J.C. Penney Gets ‘Maniacal’ About Digital Commerce
J.C. Penney has seen the future and it’s digital. The department
store chain is looking to grow its online business by $1 billion within
five years, according to a Dow Jones Newswire report, as it "restructures
itself into a digital marketplace."
As the same article points out, Penney
isn’t about to close its stores, but it will put more emphasis on using kiosks,
mobile device apps and other tactics to meld the physical and virtual worlds.
Currently, online sales represent about 10 percent of the chain’s total.
"We see JCP.com now as our flagship experience, our largest store," Mike
Boylson, chief marketing officer at J.C. Penney told an audience at Goldman
Sachs’ e-commerce conference. "This is the growth engine in the company
and it plays a key role in our merchandise initiatives."
Penney executive
vice president and chief information officer Thomas Nealon described the company’s
online emphasis as being "on the verge of maniacal."
Mr. Nealon predicted
a huge jump in mobile commerce in the years to come. He described estimates
that the U.S. market will grow from a current annual rate of between $2.5 billion
and $5 billion to as much as $15 billion a year over the next five years as
being conservative.
Andrew Lipsman, a senior analyst with ComScore, told the News
Quench website, "The
entire retail industry, in one way or another, is becoming driven by digital,
and the days of just going to the store and shopping are really declining."
Discussion Questions: Is the future of J.C. Penney and other department stores
for that matter online? What traditional retailers do you think are doing the
best job of melding their physical store and digital operations?
Yes, the near future of J.C. Penny will be online…that is until some department store creates a brand new paradigm that captures our imagination, magnetizes the human shopping animal and thereby improves upon the digital model.
Today’s reasonable retailer adapts to the current world. The unreasonable retailer continually persists in trying to adapt the world to himself. Digital is just today’s pathway. But all progress in retailing frequently depends on the unreasonable innovators. Thus, after the digital life what comes next? And who will be the retailer that will create that breakthrough in the next decade? Stay tuned.
The online and offline efforts of retailers must be complimentary, as each plays a vital role in the sales process. Offline allows consumers to physically connect with products–touch them, try them out and see if they fit. Online offers the ability to compare a broader inventory, look for better pricing and gather valuable information. All retailers should consider how they meld these two worlds.
Going digital must mean more than kiosks in stores or making computer terminals available to consumers. Consumers should be able to buy something online and pick it up at the store. They should also be able to seamlessly return items to the store.
Consumers want a seamless experience. Retailers, if they are going to successfully meld the two worlds, are going to make this happen.
Yeah, while it’s true that anybody with sense is going to go where the growth is happening–and for department stores, the only growth right now is clearly online–I hesitate whenever anyone seems to be going to an extreme. The growth is being captured online, but that doesn’t mean that online is the growth engine for the company. To put it another way: how much of that online growth is driven by store experience? Either positive (as in, I saw it in the store but chose to buy online) or negative (as in, the store experience is so horrible that I would rather take a chance online than deal with the store)? It doesn’t make sense to go all-in on a digital experience, when it is the physical in-store one that is the most at risk today.
I don’t want to be disrespectful he says, being a bit disrespectful. The core asset and investment JCP and other retailers have is their stores. Their first and top opportunity is making their stores into becoming a Direct Selling Media and digital should be a key and growing aspect of communicating (as in selling to) with shoppers where and when they make buying decisions.
I agree with Sandy. Retailers and department stores especially MUST find a way to leverage their most expensive assets. And our data tells us the way to do this is to put payroll back into them, and empower those employees with technology so they can be really helpful.
Stores will never do self-service better than the web. There MUST be people there.
It seems to me that J.C.Penney is getting maniacal about their digital growth because Sears has done such a good job capitalizing on the media. Their website is a go-to destination for shopping for home appliances, and increasingly, electronics. Sears was one of the first to break into site-to-store. No wonder J.C. Penney is running hard to catch up.
While I believe that Sears had this vision back when it mattered, it is true that home goods categories do lend themselves to digitized, long-tail patterns because the purchase cycles are so long. The role of the store then evolves into more of a showroom for bigger purchases (longer cycle) with site-to-store service, and limited in-store inventory.
I have been a big proponent of online retailing for a long time, but there are some things that you want to be able to “touch and feel” before you buy. I think that clothing is a perfect example of that. The way that sizing of clothes varies from one maker to another makes it very difficult to purchase them online. And I believe that a high percentage of Penney’s sales comes from clothing.
I think it is important that they are properly represented by digital, but I only see it as a supplement and not a replacement.
This almost sounds like a trick question. Of course JCP needs an online service as well as a physical presence. The balance between the two is what’s important. There is no miracle formula but having both will be a necessity for all retails. Technology is here to stay and growing, so they need to keep step.
If someone were going to start a new retail business today, would they start it with a brick and mortar store or would they start it online? The answer to that question is the answer for every brick and mortar retailer. The future is online. This is not a fad. The growth of online retailing is not a function of economic times. Most simply, online retailing has a sustainable competitive advantage over brick and mortar operations.
So, what is a Penney’s to do? Exactly what they are doing, and hopefully are going to do it well. The advantage that brick and mortar retailers will have is to fully integrate their two businesses. They must see them as one. Online is not a step child, but in fact the driver of the business. It provides efficient reach that the store never could.
Efficiency? Every Thursday the recycle bin in the mailroom of our apartment building is full of Penney’s FSIs that go right from the mailboxes to the bin. They never even make it to the people’s apartment to get a glance. Everyday the package room is filled with deliveries from Amazon, Zappos, Ideeli, et al. How much are those retailers spending to fill up the recycle bin?
The single competitive advantage that the brick and mortar retailer has is that it currently has a location. The retailer has to make that advantage into something the online retailer can’t. They have to use the store as a depot (as Staples and Best Buy currently do, and do it very, very well).
Provide a way for on line shoppers to pick up an item they want at the store. Or, if they bought it online, return it to the store. Or, if they are in the store and the item is not available, have them order it online right there. Most of all, encourage a mindset for everyone from the store clerk to the president that there is no difference in where the sale is made. A sale is a sale. Revenue is revenue.
46% of in store purchases now rely on online research to validate that purchase decision. It is becoming mandatory for retailers to close the cross channel divide by linking the physical store to the digital world that consumers rely upon. Only a handful of the big box retailers are realizing that digital is playing an ever increasing role in driving in store sales.
I don’t know who said it but it boils down to one key point in retailing–that is Location, Location, Location–and in today’s world a lot of the prime real estate is on the web. So if you want to be in the game, you need to go where the customers are–the Web.
There are several angles to this question, but I think the key retailer connection for the physical and virtual worlds (beyond fresh foods) is the “buy online and pick up at store” paradigm. This capitalizes on the flexibility and marketing options of the Internet while still leveraging the immediate fulfillment a store location supports. It also puts more emphasis on the accuracy of backroom applications as the promise to have items in inventory for the consumer who has ordered them must be met.
Digital is here. Grasp it. Embrace it. Learn how to live with it.
It will never replace the need for qualified people on the sales floor. It will require a different set of skills to co-exist with selling to accommodate the new breed of customers.
Ordering online and picking up at the stores could be the next step in the modernization and evolution of the retail industry. Big box retailers will have the largest learning curve because of the inventory they carry vs. smaller box retailers.
I like Penney’s commitment. It is about time a conventional retailer takes the lead in retail innovation. Throughout the last 150 years, innovation has always come from outside the industry. Montgomery Ward was a copy editor before he saw the need for a retail catalog. The founders of eBay were computer programmers. Apple has become a great retailer on the backs of innovation. Michael Dell and Jeff Bezos have shown the conventional retail world how to harness the Internet for shopping.
In the end it comes down to investment. Penney’s is spending a substantial amount of its capital expenditure on digital commerce. Apparently this is a smarter investment to its board than new or refurbished stores in malls. Perhaps, at last, innovation can come from within the industry.