May 31, 2006, 12:00 AM

J.C. Penney: The newest member of the billion-dollar club

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J.C. Penney didn’t make the early mistake of looking at the web as an isolated business and the fact that e-commerce is integrated throughout J.C. Penney’s various retail operations makes it easier to launch Internet initiatives, Irvin says. The retailer also sees its web operation as a prime opportunity to tie customers even more closely to its brand. By December, J.C. Penney expects to equip 1,000 stores with 35,000 web-enabled point-of-sale terminals from NCR Corp. The web-connected terminals will give store employees access to the entire inventory on and the opportunity to generate more cross-selling opportunities. “If a customer is buying maternity clothes, we can ask if they need a crib, show them right at the terminal what’s available by clicking on and see if they are ready to make a purchase,” Irvin says.

With better multi-channel integration, J.C. Penney is working on other ways to integrate the Internet even further into its store operations. For instance, J.C. Penney is testing a new concept in at least one store. The test involves placing web-enabled computers and large flat screen monitors in the children’s department and other heavily trafficked areas. If the customer is looking for bedding or matching accessories and can’t find a particular item or style, she can use the computer station to click on and see the available inventory in all colors and sizes. “The web-enabled POS devices aren’t the end game,” Irvin says.

Another prime example of how J.C. Penney is using the web across channels was its virtual store in New York City’s Times Square that gave customers access to the 250,000 items available on its web site via interactive kiosks. Its aim was to build brand awareness and showcase

The store, at 42nd Street and Broadway, was modeled after J.C. Penney’s signature trademark Big Red Box. Though the store closed on March 26 and was part of a broader brand awareness campaign to showcase new private label brands and coincide with J.C. Penney’s annual sponsorship of the Academy Awards, the effort drove home the fact that shoppers could access J.C. Penney across multiple channels, Irvin says.

The interactive store also demonstrated that J.C. Penney is thinking long term about e-commerce and blending the web and store experience. “The Times Square location was done up as a store and featured their private label brands as well as everything else available on their site,” Okamura says. “They do the little things right. Customers expect to have a similar experience if they’re shopping a big retailer and the Times Square effort married J.C. Penney’s web and store programs very effectively.”

Meeting rising expectations

Going forward retail analysts say J.C. Penney’s biggest challenge will be meeting the expectations of changing customer demand, especially as shoppers expect even more merchandise online, detailed product pages and better technical features such as faster search and richer media. If it expands its Times Square program, J.C. Penney also needs to refine the concept by offering more physical inventory and making other improvements. “At the very least, future interactive stores should sell the clothes and accessories on display in the physical store and then use the kiosks to build outfits on a particular selection,” Forrester Research analyst Carrie Johnson said in a recent research brief. “The store was a great experiment in blending the digital and physical environments, although some aspects of the execution were not wholly successful.”

Irvin says J.C. Penney is already at work diversifying Under an arrangement scheduled to begin in the fall, Sephora U.S.A. Inc. will become the exclusive beauty offering at and in J.C. Penney stores. “They’ve leveraged their catalog heritage nicely and keep adding a better mix of merchandise because they have a better understanding of their store and web customers,” says Arvin Jawa, vice president with retail consulting firm LakeWest Group LLC.

Another web initiative is building more fitting guides that enable shoppers to zoom in on products such as jeans and create more custom-fitted orders. “We started online in 1994 with a plan that was both innovative and defensive,” Irvin says. “Hitting $1 billion in web sales is a big milestone, but we’re already moving down the road. These days we plan our web future in five-year increments and we’re already at 2010 and beyond.”


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