Penney Goes Online to Get Younger Shoppers
By George Anderson
It’s not your mother’s J.C. Penney anymore. That’s what the department store chain wants the 50 percent of American households that have not shopped at its stores over the past three years to know and it is going online to make its point.
The company includes its new trendier private label clothing brands and other items sold in its stores on its site, as well as more upscale items that are online exclusives.
Tim Lyons, a spokesperson for the retailer, told The Associated Press that the company’s online shoppers tend to be a little younger (the median age being 45 versus 49 in-store) and more affluent (income levels 10 to 15 percent higher).
It is a younger and more affluent consumer that Penney chairman and chief executive Myron “Mike” Ullman seeks for the retailer and the company is focused on reaching them through any means possible.
The company, according to the AP report, views its online site as the “hub” of its business. JCPenney.com rang up $18.8 billion in sales last year, putting it ahead of other department stores and even Wal-Mart for revenues generated online.
“Penney’s is moving fast into this new frontier of multichannel consumer retail experience,” said Richard Hastings, retail analyst at Bernard Sands. “People are experiencing the brand in a dynamic way.”
Penney is looking to further blend its virtual and in-store selling environments with in-store kiosks that allow consumers to order products online as well as POS touchscreen technology that enables store personnel to order items online for shoppers that are not in-stock in a particular location.
Still, the retailer has some work to do in-house. According to the AP report, “At Penney, a big challenge ahead is to get store associates to actively pitch to shoppers all three ways to shop. At a Penney store in Queens, N.Y., placards throughout the store encouraged customers to check out offerings online and in the catalog. But when a reporter approached a salesman in the furniture area about children’s furniture, he just replied: ‘We don’t sell them.’”
Moderator’s Comment: Is J.C. Penney ahead of the curve on multichannel retailing? What lessons can be learned from Penney on the challenges and opportunities
associated with developing a cohesive multichannel approach to retailing and customer service? –
George Anderson – Moderator
If 50% of consumers haven’t shopped in Penney’s in the last year, the store can’t afford to wait for them to “stop in” to see their changed image. If they are trying to attract younger shoppers, doing so online is a good way to get their attention. Some consumers like to shop in the store; some like to shop using the phone; some like to shop on-line. Creating all three options is not the difficult part. Making each of the three options work well independently is the first start; integrating all three channels into a seamless way of doing business (including the salespeople) for the consumer is the biggest challenge. Penney’s is moving in the right direction. If they manage the seamless integration well, they have an excellent chance for success (assuming consumers want to buy their products).
It’s not exactly news that J.C. Penney has been working steadily to deliver an integrated, multichannel retail experience for its shoppers. As early on as 2000 the company was reporting that its three-channel shoppers (store-catalog-Web) were its most profitable, highest spenders.
It is notable, however that the company has shown long-term commitment to this philosophy while it also works on making its merchandise offering more attractive and relevant to younger shoppers. Adding in-store kiosks and touchscreens helps complete the multichannel loop by connecting the Web and catalog into the physical store.
Yes, this is a Web-centric way to run a business. JCP has been a leader in structuring its compensation and work environment to let store employees feel no conflict of interest with the Web site. A sale is a sale. A happy, satisfied customer is just that.
Having been in the catalog business since 1963, JC Penney had a head start vs. their competition in direct marketing and were already familiar with the many challenges associated with multi-channel retailing when the internet came into being.
Their strategy makes sense both from a product and a consumer perspective, recognizing that, with their broad assortment of categories, there are unique opportunities for differentiated products in the direct channel vs. stores. Some of their recent specialty catalogs have been outstanding.
Integrating kiosks in-store that include all of the products available through the direct channel will improve the shopping experience by offering more options to the consumer and by providing an opportunity for store personnel to embrace the direct channel by helping to facilitate internet sales first-hand. I believe incremental sales will result.
J.C. Penney has done a fabulous job of taking on multi-channel sales…that is, they’ve done better than most and received little credit for it.
One lesson that can be learned from Penney, and one that they will need to continue refining, is letting store personnel in on the plan and hiring store personnel who can execute that plan. I was shopping a Gap store last week and realized how this one problem can ruin the best laid plans of a multi-channel retailer.
I’d long given up on the Gap as a personal shopping venue but found myself in one of their stores for a client project. I lucked into finding a great pant style in a perfect fit – yea! One of the salespeople checked backstock and found that the additional colors I wanted were out of stock. Following the “when it fits, buy multiples” principle, I asked how I could get more. She replied “Go online.” Knowing how many retailers now carry completely unique assortments online, that solution worried me. Another salesperson walked up and I asked her the same question. She said she would check the master inventory and find stores that had the additional colors. I was thrilled when she came back to tell me she found the full range of colors between two stores in other states and that they would ship them to me. I wasn’t thrilled when this process took over half an hour as I read credit card numbers over the phone, spelled my name a few times, waited for approval, gave “bill to” and “ship to,” etc. to both stores. While on hold, the salesperson who was tracking down inventory shared with me that she blamed Gap’s online presence for lack of traffic in their stores (she viewed it as competition). So, lack of consistency, poor execution, disjointed efforts, and a lack of understanding and incentive for store personnel to participate in the multi-channel model are big hurdles that will keep consumers locked in “either/or” mode.
Penney’s has been a strong multi-channel retailer for many years and is considered one of the best and in a league with players such as REI. Now it is leveraging those strengths with first rate marketing such as the “pop-up” store in Times Square and Target style TV ads shown during American Idol. This is all good, particularly if the merchandise matches the expectations (younger and trendier) that they are creating. That still remains to be seen.
While I like the idea of emphasizing the website, and they seem to be doing a good job of it, they need to be careful not to get carried away with this one channel, as there are still an enormous amount of department store shoppers not going to the web. The site itself is well laid out and easy to use, but there isn’t much of a “wow” factor.
As a consumer looking at J.C. Penney from the outside world I have been very positively influenced by many of the things they are doing both inside and outside their stores.
Some of their most recent media advertising is upbeat, trendy, and hip…the latest campaign I viewed was clearly aimed at an upscale younger female shopper in what I would call the working/career age group…very noticeable and memorable ad copy. Inside the stores the merchandise is refreshing and noticeably different from the J.C. Penney of the past…the linkage of these two critical elements to the Internet is a very positive continuation of the in-store and on-air revitalization of their brand. I think they are moving quickly and may well be out in front of some of their key competitors!!!
J.C. Penney has really turned around in the past couple of years. The merchandise in their stores is updated quickly and they are catering to the younger generation at very affordable prices. Going on-line is a natural progression for them to target this audience. J.C. Penney’s marketing efforts and promotions are aggressive and effective. I am sure it is paying off for them. They are doing a good job.
JCP’s biggest hurdle was and is to overcome the “share of mind” the past several decades have bequeathed to the current management. They are doing an incredibly good job of that, and yet, as evidence by the quote in the article, there is still much room to improve. Improve the image of the shopping experience that a large section of the population still holds.
Penney has very correctly identified the ease with which the “shopping” experience can be managed online. It is so much less expensive to create an upscale, younger, hipper online store than it is to remodel, retrain and refixture brick and mortar stores. And so much easier to make all aspects of the experience support the strategy.
Retailers in search of a demographic or lifestyle image transition should take note. While there is no doubt you must deliver a brick and mortar experience which your target customer will value, the online path is a very effective initial step in that direction. Making the online presence the “hub” is brilliant. It is possible to control the shopper’s experience of that hub in so many more ways with so much less cost. Having created and sustained a new experience, translating it into physical reality becomes significantly easier.
Penney’s superior performance stems from a customer-centric model that combines a profit orientation. The online and telephone customers can pick up and return merchandise at the store or have it delivered. Most prices are consistent between the 3 different modes (phone, online, store). Each of the 3 modes promotes the other 2, minimizing advertising costs. Penney’s largely avoided money-losing online promotion strategies to gain transactions. All 3 modes have reliable procedures and prompt, easy customer service steps for handling errors. How’s that for a successful formula? Many other retailers won’t honor prices between modes, won’t accept returns between modes, won’t allow pickups between modes, spend huge budgets to get online shoppers without a corresponding profit, and won’t update their technology to keep things simple for the customer. Penney’s isn’t perfect, but their implementation is much better than most.