J.Crew is sued for fake sales prices
Transparency is a key word these days. Management gurus say it’s essential for motivating employees and building trust with customers. A customer of J.Crew says the retailer’s prices are transparent alright — they’re transparently made up to trick people into buying items marked down from prices that have no real meaning.
Joseph A. D’Aversa, a J.Crew Factory customer, claims he purchased two sweaters from the retailer’s website at 30 percent off the listed “valued at” pricing. After completing his purchase, Mr. D’Aversa tracked the site and found that J.Crew Factory sold the exact items at between 30 and 50 percent off the “value at” price, but never at those values. He concluded that the “value at” prices listed on the J.Crew Factory site are arbitrary and do not have an actual value, and so he sued, according to a Law360 report.
In his complaint, part of a proposed class action against the retailer, Mr. D’Aversa asserts that the prices on the J.Crew Factory site do not represent discounts or sales prices and are, in fact, “the everyday, regular prices of the items” it sells.
To be sure, J.Crew is not the first retailer to be accused of deceptive pricing practices. A 44-week survey by Checkbook.org published last year found that “sale prices at some well-known stores — even heavily discounted sale prices — are more often than not the usual prices.” Kohl’s, Macy’s and Sears were identified among retailers running sales that “often never end.”
Sears, in particular, was called out for misleading pricing practices. Even at rare times when items were displayed at their full retail price, Sears would use sales signage to suggest an item was on sale, according to Checkbook’s analysis.
- J. Crew Website’s Sale Prices Misleading, Suit Says – Law360 (reg. required)
- J.Crew Sued Over Misleading Online Sales – Racked
- Sale Fail – Checkbook.org
- Are department store prices phony? – RetailWire
- Is MSRP becoming less credible? – RetailWire
Photo: RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you believe retailers are being deceptive in their pricing practices as alleged by Mr. D’Aversa and others? Do consumers generally trust that retailers’ regular and sale prices are for real? What are the keys to effective price marketing at retail today without deception?
Poll
BrainTrust
Bob Amster
Principal, Retail Technology Group
Liz Crawford
VP Planning, TPN Retail
The issue here two-fold. One is legal and the other is more of an ethics issue. Legally the case might rest on the difference in wording.
An item may have a value (determined by the seller) of $X. That does not necessarily mean that is its regular/full retail price. In fact it may not have a “regular” price or its regular price is the 30 percent off price. This is an issue that is being determined in a number of lawsuits.
The other issue is the ethics behind using “valued at” to imply that the amount is the normal price of the item. I believe this is part of changing world of retailing. Retailers are faced with consumers who are seeking/demanding discounts and this is one approach of appearing to meet that demand. In the dark ages of retailing this would be called marketing. Today it is more likely to be labeled deceptive.
This pricing approach is deceptive but the words “valued at” are probably vetted by legal counsel because it is difficult to prove that that item, or a similar product, does not have that value at other retailers. If the product was advertised as “marked down from … ” or “was … ” then the retailer would be lying in this case.
This is what a retail veteran whom I know well sarcastically calls “The ‘never was’ price.”
Unfortunately, there are retailers that seek to engage shoppers with high-price, multiple-discount bait. Sure, online shoppers can get the price brought back down to the “regular” price. But I imagine there are other shoppers who don’t remember to put in the coupon code before checkout — and thus are paying a higher price.
The only way a shopper can truly get a deeper discount is when combining different sources — such as a retailer coupon and a manufacturer’s coupon — or even coupled with a Groupon discount. It’s when all of the discounts are being offered exclusively through the retailer that the shopper needs to be on alert.
Mr. D. needs to get a lesson in shopping. Never base the item you are looking at on the price stated in the past. Look at it today and decide, is this worth that much to me? I can’t believe that people would whine about this typical old retail process. TV shopping — “get these knives at over 80 percent off!” … Come on, who has time to sue for this? This is just a typical class action lawyer that got Cs in law school needing to make money.
People need to shop based on the value to them versus how much they save. I do this and may be lured by savings, but it’s not my final decision — just a way to keep the wife from killing me when I spend. “Look I got a deal honey! Put the knife down and, hey, didn’t you get those knives on TV Shop for 80 percent off? Great deal dear … Put that down and let me come in the house … “
Pricing is pricing no matter what you call it. If a retailer can use words to add “value” to the purchase price, it is the retailer’s prerogative. If the customer believes it, it is their problem. I always get a kick out of it when someone buys something and pays $30 for it and then says I saved $20.
My answer of course is no, you saved nothing. You spent $30. You might have been $20 smarter than someone who paid $50, but you didn’t save a penny.
Retailers have done a exceptional job of playing this game for less-than-wary consumers. And why not? It is their job.
This will not stop until the consumer gets smarter. This strikes me as “The consumer is dumb, so let’s sue J. Crew.”
This has been going on for as long as I’ve been in retail. Each state has a rule about how long an item is supposed to be available at the “compare at” or “original” price. Retailers try and use comparable items. They get fined. There’s noise. The noise goes away.
It is what it is. Ron Johnson tried to stop the practice and made a terrible hash of it. I give him credit for trying to inject some honestly in the process. I give him zero credit for the way it was handled.
And now we’re right back where we always were.
Paula’s right. J.C. Penney under Ron Johnson priced most of its merchandise as EDLP and took a bath. (Apparently customers don’t want $14 pants. They want $28 pants marked at half off.) I don’t know how retailers both follow state laws and entice customers with pricing tricks that they obviously want.
You can sue for being a sucker?
I can’t believe this is even an issue — especially at their outlet/factory store.
A sleuth (more diligent than I) could do the same reverse engineering on jet.com to verify that yes when I added kitty litter to my shopping basket 10,000 other items truly were discounted!
The real price is what you pay at the register. Anything else is just a facade.
We could name absurd examples all day long starting with phony gold-colored coins sold on TV.
The opposite happens quite often, especially in travel like car rentals and hotels. How often has that $99 per week car rental turned out to be $250 after all the concession fees? Or a hotel room room turns out to be double due to resort fees and taxes?
The best price marketing is to just tell the consumer what the bottom-line price is.
The proliferation of “factory stores” and brand-name outlets has added another layer of pricing deception and too often a lesser level of brand-name quality into the retail mix. This type of lawsuit was bound to happen sooner or later in our litigious society. It used to be that “compare elsewhere to $34” was the way discounters handled the value equation. That’s much harder to do when you only sell your own brand exclusively in these stores.
As several other commenters have pointed out, it is a buyer beware type of endeavor looking for deals today. Retailers have a long history of using this discounting psychology and while the terms may have changed, honestly, the practice still works.
However, in the current environment of shopper transparency and — lets face it — data, retailers need to re-examine perceived value and the shopper experience. Likely these types of issues will force retailers to collect and maintain pricing data and histories of themselves and competitors to justify practices.
This is the perfect storm — retailers have trained consumers to never pay full price and consumers are trained to “blame.”
Again? (Sigh) Yes … some. Sometimes yes, sometimes no.
If ever there was a situation for which “caveat emptor” was designed, it’s this (and the fact that the phrase is Latin suggests just how time-(dis)honored selling ethics issues are).
There is no real “solution” to this problem — other than a commitment to not mislead on behalf of the seller — since any proposal would almost certainly be evaded; and honestly, there isn’t much excuse anymore for lack of due-diligence on the part of the buyer. The fact that Mr. D’Aversa tracked prices AFTER he bought the items, rather than before, suggests his case is contrived.
Retailers know that tapping into the psychology of their shoppers will help them make more sales. Shoppers at value and mid-tier retailers are often looking for a deal. Unfortunately, they are artificial deals sometimes. Shoppers have been conditioned to look out for sales no matter what.
Saying an item is discounted, but never listing it at the original price is deceptive, but J.Crew is doing it for a reason — they must know that those items will only move at a “discounted” price (because of course they’d rather make higher margins on those sales). It’s kind of a chicken and the egg issue. While J.Crew should not deceive their customers, shoppers have to be willing to buy more merchandise at full price. But it’s not about which came first, it’s about what comes next.
Shoppers are incredibly price sensitive these days and getting them to buy full price items at a large scale would mean that retailers need to offer more experiences and perks to make up for the seemingly higher prices. Otherwise, it doesn’t seem like this kind of issue will go away any time soon.
Protecting the consumer from artificial price comparisons, indeed!
With today’s transparency and technology, nothing’s as it was before, and never will be again. Especially pricing, with competitive pricing, dynamic pricing, predictive pricing, Amazon pricing (yep, I deem this a category), MSRP, MAP, and what have you.
I feel sorry for J.Crew, Overstock, Sears, and any retailer — even Amazon who slipped the noose with an arbitration deal — subjected to incredibly indecent fines for rules which are now anachronistic, confusing, and ill-applied.
I also commend you to this week’s New York Times article, “It’s Discounted, but Is It a Deal? How List Prices Lost Their Meaning.“
Or, as Ian Percy said in a previous Braintrust discussion on MSRP: “Let’s just declare that as the rule leaving each of us to make the best decisions we can. Every price tag for itself.”
Dare I say it? Redd is right! Really.