1 Thing J.C. Penney Is Doing Wrong

The following video is part of our "Motley Fool Conversations" series, in which analyst Austin Smith and analyst Andrew Tonner discuss topics across the investing world.

In today's edition, Austin and Andrew chat about potential turnaround candidate J.C. Penney. As part of his sweeping efforts to right Penney's ship, new CEO Ron Johnson has implemented the much-hyped "fair and square" pricing strategy. The company has even partnered with Ellen DeGeneres to promote the plan, which does away with huge discounts in favor of a simple three-tiered pricing structure. The program also simplifies many items' pricing, rounding out products that were previously $14.99 to an even $15, for example.On the surface, this seems like a great plan, but it's actually extremely risky and removes many sneaky and effective retail tactics. For one thing, gone is the high price anchor that made shoppers feel like they were getting the deal of a lifetime. Also gone is the "treasure hunt" aspect to off-price retailing, one that competitor TJX has ridden to riches. What seems like a great plan at first ignores some key behavioral aspects to shopping, and Austin isn't a fan.

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Andrew Tonner has no positions in the stocks mentioned above. Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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