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JCPenney’s Omni-Channel Approach Could Drive Its Future Growth

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Omni-channel approach

JCPenney’s (JCP) overhaul under Ron Johnson affected the development of the company’s omni-channel capabilities. The company has been aggressively enhancing its online business and integrating it with its brick-and-mortar business. The company believes that converting 10% of its store-only customers to omni-channel customers can lead to a potential $1.2 billion in incremental sales. This is because omni-channel customers spend three times more than a store-only customer. Also, an omni-channel consumer visits JCPenney’s stores or online channel 2.5 more times per month compared to a store-only customer.

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Online channel

Though JCPenney lagged its peer group in introducing some online capabilities like same-day delivery, it has taken several actions to capture online growth. According to the “Digital IQ Index” compiled by L2, JCPenney and Nordstrom (JWN) are ranked as the second most digital savvy department stores. Meanwhile, Macy’s (M) tops the list as the most digital savvy department, and Kohl’s (KSS) ranks fourth on the list.

According to L2, JCPenney achieved a high ranking due to its search engine marketing, or SEM, efforts. JCPenney has garnered the highest paid visibility helped by heavy investments in search advertising. Also, the company’s app supports ApplePay (AAPL) and visual search capability. The company’s app also supports the in-store mode. JCPenney’s “Find it, Keep it” bar code scanner enables consumers to scan the barcode to access the store’s inventory and then directly order it from the iPhone. JCPenney constitutes 0.03% of the holdings of the iShares Russell 1000 Value Index (IWD).

In fiscal 2014, JCPenney’s internet sales increased by 13.4% to $1.2 billion. Currently, the company does not provide separate details on internet sales as its omni-channel approach makes it difficult to distinguish between a store sale and an internet sale.

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Enhancing omni-channel capabilities

To further enhance its omni-channel capabilities, the company is expanding its ship from store capabilities and also broadening its online assortment. The company is working on new mobile apps for iPhone, Android, and Apple Watch devices. The company will be piloting its buy-online-pickup-in-store same day facility in several key markets in late 2015, with a company-wide roll out planned in 2016. This facility will help in increasing store traffic. According to JCPenney, there’s a 20% chance that the consumers who utilize the buy online, ship to store option will make additional purchases when they visit a store.

JCPenney’s omni-channel approach represents an $800 million sales opportunity for the company over 2015–2017. The company expects to derive $450 million from assortment expansion and share growth, $200 million from leveraging enterprise inventory, and $150 million from an enhanced mobile experience as well as enhanced customer experience.

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