Until 40 percent off, “the customer doesn’t even pay attention,”
P. T. Vineburgh has a sense of how much things should cost, and on a recent trip to the Boston jeweler Shreve, Crump & Low, he was not afraid to say so.
“I know these things are significantly marked up,” Mr. Vineburgh, 33, said about Chelsea clocks priced at several hundred dollars. “I said, ‘I’m buying three; I’d like 15 or 20 percent off.’ ”
Sold.
Pricing has always been a tug of war between retailer and shopper, with the retailer having more muscle. No more. Thanks to the Internet and shopping comparison apps, price-wise shoppers are haggling. Mr. Vineburgh, a real estate agent, has a closet full of haggled items, including shirts from Jos. A. Bank and the Brooks Brothers outlet.
If retailers balk, some shoppers walk; there is always Amazon and eBay. The shifting balance of power has many stores scrambling for pricing strategies that get beyond the time-worn cycle of markups and discounts — and still make them money.
But can they outfox the newly empowered consumers?
J. C. Penney has introduced a streamlined system: daily prices, lower monthlong specials and clearance prices. Mango, the fashion retailer, has cut all prices by one-fifth. Stein Mart, the specialty chain, has reduced its coupons. Supervalu, the grocery chain, has sworn off heavy promotions and lowered some prices. Even Walmart has pledged to match competitors’ prices if it sets its own too high.
“The customer knows the right price,” said the chief executive of J. C. Penney, Ron Johnson. “We can raise the price all we want; she’s only going to pay the right price. And why is that? Because she’s an expert.”
Penney’s argues its proof is in the math. Over the last decade, higher prices did not make customers spend more, said Mr. Johnson, who took over the top job last year after running the retail operations at Apple.
An item that cost Penney’s $10 in 2002 was typically marked up to $28. By 2011, a $10 item had been marked up to $40. But the price the customer actually paid for the $10 item increased only 5 cents during that period — to $15.95, from $15.90.
Until 40 percent off, “the customer doesn’t even pay attention,” Mr. Johnson said.
Ronald S. Friedman, the head of the retail group at Marcum L.L.P., an accounting firm that advises department stores and manufacturers, said the average markup for apparel at a department store began around 65 percent. Over 10 weeks, the stores will go to 25 or 30 percent off, then 50 percent off, 60 percent, and finally 70 percent or more, a discount so deep that the stores sometimes sell below cost.
“The shopper knows to wait for the sale,” he said. “They know the prices are inflated when they first come out.”
The new pricing at J. C. Penney is intended to break that mind-set, and the company is betting its turnaround on it.
