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TheStreet Open House

Good Luck Penney

The following commentary is from an investment professional with Clear Harbor Asset Management who is a participant in TheStreet's expert contributor program.

NEW YORK ( TheStreet) -- I've always been annoyed when I'm shopping for a product that is priced one penny below a flat dollar amount, like $19.99. Does the seller honestly believe I'm dumb enough to look at the price tag and think I'm paying any less than 20 bucks? Is it really a good idea to try and dupe your customer into thinking they're paying less than they really are with such a transparent ploy?

Apparently, the answer is yes. Everywhere I go, I see this pricing strategy in action. Fly round-trip to Miami for just $49.99! Buy an iPad 2 for just $499.99! There is even a so-called "dollar store" chain called 99 Cents Only Stores (NDN), which is really sticking it to higher-cost rivals like Dollar General (DG) and Family Dollar (FDO). Back in 2008, they announced raising their top price point for the first time in 26 years from 99 cents to 99.99 cents -- perhaps the most irritating move in the history of retail.

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This strategy could not be so widely employed if it annoyed everyone as much as it annoys me, or could it? Maybe there's a silent majority of consumers all over America who share my desire to see prices advertised more forthrightly. We'll find out soon thanks to JC Penney (JCP).

The venerable department store chain has hired one of the brightest lights in retail, Ron Johnson, as its CEO, hoping he can overhaul its stores and reverse the company's declining fortunes. The merchandising whiz behind the rise of Target (TGT) and, subsequently, the retail arm of Apple (AAPL), has said he will, among other things, do away with the 99-cent pricing gimmick.

Finally, 20 bucks is priced as $20. Thank you very much for choosing not to insult our intelligence, Mr. Johnson.

Clearly, I'm biased here, but I hope for the sake of humanity that Johnson's strategy is successful. He and his team have announced all sorts of great, new ideas for JC Penney. They'll stop bombarding customers with coupons and non-stop sales offers, and he'll stop claiming that items are marked down from artificially inflated prices. He'll also carve up stores into an array of specialty shops and turn the high-traffic center selling space into an entertainment and hang-out area, or "Town Square," where they'll offer things like free haircuts during back-to-school season or free hot dogs and ice cream in July.

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