Doing away with coupons all at once didn’t work so well for JCPenney several years ago. So today, the department store chain hopes gradually cutting back on coupons will work out better. And now a competitor is thinking the very same thing.
Macy’s is hinting at a new strategy of “moving away” from coupons, as a way of reviving the company’s faltering fortunes. The retailer recently reported sluggish sales over the holiday season, and discussed modifications to its couponing strategy – just like JCPenney did last month.
“We recognize we need to make dramatic changes in how we operate the business,” Macy’s Chief Financial Officer Karen Hoguet told investors. So she said the company is “testing how we can simplify our pricing” and “testing some other strategies to move away from some of the coupon reliance.”
In other words, they’d like more shoppers to come to their stores with fewer coupons.
The first sign of Macy’s evolving attitude toward coupons occurred around this time last year, as its stores began featuring “Last Act” clearance sections. Discounted items are no longer mixed in with regular-priced items. Instead, they’re set aside in a special area of the store. And you can’t use coupons on them – the price that’s listed, is the price you pay.
“Customers want simplicity,” Hoguet explained last year. “When you are looking for deep clearance goods, you could just see the price of the item and not have to do the math in your head, and it’s easier.”
Calling the strategy “hugely successful,” Hoguet is now pledging to apply the lessons learned from the Last Act rollout, elsewhere in the store. If shoppers can be trained not to look for coupons on clearance items, maybe they’ll learn not to use so many coupons on full-priced items either?
“As we all know, making dramatic changes in coupon strategies is not good,” Hoguet acknowledged. “But you will hear more on this subject as we move forward.”
That’s an intriguing, and possibly troubling, tease.
(Hoguet expanded on her thoughts in a Q&A at the UBS Consumer & Retail Conference in Boston on Wednesday. She said the brands that Macy’s sells are partly to blame for the new strategy. “Customers always blame us for all the exclusions on the back of coupons,” she said. “We wouldn’t exclude anything if we had our choice. This is all vendors saying, you have to exclude us or else. So… given the vendor concerns, we’re trying to find different ways of promoting.”
Different ways – like no coupons at all? “Every time we try to say to a customer group, ‘What if we didn’t have coupons?’ the answer is, ‘We hate them – but whatever you do, don’t take them away,'” Hoguet said. “So it’s a dilemma. Everyday pricing always sounds good intellectually, until a customer has to try it. And it just doesn’t work… there is a psychology that loves that promotion.” So one way or another, she acknowledged, “this business is always going to be promotional.”)
So at least Hoguet’s comments allude to, and attempt to distance Macy’s from, JCPenney’s attempt to go cold turkey on coupons. JCPenney is also now distancing itself from that 2012 disaster, even as it pledges to ease up on what its CEO called an “unhealthy” level of couponing that came in the wake of that failed experiment. But “we’re not saying we’re going to eliminate couponing,” JCPenney CEO Marvin Ellison cautioned.
Macy’s is signaling the same – fewer coupons are preferable to no coupons, at least for now.
“It’s not as if you can just change over to an everyday low price at Macy’s and assume that the customer will get that,” Macy’s CEO Terry Lundgren told investors back in November 2015. “But I do think that there are opportunities for us to find new handles and new ways to create value for customers without the typical discount that you’re used to seeing.”
So it appears Macy’s has been thinking about how to wean customers off their reliance on coupons for a while now. The retailer may not end up doing away with coupons altogether. But if Macy’s can boost its profitability and stay in business by cutting back on coupons – it may be better than the alternative.
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