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How JCPenney Is Strengthening Its Digital Business

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Focus on digital channels

Major department stores are following an omnichannel approach to their business to provide a seamless shopping experience for consumers through digital channels as well as physical stores. JCPenney (JCP) lagged its peer group in implementing several initiatives, like same-day delivery, to increase online sales. But now, the company is aggressively enhancing its digital channels to boost its top line.

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Digital index

More and more consumers are opting for mobile and other digital channels to check and purchase the merchandise offered by department stores and retailers. Department stores have been investing heavily in enhancing their online channels to fight the intense competition from online retailers like Amazon (AMZN).

Based on rankings compiled by benchmarking firm L2 and released in 2015, Macy’s (M) is the most digital-savvy department store, with a digital IQ index of 142. JCPenney and Nordstrom (JWN) tie for the second position on the list with a digital IQ of 141. Kohl’s (KSS) is fourth on the list.

Growth initiatives

To focus on its omnichannel approach, JCPenney strengthened its leadership with the August 2015 appointment of Michael Amend as executive vice president of omnichannel. Michael Amend previously worked as vice president of online, mobile and omnichannel for The Home Depot (HD).

In 1Q16, which ended April 30, 2016, JCPenney’s digital business continued to perform strongly. In 1Q16, the company’s online SKU (stock keeping unit) count increased over 50% on a year-over-year basis, and the online supplier base was up ~20%.

In the 1Q16 conference call, JCPenney’s chief executive officer, Marvin R. Ellison, stated that the company’s mobile traffic continued to increase dramatically in the first quarter. The conversion on mobile devices improved nearly 50% in 1Q16.

In 1Q16, JCPenney continued to roll out the “buy online, pick up in store” same-day facility. The company was able to offer this facility in about 250 stores in 1Q16, and it expects to roll out the facility to all stores nationwide by the end of August. JCPenney continues to enhance its online merchandise assortment, with recent additions being appliances and Boutique+, the company’s first-ever plus-size fashion brand designed exclusively for plus-size women. The iShares Core S&P Mid-Cap ETF (IJH) has 0.2% exposure to JCPenney.

We’ll discuss the company’s initiatives to improve its bottom line in the next part of this series.

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