JC Penney CEO compares coupon shoppers to drug users, loses $55 million after getting rid of coupons
This story's been making the rounds since yesterday, and I just shook my head when I read it. Who couldn't have predicted this months ago? From the Huffington Post:
Ron Johnson, the new star CEO of J.C. Penney, wishes that couponing fanatics would just listen to him already and stop fussing with those little scraps of paper.
"Coupons were a drug," said the CEO on Tuesday evening at a conference with analysts. Earlier that day, J.C. Penney announced abysmal results for the first three months of this year, with sales plummeting 18.9 percent at stores open at least a year. Net losses for the period were $55 million. Executives blamed the results on the departure of deal-hunting shoppers after the company changed its pricing strategy in early February to abandon coupons.
"We did not realize how deep some of the customers were into this," noted COO Michael Kramer about couponing. "We've got to wean them off this and educate our consumers."
The article continues: "History lies on the side of coupons. Macy's once tried and failed to reduce coupons after it acquired May Department Stores in 2005, leading to consumer backlash, weak sales and a declining stock price."
Nearly every major company that has tried to get rid of coupons has felt consumer backlash. Way back in 1996, Procter & Gamble experimented with getting rid of its coupon insert entirely in three test-market areas in New York. Guess what happened -- they abandoned the project because their competitors, who still offered coupons, were taking P&G's market share... to the tune of 48% increases in sales! The Supermarket News story on P&G's no-coupons test noted that Procter & Gamble was discontinuing coupons "in an effort to prove that coupons are an expensive and wasteful promotional practice."
Guess who's still got coupons today?
When the coupons go away, so do the shoppers.
Personally, I never went into JC Penney without a coupon -- but when the coupon motivated me to take the trip to the store, I usually came home with more than the $10 worth of "free" stuff the coupon sent me in the store to get. Sears Outlet offers a coupon for one free item of clothing nearly every Tuesday, and guess what days I go to their store? Tuesdays. Yes, it's to get the free item, but do I come home with other things too? Sure!
Interestingly, Carson's ran a $10-off-$10 coupon in the Tribune on Thursday, the same day that this article hit the news. It's good today and tomorrow, 5/18 and 5/19. Guess where your competitors are shopping today, JC Penney?