J.C. Penney is not too happy with one of their employees who went on television to reveal how the department store has been ripping off customers. In the magic of retail “smoke and mirrors,” you aren’t supposed to say how the magician does the trick.
According to (now “former”) employee Bob Blatchford, J.C. Penney has been hiking up prices on items, then “slashing” them with sales that makes it appear like customers are getting huge discounts. In reality, a customer is more likely to be spending more money than less.
“I saw a lot of pricing teams going through the store, raising the prices, mostly doubling – towels and clothing,” Blatchford told NBC’s Jeff Rossen. “Then they would go on sale, and they wouldn’t always go on sale for 50 percent off. Not only was it a fake sale, but they were actually paying more than they would have been previously.”
It’s a neat trick (if ripping off loyal customers if your “thing”) because people have a psychological tendency to spend more when they think they are saving money. If you’ve ever found yourself an owner of something you didn’t want just because you couldn’t pass up a good deal, you know the feeling. J.C. Penney turned that psychology into a business model. But Blatchford exposed it and the illusion was shattered. Suddenly it didn’t feel good spending $8 for a pair of shorts that used to cost $7 just because a sticker said “50 percent off.”
Not that the store stopped. An investigation by Time in January revealed that “J.C. Penney’s pricing is faker than ever.”
J.C. Penney is already struggling to remain solvent. In early 2014 they announced that they would be closing 33 stores and laying off over 2,000 employees due to poor sales. They had hired a new CEO to get their company back on track, he ended up doing worse, and they fired him after a short time. In that desperation, they looked towards less-than ethical business practices to make ends meet.