June 23, 2010, 1:57 PM

Penney’s billion-dollar bet

J.C. Penney hopes to boost web sales by $1 billion within five years.

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Web sales have been flat at $1.5 billion for the last three years, but J.C. Penney Co. Inc. will use an aggressive mix of new e-commerce technology and other tactics to generate $1 billion in new Internet revenue over the next four to five years, the retailer says.

To become a $2.5 billion annual web retailing operation, J.C. Penney, No. 16 in the Internet Retailer Top 500 Guide, is building an entirely new infrastructure for JCP.com using an e-commerce platform from Art Technology Group, chief information officer Tom Nealon told attendees yesterday at the Goldman Sachs Dot Commerce conference in New York. “This is the single biggest investment we are making as a company,” Nealon said. “The organizational focus is on the verge of maniacal.”

J.C. Penney, one of the first retail chains to actively embrace e-commerce in the mid-1990s, used its large catalog infrastructure to launch a web channel and build a critical mass of online customers. But now, facing more competition from traditional chain retailers such as Kohl’s Corp. (No. 43) and others, web-only retailers such as Amazon.com (No. 1) and private sale web sites such as Gilt Groupe (No. 140), a catalog-based infrastructure modified over time for e-commerce isn’t sufficient, Nealon said. “It was a tremendous asset early on and a liability going forward,” he said.

J.C. Penney will replace all of the key components of its e-commerce infrastructure over the next 18 months, the retailer says. “The dot com platform is the centerpiece for achieving the $1 billion in new sales over the next four to five years,” Nealon said.

J.C. Penney already has several hundred software engineers, designers and data modelers working to implement the new online infrastructure. “This project is not for the faint of heart,” Nealon said.

With a new infrastructure in place, J.C. Penney will be able to expand its social marketing program and develop full-scale mobile commerce technology, which will be included in the first wave of technology implementation, Nealon said, though he didn’t provide a specific date. When fully rolled out, J.C. Penney’s mobile commerce program will include more couponing and support multiple wireless device operating systems, including iPhone and Android, he said. The mobile commerce program will also feature full shopping cart capability and ratings and reviews. “We are focused tremendously on mobile at this point,” Nealon said.

E-commerce revenue for J.C. Penney increased just 1% in the first quarter ended May 1. J.C. Penney, which doesn’t break out actual web sales totals in its quarterly earnings, grew total sales year over year about 1% to $3.92 billion from $3.88 billion. Comparable-store sales in the first quarter increased 1.3%.

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