .