JCPenney loses $55million after scrapping coupon system that made it a favourite with bargain-hungry moms

JCPenney loses $55million after scrapping coupon system that made it a favourite with bargain-hungry moms

Olivia Fleming


18:19 GMT, 17 May 2012



18:19 GMT, 17 May 2012

JC Penney has lost $55million after the company abandoned coupons and deal-hunting shoppers fled.

Sales plummeted 18.9per cent for the first three months of this year, after the company stopped printing coupons in early February, part of the brand's image shake-up.

However Ron Johnson, the new CEO who hopes to turn JC Penney into an innovative, fashion-focused brand, is refusing to reinstate them, saying simply: 'Coupons were a drug.'



The coupon culling came as JC Penney changed its branding and pricing strategy, dropping prices by about 40per cent since February.

But frugal mothers who use coupons for clothing, food and beauty products daily are choosing to shop elsewhere.

The COO Michael Kramer said: 'We did not realise how deep some of the customers were into this. We've got to wean them off this and educate our consumers.'

Mr Johnson, who hails from Apple, has been on a mission to de-frump the company since his appointment in November.

Some of his tactics include updating the stores, redesigning the logo, choosing Ellen DeGeneres as a spokeswoman and adding campaigns with supermodel Cindy Crawford – while simultaneously getting rid of coupons.

However mother-of-four Amber Bustanoby, who writes a Coupon Connections blog and appeared on TLC's reality show Extreme Couponing, says people like herself will never abandon coupons because they help make ends meet.


BUY ONE GET ONE FREE Coupon cut out with scissors, close-up

She told the Huffington Post: 'I don't think it's a drug. For me as a mom, I want to do the best I can with the resources I'm given. We live on one income in a two income world.'

Mrs Bustanoby, whose family makes about $50,000 a year, believes JC Penney's prices didn't drop enough to get her back into its stores.

The prolonged effects of a recession have also made coupons more appealing to consumers.

Americans redeemed $4.6billion worth of coupons in 2011, a 12per cent increase from 2010, according to NCH Marketing Services.

'We did not realise how deep some of the customers were into coupons'

Macy's also attempted to phase out coupons in 2005, which were reinstated in 2007 after consumer backlash, weak sales and a declining stock price.

Karen Hoguet, Macy's CFO, said recently: 'People love these coupons. They love thinking they got us.

'From the customer perspective, it’s been very important,' she added.

Mrs Bustanoby's shopping mantra resonated with this sensibility.

She said: 'I’m a typical mom like everyone else that likes to save her family money. Couponing has allowed me and my husband to not both have to work. I think this is a big accomplishment.'

Despite this, Mr Johnson doesn't want to follow stores like Target, Walmart and Rite-Aid which continue to offer coupons.

Promising to run JC Penney 'like a start up,' Mr Johnson's team attempted to soothe worried Wall Street investors with mentions of fashionable new lines by Cynthia Rowley and Vivienne Tam.

By adding quality to the store's stock, he believes JC Penney will gain more, new customers than the couponing mums it has lost.

However yesterday afternoon, stocks plummeted 19.7 per cent after investors fled.

Still, some analysts are optimistic.

Analyst Liz Dunn of Macquarie praised JC Penney's new brands and marketing method, blaming bad sales on 'slow customer adaptation to [the] new approach.'