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JCPenney Has Capitalized on Its Online Business to Boost Sales

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Online sales

JCPenney’s (JCP) holiday results, reported on January 7, 2016, re-established the importance of online sales for department stores and retailers. JCPenney’s chief executive officer, Marvin R. Ellison, stated that the company experienced record online sales in the 2015 holiday season from November to December. As we mentioned in Part 2 of this series, JCPenney reported same-store sales growth of 3.9% in the 2015 holiday season.

Macy’s (M) disappointed investors with a 4.7% decline in its 2015 holiday season sales. However, Macy’s experienced a double-digit increase in its online sales in the 2015 holiday period.

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Growing US e-commerce sales

According to data released by The Census Bureau of the Department of Commerce, US e-commerce sales rose 4.2% month-over-month and 15.1% year-over-year to $87.5 billion in 3Q15. E-commerce sales as a percentage of total retail sales rose 7.4% in 3Q15, up from 7.2% in 2Q15 and 6.5% in 3Q14.

Initiatives to boost sales

JCPenney, Kohl’s (KSS), and Macy’s follow an omnichannel strategy for their retail and online businesses. They no longer separately report their online sales. In the first nine months of fiscal 2015, Nordstrom (JWN) derived about 18.6% of its retail segment sales from its online channels. JCPenney and Nordstrom together account for 0.04% of the iShares Russell 3000 ETF (IWV).

JCPenney has been undertaking several initiatives to ensure faster delivery of online purchases. The company can ship its online orders from a dedicated online fulfillment center, a store, a store merchandise center, a regional warehouse, or directly from vendors. JCPenney has 250 stores across the country that help fulfill online orders using in-store inventory. JCPenney started the buy-online, pick-up-in-store, same-day facility in select markets in the second half of 2015. In its January 7 press release on holiday sales, the company disclosed that it saw more online customers utilizing its in-store pickup option available at over 1,000 JCPenney stores nationwide.

JCPenney has also been expanding its merchandise assortment to support its accelerating online business. In the 3Q15 conference call, the company disclosed that it has improved its site speed performance by ~30% and increased its product reviews by over 40%. 

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