Caution: JCPenney’s V-Day Discounts Aren’t as Sweet as They Seem

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Source: http://www.flickr.com/photos/idovermani/

Source: http://www.flickr.com/photos/idovermani/

JCPenney (NYSE:JCP) has good news and bad news. The good news is that the retailer is planning major Valentine’s Day discounts of up to 40 to 60 percent. The bad news is that in order to offer those discounts, the company is hiking its prices up in the near-term — and it doesn’t want you to notice it.

According to the New York Post, JCPenney’s CEO Mike Ullman is in the midst of orchestrating a company-wide strategy that involves significantly increasing prices on all the retailer’s products in order to make JCPenney discounts look more dramatic later in the year. Faced with falling sales and a lack of consumer demand for JCPenney products, executives at the company recognize the need to make the retailer stand apart from the crowd, and that’s where the discounts come in.

The problem, however, is that cash-strapped JCPenney can’t afford to drive its prices down, so it has to drive them up first to try to trick customers into believing they’re really getting the best discounts in the future. Last year, Valentine’s Day discounts reached 20 to 30 percent, while this year, they are expected to be marketed as 40 to 60 percent. Mark Cohen, a professor at Columbia Business School, explains via the Post that, “Ullman is trying to get back the old JCPenney customer, and that customer wants to see 50 and 60 percent off. Taking off 20 or 30 percent doesn’t even get you noticed.”

JCPenney’s former CEO Ron Johnson was already blasted for reportedly practicing the strategy during his reign at the retailer, but it is clear that Ullman and his team aren’t worried about those rants against “fake prices” because this is the best plan of action they think they have.

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