February 19 - 22, 2019
JW Marriott, Palm Springs, CA
JCPenney Has An Omnichannel Strategy Secret
It wasn’t so long ago that retail department store chain J.C. Penney was having to fend off some pretty serious press coverage about “epic declines” and “closing stores”. But, such dubiety has now been cast back to the realms of history, as last year’s overhaul of the chain’s leadership team has led to new strategies that combine online and offline consumer channels. JCP has come fighting back with an aggressive enhancement of its digital capabilities, and a clear mission to convert as many store-only customers to omnichannel customers as it can, potentially driving a critic-hushing $1.2 billion in incremental sales by 2017.
Leading the changes are newly appointed Executive Vice President Mike Amend – former vice president of online, mobile and omnichannel for The Home Depot Inc. – and Marvin Ellison, who officially took over as CEO of JCP in August last year.
The Decline And Recovery
About six years ago, a major decision was taken at J.C. Penney that, in hindsight, was perhaps responsible for ushering in the era of decline – JCP’s famous Big Book catalogue was scrapped.
Previously, the firm had published three of these 1,000 page tomes a year, in a defining campaign that dated all the way back to 1963. But, in 2010, the catalogue was axed following a conclusion that the traditional catalogue shopper would simply migrate online. Needless to say things didn’t quite pan out as smoothly as that. In internet terms, 2010 was practically a whole generation ago, and so the transition, which would have probably been perfectly effective in 2015, was a little premature for the 2010 JCP consumer.
Even so, it still came as somewhat of a surprise when in March last year the firm published a 120-page catalogue featuring its home department range – a policy reversal that seemed to suggest that the top brass at JCP had finally conceded their mistake: consumers – even online consumers – still like leafing through print publications.
Indeed, what JC Penney found was that what it thought were pure online sales, were actually sales that were driven by customers browsing the catalogues and then completing their transaction online.
The Omnichannel Demand
Whilst there are no current plans for JCP to revive its iconic Big Book, the lessons learned by the retailer over the past half-decade are very much informing the latest strategies championed by the new leadership. “We have no expectation to try to recreate a pre-2011 JC Penney,” said Marvin Ellison in diginomica. “That company could not compete well in this marketplace.”
Indeed, the mindset that Ellison is adopting is one that decidedly looks forward rather than back. Talking frankly about the challenge ahead, the CEO said in Internet Retailer: “It’s very clear to us that our effort to improve omnichannel functionality while increasing our online SKU count is key to our future.”
Internet Retailer reports that the department store expanded the SKU count on jcpenney.com by more than 40% during Q3 2015, and it increased the number of drop-ship suppliers it works with by 15%.
Keeping Pace With The Competition
In pursuit of the omnichannel ambition, Ellison has always been frank about the realities of J.C. Penney’s need to play catch-up, while also being able to exploit the firm’s own private brands business: “Candidly, we are quite a bit behind,” said Ellison. “But we are excited, because we are creating a very talented team that can accelerate our improvement [in omnichannel].
“On the private brands side, we were excited about the infrastructure we currently have with sourcing in private brands, design and development. The challenge we face is, how do we intelligently attack the opportunity? Our goal is to increase our online business while increasing our private brands penetration, while nurturing and protecting the national brands that really matter to our customers.”
The private-label side of the business accounts for more than half of total sales for JCP, and indeed omnichannel innovation is part of the ongoing plan for this segment in 2016 as well. “It is our belief that if we grow our private-brand penetration and position these goods online, we will grow our top line, protect our bottom line and have differentiation from pure-play e-commerce competition.”
New Goal: Same-day BOPUS
During Q3 2015, J.C. Penney also introduced updated versions of its mobile apps, improved its website speed by 30% and increased the number of product reviews by 40%. This translated directly into revenue – net sales of $2.90 billion were enjoyed, a 4.7% increase compared with $2.77 billion in the third quarter of 2014, and comparable-store sales, which include revenue from jcpenney.com, increased by 6.4%.
However, Ellison admits that there still remains one glaring trick that JCP is missing – shoppers cannot buy online and pick up in-store (BOPUS) on the same day. As such this is a top priority for 2016, and Ellison has turned to old colleagues from Home Depot, his previous firm, to lead the way:
We are in pilot and we will roll it out in the first part [of 2016]. The good news is that we now have a leadership team in place on the supply chain and the dot com side that has executed and rolled us out before, bringing a degree of knowledge from my years at the Home Depot where I think we did it very well.
Whilst it’s clear that J.C. Penney took its eye off the ball there for some time, the firm’s focus is now crystal clear once more, and the track that it’s on is the correct one. It will, naturally, take time to deliver the results that it craves – but, the combination of JCP’s omnichannel improvements with its increased online SKU and private label assortment, will most surely spell retail success, with 2016 perhaps being the tipping point for the company.
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About John Waldron: John Waldron is a technology and business writer for markITwrite digital content agency, based in Cornwall, UK. He writes regularly across all aspects of marketing and tech, including SEO, social media, FinTech, IoT, apps and software development.
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