Wednesday, August 22, 2012

Retailers hurt by 'everyday low prices'?

At least two prominent retailers, JC Penney and Mooresville-based Lowe's Inc., have been hurt recently as they move away from using promotional discounts, begging the question: Will we still buy anything that's not on sale?

Lowe's announced disappointing earnings Monday, and executives attributed much of the problem to missing promotions. The home improvement retailer has been trying to get away from deep discounts and sales, instead moving to an "everyday low prices" strategy, or ELDP. Lowe's strategy is something executives call EDLP-Plus, which is designed to still use some promotions, but the general trend is fewer sales.

Over Memorial Day, Lowe's said it reduced promotions too steeply, and customers steered clear. Lowe's then overcompensated with deep discounts to draw customers back, which hurt profits as well.

And JC Penney has been struggling since former Apple executive Ron Johnson took over and eliminated most sales and coupons in favor of a simplified, three tier strategy. The well-publicized problems have hurt the company financially and cost some top executives their jobs.

"The customer didn't recognize the changes we were trying to make," Lowe's CEO Robert Niblock said about the attempts to reduce promotions, in an interview Monday.

But he said there is still a need to move away from promotions towards EDLP. "Coming through the Great Recession, the whole industry probably got too promotional," Niblock said.

Many customers apparently don't agree: We're used to deep sales, and we've come to expect them, especially on big-ticket items.

As investor advice site SeekingAlpha put it: "LOW has attempted to change its business model from a "high-low" retailer that uses promotions to drive customers and revenue to one of "everyday low price" where customers can come to expect low prices everyday. This transition is one that is difficult and costly to pursue as customers often feel that EDLP means not receiving the bargains they previously did.

So, what do you think? Do you believe retailers who say they're switching to EDLP, or do you feel like you're getting nickel-and-dimed out of promotional savings? And would you switch away from a retailer that makes the pricing switch?

16 comments:

Anonymous said...

Interesting strategy during tough economic times. I shop Lowes but not JC Penny. But I Feel strongly that without advertised discounts or coupons, or at least highlight ads a business sacrifices their ability to stay in front of the consumer at least on Sunday.

Anonymous said...

American consumers are sheep. They don't actually compare prices, they respond to sales and rebates. If you want to sell stuff you either tell people to give you more money than you actually charge and tell them that in 6 to 8 weeks you will mail some of it back to them, or you set the price 50% higher than you should and then once a month put it on sale for 25% off.

Anonymous said...

Same flawed mentality running Lowes and J C Penny....utterly clueless

Anonymous said...

Im not a JCP shopper but can vouch that those that regularly shop there hate the changes.

And for that Target and Wally World thanks you.

Anonymous said...

Compare prices, then decide on a case by case basis. When I compare ad prices I find that in general EDLPs are not a good value.

Anonymous said...

They can make all the excuses they want, but here's the bottom line (literally):

Home Depot and Lowes sell essentially the exact same items.

Lowes profits for the quarter down 10%....Home Depot up 17%!! That's a HUGE difference.

If I were Mr. Niblock, I'd be updating my resume.

Anonymous said...

I sometimes feel like I'm not getting the best bargain when I shop stores that offer discounts and coupons because I'm generally not prepared to have that mailing or email or whatever with me. I'd prefer to shop stores that truly offer every-day-low-prices, but they have to live up to that overall promise. If I see the same product at the same price or lower somewhere else, the retailer looses creditability.

Anonymous said...

When is the Lowes board going to wake up and get rid of Niblock and the rest of the good old boys at the top. They don't have a clue what they're doing.

Anonymous said...

I research all big ticket items throughly before I buy. I spend a lot of time online checking out to see who is going to offer the best price regardless of sale or promotion. I also shop places where, horror of horrors to most retailers, I GET THE BEST CUSTOMER SERVICE AVAILABLE!!!!!! That means, if you have treated me well in the past, I will return with my business even if I pay more. That means your employees are knowledgeable and helpful but not badgering me to consider something I didn't come in for or using bait and switch. Which is the reason I will never set foot in Best Buy again. Give me a fair price and great customer service and I will return again and again, also telling friends and family members. That is how you survive the 2nd Great Depression (whoops, sorry, politically incorrect, Great Recession).

John said...

Sales have a tendency to increase "impulse buying" where customers either buy something they wouldn't have bought, or buy when they don't need it.

Many of my discretionary purchases I put off until I see a good sale. So, if I don't see a sale, I just don't buy. EDLP work best on the items that consumers need to buy on a regular basis, like food. If I don't need it right now, then I want to see a sale.

Anonymous said...

I'm cheap - if I see a "deal" on a product, I'll at least cross-check it on Amazon (generally lowest prices on the net) and usually I'll do even more diligent research before making a purchase. I haven't paid full retail for a high-price point item in as long as I can remember.

John said...

What's with the moderation on this forum? I don't recall there being anything in this story that was race, gender, sexual orientation, political party oriented and unless someone was killed by falling prices, then nothing death related either!

Seriously, unnecessary moderation eliminates the entire concept of this as a discussion, since by the time comments are published, everyone has left the room!

Oh, and "Prove you're not a robot" thing is unreadable about half the time!

Anonymous said...

i buy everythang at the dolla store...stuff do break a lot tho.

Anonymous said...

I fought with Lowes about a price match for about $4 difference. I had the ad with me. I spent about an hour and realized I should have bought it at the lower priced place (HD) to begin with and not had to deal with the price match cluster that ensued.

Anonymous said...

JCP lost its customers when they adopted a gay or stay away policy via. Lowes is down because building is down, home equity loans are down, the economy is down.

Wake up.

dragonsfly773 said...

Will this have any effect on employees and their jobs. If so, how?