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?