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

These costs include issues such as paying for gas, the travel time spent frommoving from one place to the other, and the ease at which an individual canachieve comparative pricing.Because the average consumer would like to be able to incur these costsat a minimum, most avid shoppers head to the nearest mall for Saturday outingswith friends and families. In turn, this creates moderately low switching costs inrespect to the department store in which the customer decides to spend theirdisposable income on any given day. This is important the companies we willdiscuss in future portions because most of the direct competition in this businessdeals with department stores that serve as anchors to local malls. Therefore,buyers in the department store retail industry have a very high power over thefirm. As we look ahead to consumer price sensitivity and relative bargainingpower, we discuss this in more detail.Price SensitivityPrice sensitivity of a customer is just as it sounds—it relates the price theaverage customer will pay in respect to the perceived value of the item. Value isgiven a price by patrons of the industry, which includes variables such as thecosts of expanding effort into locating specific items, the importance of theactual item to specific consumers, and they actual price at which comparablebrands are offered. Since items located within these stores are essential toeveryday living—such as clothing, linens, house wares, bath items—they arerelatively easy to locate at most places. Customers are attracted to one storeand not another because of lower prices or step-above-the-rest quality found atdifferent stores.Companies in the industry including Kohl’s, Stage Stores, and J. C.Penney, as well as many others create private brands and product lines withpatents and trademarks to instill this sense of quality into their products. Theyhave also utilized brand positioning to increase customer awareness of each oftheir private label items in each specific store. As the average customer looks23