One year into a plan to wean its customers off coupons, a national retailer says the plan is working. And no, we’re not talking about JCPenney.
In November 2011, Jacksonville, Florida-based department store Stein Mart embarked on an effort to reduce coupon usage by half. “It became clear that we needed to make some significant changes to return our company to the market position we have always sought – delivering high-quality, fashion merchandise at everyday low prices,” said Jay Stein, the interim CEO and grandson of the company’s founder. “The proliferation of our use of coupons had diluted that message and I believe has greatly hurt our brand.” The company began lowering many of its prices, and cutting back on coupons – reducing them by more than 20% in the fourth quarter of last year.
It wasn’t an easy transition. “We made progress in reducing our reliance on coupons,” Stein said a month later, “but not without some adverse impact to our sales.” He insisted, though, that it was a necessary move in the long run. The challenge in each monthly earnings report going forward, was “to increase our sales against the prior year which includes the higher amount of couponing.”
So how’s it working out for them? Quite well, thank you, the company says. In its most recent monthly earnings report last week, Stein Mart reported a 7.1% rise in same-store sales – nearly triple what analysts had forecast. Total sales also increased by 7.5% from the previous year. The positive figures indicate that Stein Mart managed to make it over the hump of anniversarying its change in strategy, and came out stronger.
Still, there was one little problem – the marketing department that lowered Stein Mart’s prices apparently forgot to tell the accounting department. The chain announced last month that it had mistakenly “accounted for certain markdowns as promotional (temporary)” when the markdowns had in fact become permanent. As a result, Stein Mart is working to revise previously-released financial statements, though it estimates the ultimate impact on earnings won’t be too drastic.
At any rate, compare the Stein Mart story to JCPenney. Penney’s has been struggling all year, since CEO Ron Johnson decided to scrap coupons and most sales altogether (read: “JCPenney Coupons and the CEO: Only One Can Survive”). Customers howled in protest, analysts fretted, and the chain watched its sales and stock price plummet. As the chain approaches the one-year mark of its own change in strategy, there are no signs it’s getting over the hump the way Stein Mart has.
So what did Stein Mart do right, that JCPenney is doing wrong? First, it didn’t force its coupon-loving customers to go cold turkey. “We are making this reduction in a reasoned and methodical way,” Stein said last year. “Our ultimate goal is to reduce coupon usage by 50 percent,” not to do away with them permanently. Johnson, on the other hand, dismissed coupons as “a drug” and eliminated them altogether – later admitting that he underestimated their appeal (read: “JCP’s CEO on Coupon Love: ‘I Didn’t Understand That'”). Second, Stein Mart’s goal was simple: “We want our customers to know that they do not have to use a coupon to get a better price than our competition.” JCPenney’s goal was to completely transform itself. Not only did it eliminate coupons and sales, but it began remodeling its stores, trying to appeal to younger customers. And then it started bringing back coupons and sales, while denying it was changing its strategy at all (read: “JCPenney: Reversing Course on Coupons?”).
The results were continued financial woes, and customer confusion. Even a recent pair of positive stories that paint a rosy picture of JCPenney’s new strategy highlight the confusion – is JCPenney going upscale, or downscale? Do the lack of coupons and sales mean products are more expensive now, or do the markdowns make them less expensive? Shoppers, and journalists, can’t seem to agree. The remade stores are “going to be for people who have more money,” one bargain-hunting shopper grumbled to Reuters, while another shopper told the Dallas Morning News that his wife thinks JCPenney is “more like Target now. We like Target.”
Right now, though, shoppers seem to like Stein Mart more than they like JCPenney. A mix of everyday low prices, and coupons too. What’s not to like about that?