As JCPenney Streamlines, CEO Ellison Points To Omnichannel Progress
Omnichannel shoppers spent 3x more with JCPenney compared to store-only or e-commerce only customers in 2016. More to come, says CEO Marvin Ellison.
JCPenney is reacting to what many retail analysts see as the “over-storing of America” with plans to close between 130-to-140 of its 1,000 outlets over 2017 to better concentrate on high-performing locations and align its online/offline sales.
As JCPenney CEO Marvin Ellison told analysts during the retailer’s Q4 earnings call on Friday, the retailer recognizes that it simply makes clear sense to meet customers’ needs by concentrating on its higher-performing, high-traffic stores as it continues to evolve its omnichannel strategy.
“We remain committed to becoming a world-class omnichannel retailer,” Ellison told analysts (see JCPenney’s transcript for more). “Our online business remains strong delivering double-digit growth in both the quarter and the full-year.”
As evidence that “our omnichannel strategy is working,” Ellison outlined a number of successes on that front.
For example, 40 percent of online orders are picked up in a store using JCPenney’s “ship to store and buy online, pick up in store same day” options. Furthermore, over 30 percent of customers that pick their item up in a store make an additional in-store purchase of $50 online.
“Over 90 percent of all of our online returns actually take place in the store, which creates convenience and also gives the customer a reason to come to the store to buy additional items,” Ellison added. “So, part of our challenge is learning how we simplify the in-store environment. And some of our recent customer survey data is telling us that the customer are responding very well to some of the store changes that the team has made to create an ease of shopping environment in the store.”
Beauty And Loyalty
Within the larger omnichannel attractions, Ellison noted that the work JCPenney has been doing on its Beauty and Cosmetics segment seen a successful turnaround.
Over the course of 2017, JCPenney will have about 70 new Sephora shops-within-a-shop around the country. Ellison hinted at will be new product features to be launched in conjunction with those Sephoras.
“Our Salon business was one of our best businesses in 2016 and that business for years has been dragging behind the overall retail business, but we turned it around with great leadership and really great focus in 2016,” Ellison said. “The part of that now is growing that business by creating a digital interface for customers to interact, set up appointments and for our Salon associates to engage the customers in a much more modern way. This is working and it’s also creating a loyalty factor that is as effective as any customer acquisition strategy that we have. And you can’t replicate these two initiatives online, so that’s important.”
As for making the most out of its network from an omnichannel standpoint amid JCPenney’s store closings , one of the key decision-making points Ellison said was made in deciding which stores would shutter was to make ensure individual outlets could still could service its online-to-offline customers effectively.
“We’ll be very aggressive this year rolling out a ship-from-store initiative that’s going to allow fulfillment of online orders from a significantly higher percent of stores than what we’ve ever done in the past,” he added.
During the holiday season, JCPenney rolled out Google Android-based mobile devices to all stores this past holiday season that allows the associate to process a “buy online, pick-up in store order” capability on the sales floor without having the customer to stand in line or wander around to find a service desk.
A JCPenney representative further outlined the company’s omnichannel strategy by highlighting several stats:
- Up to 70 percent of our customers go on jcp.com to research before they come into the store.
- We have expanded our SKU assortment on jcp.comby over 40 percent. Online has @2X the number of SKUs of our largest store – which is why we are focused on aiding product discovery of our expanded assortment online.
- We’ve dramatically reduced both the time and resources required to get products available for sale on jcp.com. Previously, this used to take multiple months, and we have now brought this down to – in many cases – less than 24 hours, and with a fraction of the resources required.
- Our enhanced mobile app has received 4.5 star rating and today over 50 percent of our online traffic is now coming from mobile.
- These initiatives are turning more customers into omnichannel customers, which we know spend over 3X more with us annually (than store only or .com only customers). In fact, in 2016 approximately 75 percent of all online orders touched a physical store.
“We’re also focused on further differentiating JCPenney from brick-and-mortar and online competition thorough our products and services,” the JCPenney rep told GeoMarketing. “We have private and exclusive brands that are only available at JCPenney. In fact, we recently announced that we will drive our private and exclusive brand penetration up to 70 percent of total merchandise sales by 2019. Additionally, our services – whether it’s a hair cut, eye exam or taking family photos – simply cannot be done online.”
While at least one retail veteran has noted that the general retail experience hasn’t changed much over the last century, major brands have started to recognize the need to create a sense of fun and entertainment around the concept of going to a store.
Apart from the immediacy and tactile sense associated with shopping at a place, the drive to make stores a cultural destination is increasingly on the minds of retailers like JCPenney.
After all, consumers don’t shop on Amazon because it gives them any thrill or excitement; they go for the low prices and speed of finding the product they want.
One other way JCPenney can compete with online pure players is through “retailtainment experiences” within its stores, the rep said.
Last holiday season, JCPenney offered a virtual reality experience in a handful of mall-based stores; this past spring it partnered with Pinterest to bring virtual pinboards to life in select mall locations and hosted live demo’s on fashion, hair and make-up from local bloggers and “pinfluencers”; and this past fall, the retailer tested career styling workshops in select markets.
“Today, we have approximately the same number of active customers to date as we did in 2011,” JCPenney’s spokesperson said. “However, there’s an opportunity to increase their frequency and amount they spend on every transaction. As we think about the future of both stores and online, it’s critical to understand that approximately 75 percent of our online orders go through our stores.”
Whether the customer’s jcp.com order is shipped to a store, picked up in a store same day, shipped from a store, sold by an associate via jcp.com within a store, or freely returned to a store, “omnichannel is not a catchphrase at JCPenney — it is a strategic process,” the representative added.
“This process allows a 114-year-old retailer to leverage all of our assets — our stores, associates, our inventory, our digital platform and supply chain — to reduce our costs and serve our loyal and valued customer,” JCPenney said. “This only furthers the strategic value of our store locations as omnichannel continues to grow. We understand that leveraging our stores allows us to have a lower delivery cost, to reduce the delivery time for customers and also drive traffic.”
Among the forthcoming “retailtainment” initiatives JCPenney has on board is happening next month in advance of the crucial prom season.
“We want to be top of mind when it comes to dress and beauty needs for prom. We will be hosting an ‘All Prepped for Prom Event’ to reinforce our variety and expertise,” JCPenney’s rep said. “The events will take place in 487 JCPenney stores in the Juniors department near our prom pad. jcp salon and Sephora Inside JCPenney will bring out portable booths to the area where they will give complimentary prom hairstyle and make-up demonstrations from 12-3pm on Saturday, March 18.”