J. C. Penney Company, Inc. Equity Valuation and Analysis As of ...

cost of buyers can be perceived as low. However due to certain branding andexclusivity, a product increases in value. Middle-income families want to receivethis value but at an affordable price that stores such as Nordstrom’s cannot offer.Buyers’ Willingness to SwitchSubstitute products remain the largest threat when dealing with retailing.Consumers have different wants, which they hold highly in their shoppingexperience. If a retailer lacks what the consumer desires, the customer is likelyto switch retailers. Buyers have many options when switching betweendepartment stores. This is why it is very important for J. C. Penney to knowtheir target customers and be able to satisfy their needs. Many consumers arenot willing to shop around for the lowest price because of the inconvenience andlower quality of products. Likewise, many consumers are not willing to paypremium prices for products of similar quality that has a more recognizablebrand name. The fact that buyers have a low switching cost is a driving factorthat retailers must focus on at all times. Department stores know maintaining astrong customer base is what drives the industry. This forces the retailers tocater to the customers taste and preference.Relative Price and PerformanceConsumers perceive value in price. When an item is priced too low,consumers believe they are receiving a low quality product and vice. However,there comes a point when some consumers no longer perceive value in pricing,but rather equate high prices to brand image. For example, if a customer thinksthat a product is worth X amount of dollars, anything paid above that price isstrictly a premium for the brand. While customers at J. C. Penney care aboutimage, they are more concerned with the comfortable relationship created withspecific brands that are perceived as a certain level of quality. Instead, J. C.Penney’s customers care about value and realize that you can find it at areasonable price. In the retail industry, you must maintain a high quality product21