When former Apple CEO Ron Johnson joined the JCPenney team, we knew there would be major changes, but on Feb 1^st the company surprised us all. JCPenney is permanently marking down all of its merchandise by at least 40%. There will be no more Saturday sales, weekend deals, or President’s Day clearance events. The department store retailer is getting rid of the hundreds of sales it offers each year in favor of a simpler approach to pricing. The team lead by new CEO Johnson is taking the guesswork out of shopping by offering more predictable pricing, and plans to transform the customer experience and the way people shop at a department store.

 Photo Courtesy of the JcPenney Media Room. All rights reserved

The three-tiered strategy

• “Every Day” low pricing daily
• “Monthly Value” discounts on select merchandise each month
• “Best Price” clearance deals during the first and third Friday of each month

The company used last year’s sales figures to slash prices 40% or for the current year. With fewer sales, the company will pick items to go on sale each month for a “Monthly Value”. Items that don’t sell will go on clearance and will be tagged “Best Price” telling the customers that it’s the lowest price.

New tags, simpler pricing

The retailer used to pile stickers on price tags to indicate each time an item was marked down. Now when an item gets a new price, it gets a new tag. A red tag indicates an “Every Day” price, a white tag a “Monthly Value” and a blue tag a “Best Price”. JCPenney will now use whole figures when pricing items. No longer will you see signs for $19.99, but rather a simple $20.

Photo Courtesy of the JcPenney Media Room. All rights reserved

The in-store experience

JCPenney’s new fair and square pricing approach is only part of the changes you will see for this 110 year old company. There is new advertising, and plans to transform its 1,100 stores by 2014. The new store layout will include a Main Street, or series of 80 to 100 brand shops similar to the Sephora cosmetic ones it has in stores now. These will replace racks common in department stores. There will be new areas in all stores called Town Square, a place that will offer services and expert advice. Changes already made to stores include more displays, more modern signage, and a clean crisp look to the departments. In-store advertising matches the company’s new commercials, which use a red square as the company’s new logo to portray the fair and square concept.

Unmatched customer service

The new CEO plans to change the shopping experience, shun heavy discounting and sell services along with products. In an industry where a bargain is key, the plan to do away with the almost 600 sales the company had last year is daring, to say the least. The company can no longer count on its temporary price cuts to bring in customers, or to keep them coming back.

JCPenney announced plans to add areas in the middle of each store that will offer services much like the Apple Genius Bars Mr. Johnson created. Although the details are still hush-hush, industry watchers say food demonstrations or haircuts could be among them. Besides flashy demonstrations, JCP employees are trained to give great customer support before someone is ready to buy, when they buy, and after they buy. CEO Ron Johnson will transform the buying experience at JCPenney not unlike he did at Apple.

The risk

Mr. Johnson and JCPenney are announcing this new pricing plan at a time when department stores are struggling to keep customers coming back. The move is risky because shoppers who love to bargain hunt may be turned off by missing the thrill they get from finding that great deal. Macy’s cut back on coupons a few years ago, but soon after started seeing sales suffer and brought the coupons back. It may be difficult to change shoppers’ buying habits.

The threat to others

The department store industry is dominated by the Top 10 retailers, which can be found in Chain Store Guides Database of Department Stores. This major change in the way an old company operates will definitely stir things up in this close-knit industry. JCPenney plans to dominate with unmatched customer service. They plan to change the way customers shop at department stores. Most importantly, they plan to offer more reliable pricing. If this is true, isn’t it just what we all want, the best customer service and a fair price?

JCPenney is creating a destination, a shopping experience for all. If they put their money where their mouth is, they will definitely start to steal their competitors’ market share.