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JC Penney’s Multichannel Fail

 June 08, 2012 04:23 PM

(By Retail Sails) Much has been made of the ‘radical transformation' of JC Penney – here are just a few examples:

  • JC Penney Re-thinks Terminology, Embraces ‘Sales' Again (AdAge)
  • Too Much, Too Soon Proves an Error for JC Penney (Retail Traffic)
  • Discounts are already back in style at JC Penney (MarketWatch)
  • Why Everyday Low Pricing Might Not Fit J.C. Penney (Businessweek)
  • Why JCPenney's ‘No More Coupons' Experiment Is Failing (Time)
  • Ron Johnson's revolutionary transformation of JC Penney from traditional department to ‘lifestyle' stores (Forbes)
  • Ron Johnson: Retail's New Radical – The Man Behind JC Penney's Transformation (Fortune)
  • Does JC Penney's new pricing structure represent the future of retail? (CNN Money)

[Related -Google Inc (GOOG): Why Nest Labs Deal Is A Wakeup Call For Apple Inc.?]

[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]

Nearly all of the focus of late has been on changes in promotions and pricing, and the negative effect on sales and traffic. However, the fact that e-commerce sales plunged 27.9% in the first quarter was almost completely ignored.

Perhaps that's because online sales have been lagging store sales and the performance of rivals for years now.

Macy's has been a leader in multi-channel integration – a year ago it extended e-commerce availability to 91 countries internationally and recently said most of its stores will be doubling as distribution centers for online orders:

  • Macy's CEO sees stores borrowing ideas from online (Reuters)
  • Macy's 2.0 Sales Strategy Puts Pedal to the Metal in Digital (Forbes)
  • Macy's ties stores more closely to the web (Internet Retailer)

Kohl's has grown e-commerce sales from just $84 million in 2004 to over $1 billion in 2011, and continues to invest heavily to grow the business, opening its 3rd fulfillment center in 2011 with another planned for 2012.

JC Penney was once a pioneer of multi-channel commerce, with the largest retail catalog business and one of the first chains to sell online – in 2001, combined web and catalog sales were $3.349 billion and accounted for 18.8% of total revenues.

Today, the catalog business is closed and online sales have been flat at just $1.5 billion for 5 consecutive years. Total sales of $17.26 billion in 2011 were below levels from 10 years ago of $17.84 billion.

On analyst day in January when ‘transformation' plans were revealed, barely a mention was given to jcp.com or multichannel integration (see here and here). Not much was said about the 28% dive in jcp.com sales in the first quarter either.

Ron Johnson is obviously a very successful executive with a proven track record at Apple and Target. The 1st quarter presentation did mention "creating a whole new experience that will win in the age of a connected world, a digital world with a physical retail store."

We're just a little short on the details for now. Obviously the restructuring is a long-term project – later this year we will get a better idea of what the new stores will look like, what brands will have shop-in-shops and maybe the company will have a better handle on pricing.

But unless there are drastic changes in digital strategy, JC Penney will just be another once-great American retailer that failed to adopt in the rapidly changing environment. 



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