March 28, 2012
Ronald Friedman, Co-Leader, Retail/Consumer Products Industry Group, was Quoted in the New York Times Article "Knowing Cost, the Customer Sets the Price"
By Stephanie Clifford
Ronald S. Friedman, the head of the retail group at Marcum LLP, an accounting firm that advises department stores and manufacturers, said the average markup for apparel at a department store began around 65 percent. Over 10 weeks, the stores will go to 25 or 30 percent off, then 50 percent off, 60 percent, and finally 70 percent or more, a discount so deep that the stores sometimes sell below cost.
“The shopper knows to wait for the sale,” he said. “They know the prices are inflated when they first come out.”
The new pricing at J. C. Penney is intended to break that mind-set, and the company is betting its turnaround on it.
The store has cut prices by about 40 percent versus before the change, and rounded prices to the nearest dollar ($12, say, versus $11.95 or $11.99). After that first tier of regular prices are specials, which last a month rather than a day or a few hours. And Tier 3 is clearance items, which go on sale the first and third Friday of every month, in tandem with many paycheck cycles.
J. C. Penney calls it “fair and square pricing,” but some consumers seem to find it confusing.