The retailer that swore off couponing is doing just that in a brazen way.
J.C. Penney (NYSE:JCP) is trying to lure shoppers into its stores this holiday season with the promise of 80 million chances to win one of 20 million prizes.
The struggling department store chain is giving away 80 million festive holiday buttons. They each come with a unique code on the back, and the seven digits can be entered online to determine if it's a winner. The top prizes are vacation getaways, but the more common giveaways include coffeemakers, jewelry, cookware, and store gift certificates.
The buttons themselves are festive. Most are graphical, including items such as a mug of eggnog, Santa on a scooter, and fruitcake. Many feature seasonal sayings. Things like "merry christmas america," "santa i can explain," and "sorta naughty" give some of the buttons a candy-hearts appeal.
It's a brilliant promotion. The prizes may draw folks in -- and we're talking about a cumulative retail value of $159.4 million for the 20 million giveaways -- but the buttons can also be fashionable as holiday parties roll around.
In the spirit of gunning for one of the buttons featuring a lump of coal, let's have some fun with this promotion.
After all, the chain has been a disaster since CEO Ron Johnson was brought in late last year. He initiated a new store model in February, and it's been as well received by consumers as New Coke or Taken 2. Every quarterly report has been horrendous, and the last one was a doozy.
So, let's throw out some new button ideas for the chain to hand out.
1. "Ho ho ho, down the chimney store comps go"
If Johnson thought that moving away from clearance sales and coupons toward everyday low pricing would restore shopper confidence, same-store sales tell a different story. Comps fell a sharp 18.9% during the quarter ending in April, and things only got worse. Comps plunged 21.7% in the quarter ending in July, and by 26% in its latest quarter. Sure, the comparisons will get dramatically easier next year, but it's this year's biggest retail failure.
2. "My parents went to JCPenney and all I got was this free haircut"
An August promotion offering free haircuts for kids on Sundays helped attract traffic, but obviously it wasn't enough to lift comps. Of course. How much disposable income do you think someone who's willing to put kids through an often long wait on Sunday for a free haircut has to spend in the store? Incredulously, J.C. Penney brought back the promotion last month. The move may have a negative impact on Supercuts parent Regis (NYSE:RGS) as the thrifty head over to JCPenney for the millions of free snips being given away, but it's not going to have a positive impact on J.C. Penney's sales. If anything, it cheapens the department store brand.
3. "Red is the new green"
Bad things tend to happen when you're suffering double-digit declines at the average cash register. For J.C. Penney, we're looking at a company that has not only posted three chunky deficits in each of the past three quarters, but has posted substantially wider losses than analysts were expecting. These same pros see a small profit during the current holiday quarter. Don't be surprised if it's more red ink.
4. "There's a lump of Kohl's in my stocking"
J.C. Penney's new "fair and square" pricing moves it away from traditional department store leaders, pitting it closer to Kohl's (NYSE:KSS) as a rival. Kohl's isn't perfect, but at least it's managed to post consistent profitability during the seasonally slow quarters. It has also topped Wall Street's profit targets during the three quarters since J.C. Penney's ill-advised makeover.
5. "This isn't a blouse -- it's an iBlouse"
Investors were pumped about Johnson's arrival last year. He came over from Apple (NASDAQ:AAPL), arriving at the tech giant just as it was beginning to roll out its envy-of-the-industry Apple Store platform. It didn't dawn on investors at the time to wonder what hardware had in common with soft goods. They didn't stop to realize that the Apple Store concept rings up more sales per square foot than any other mall tenant because Apple has proprietary technology. Johnson's revival plan involves bringing in third-party brands for the "store within a store" format that is everything that Apple Store is not.
6. "I came here for the free family portrait -- can I borrow your PC?"
The biggest shock in J.C. Penney's quarterly report last month -- and it was a minefield -- was the 37% slide in online sales. That's pretty nasty. Sears Holdings (NASDAQOTH:SHLDQ) has been posting years of sluggish sales at its namesake and Kmart stores, but even Sears.com managed to boost its online sales by 20% in its latest quarter.
I'm just spitballing here, but could all of the freeloader-attracting promotions -- from the kids haircuts to free family portraits this holiday season -- be attracting shoppers that either don't have online connectivity or don't trust e-tail? I mean, how else can one explain the sharp drop in online sales when the Internet should be gobbling up the everyday-low-pricing strategy. The new "JCP" logo is practically a billboard for jcp.com.
If I'm right, doesn't this make the button contest a travesty? Shoppers need to go online to see if they are winners, but what if that's not as easy as it was for you to read this article? Sure, cheap-eats magnet McDonald's has an online component to its annual Monopoly promotion in October, but at least players know right away if they've won a peel-off prize.
7. "Merry Christmas, America"
Hey, I'm just reversing the likely backlash from folks offended by J.C. Penney deciding to lowercase "Christmas" and "America" in the button that it's using to promote this entire 80-million-button campaign. (Not to mention the missing comma that will have grammarians up in arms.)
I still think the campaign itself is a smart move by J.C. Penney. It's the ultimate reversal. Johnson has gone from swearing off coupons to making them fashion accessories. That's humbling, and it's a trait that will serve Johnson well as he bubbles to the top of "Worst CEO of 2012" lists.
Give the shoppers buttons. Let the promotion generate excitement. Let the button pins prick the clothes, encouraging customers to buy new clothes!
Isn't this what the season is all about?
Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, McDonald's, and Regis. Motley Fool newsletter services recommend Apple and McDonald's. 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.