JCPenney’s “Fair and Square” Pricing Strategy a Bust

Back to the Basics for the Win!

Amy J. Shane-Nichols , Jessica L. Hurst

Business Case
Source: Bloomsbury Fashion Business Cases
DOI: 10.5040/9781474208772.012
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Abstract

In 2011, JCPenney hired Ron Johnson, the former head of Apple’s retail stores, with the hope that he would revive JCPenney’s retail sales. Prior to his move to JCPenney, Johnson had been extremely successful at reinventing retail concepts and reinvigorating sales at both Apple and Target. “Fair and Square” pricing was one of Johnson’s strategies for JCPenney’s makeover. The pricing strategy was aimed at eliminating deep discounting by offering customers an everyday low price (a strategy known as “EDLP” in the retail industry) and eliminating sales events and coupons. Johnson’s “Fair and Square” pricing, changes to JCPenney’s brand/vendor matrix, and the proposed addition of coffee and juice bars in stores was ill received by consumers and resulted in alienated customers, lost sales to competitors, and a drop in stock value. This case study focuses primarily on pricing strategy, and the main learning objective is for students to understand the critical role that pricing plays in a retailer’s business model, both short term and long term. Students will be asked to generate solutions to the overarching problem “How can JCPenney regain customers?” in the areas of (1) pricing, (2) brand/vendor matrix, and (3) in-store layout, all from the perspective of JCPenney’s current CEO, Marvin Ellison. This case study presents students with a variety of problems the company now faces, and asks them to generate a variety of responses, from which they will choose the best solution in each of the three aforementioned areas, and explain how they would implement these solutions.


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