April 13, 2013
Ronald Friedman, Co-Leader, Retail/Consumer Products Industry Group, Quoted in The New York Times Article "Sometimes, We Want Prices to Fool Us"
By Stephanie Clifford and Catherine Rampell
When the board of J.C. Penney ousted its chief executive, Ron Johnson — news that broke last Monday — you might say it was, in some small way, because he didn’t understand Tracie Fobes.
Ms. Fobes, who lives in Raymore, Mo., plans meals around discounts offered at the grocery store and always checks coupon apps on her cellphone before buying clothes. When, a little over a year ago, J.C. Penney stopped promoting sales and offering coupons and instead made a big deal about its "everyday" low prices, Ms. Fobes stopped shopping there. It wasn't that she thought the prices were bad, she said. She just wasn't having any fun.
"It may be a decent deal to buy that item for $5," said Ms. Fobes, who runs Penny Pinchin' Mom, a blog about couponing strategies. "But for someone like me, who's always looking for a sale or a coupon — seeing that something is marked down 20 percent off, then being able to hand over the coupon to save, it just entices me," she said. "It's a rush."
Devoted coupon users like Ms. Fobes may be more frugal than the typical consumer. But most shoppers, coupon collectors or not, want the thrill of getting a great deal, even if it's an illusion. In recent months, Penney recognized that human trait and backtracked on its pricing policy, offering coupons and running weekly sales again. And it started marking up items to immediately mark them down for the appearance of a discount.
The switch came too late to make Penney's numbers look better — sales dropped 25 percent in 2012, to $13 billion — and too late to help Mr. Johnson. And Penney's failure to wean consumers from sales and discounts probably won't stop retailers from trying to simplify pricing in the future. But it should give them pause.
Simplifying pricing, it turns out, is not that simple.
For sellers, setting and holding one price makes plain, economic sense. "You're always going in and changing prices and that takes manual labor," said Ronald Friedman, retail practice leader at the accounting firm Marcum. "Also, if you have one price, you have a better feel for expected margins and gross profits, you can manage to your budgets a lot better, and it's more efficient."