J.C. Penney flourishing online

Monday, September 11th 2000, 12:00 am
By: News On 6

By Maria Halkias / The Dallas Morning News

J.C. Penney Co. is struggling to jump-start its department stores, but online it's succeeding where others are failing fast.
The Web site ranks No. 1 on the Nieslen//NetRatings list of online apparel and home merchandise retailers. It ranks No. 7 on a broader list, PC Data's Top 20 Online Retail Report.

This year, JCPenney.com has received 40,000 Web orders a week averaging about $100 each.

The pendulum has swung back toward traditional retailers on the Web, and you can hear their sighs of relief, said Carol Ferrara, director of research for the Gartner Group. "There is a recognition in the industry now that they can dominate in the online channel, and J.C. Penney is in a very good position to do that."

The 98-year-old retailer has one of the more advanced click-and-mortar models. It's supported by a $4 billion-a-year catalog operation, and all merchandise bought online can be returned at Penney stores.

"We have the opportunity to create a seamless experience, and that is something other retailers don't have," said Paul S. Pappajohn, president of e-commerce at J.C. Penney.

This cum laude business graduate of Yale University, who also has an MBA from Insead, a French business school, says Penney's numbers are limitless.

"We're in such a unique position: We're the nation's fifth-largest retailer, the Western Hemisphere's largest catalog, and we're leading the ranks of apparel and home merchandise sites on the Internet under a brand that carries the reliability and convenience of a 98-year-old company."

This multichannel shopping is the theme of Penney's new "it'sallinside" advertising campaign that debuted on television Sunday.

Store-catalog-online shopping – "3-tailing" in retailing lingo – has obvious benefits. And Internet shoppers are turning to names they've known for years as catalog or store customers, Mr. Pappajohn says.

"We know that our customers who shop all three channels are spending four times more than those who are shopping just one channel," he said.

Today, Penney has 2 million online customers.

"Our mission is to introduce all 52 million J.C. Penney customers to JCPenney.com," he said.

Enhancing sales

There's no talk of cannibalizing sales from Penney's catalog or stores. "We're not competing with each other; we're enhancing each other," Mr. Pappajohn said.

Penney separated its online store from its catalog operation two years ago. A staff of about 20 people was moved into offices away from Penney's Plano corporate headquarters.

The online organization, which is in North Dallas in Park Central Place on LBJ Freeway, now has a staff of about 120 people.

"We're growing, and we're hiring. We plan to double our organization over the next 18 months to two years," Mr. Pappajohn said in an interview last week. He was hired last fall from The Washington Post Co.'s Web sites division and also had Internet experience at Disney.

"This site has evolved quite nicely," Ms. Ferrara said. "Merchants with catalog operations have had a much easier evolution online because of the infrastructure. It's such a tremendous advantage."

Penney has 14 call centers, five 2 million-square-foot distribution centers and 2,000 catalog desks where customers can pick up and return orders, including those inside J.C. Penney's nationwide network of 1,100 department stores.

Just the distribution centers alone would cost $250 million to build from scratch, Mr. Pappajohn estimates.

Federated Department Stores tried to duplicate Penney's catalog operation when it purchased Fingerhut for $1.7 billion last year, but it has run into trouble. Federated, the parent to Macy's and Bloomingdale's, is reportedly considering "all options" for the Fingerhut catalog unit, including a sale.

Sears, Roebuck & Co.'s experience has been more like Penney's. The company relaunched Sears.com this summer to add home electronics, home office, small appliances, lawn tractors, baby products and school uniforms. In July, it ranked just behind Penney in PC Data's monthly rankings. And Media Metrix, which also compiles unique visitors to Web sites, ranks Sears.com ahead of JCPenney.com. Both retailers ranked ahead of Walmart.com, the online store for the nation's biggest retailer.

This summer, Penney added Sony consumer electronics to its 250,000 items available on its Web site. Basically, Penney has put its catalogs online, including three "big books" and about 70 specialty issues a year.

Raising forecasts

Twice this year, Penney executives have raised the company's forecasts for online sales. JCPenney.com is expected to end the year with sales of $300 million – triple last year's $102 million and a long way from $15 million in 1998, the first year that Penney began breaking out its online sales from its catalog numbers. The company expects sales of $1 billion in 2003.

In fact, incoming chairman Allen Questrom can put JCPenney.com at the bottom of his to-do list when he arrives Friday to begin rescuing Penney from a five-year slump. The celebrity CEO has already been touting the division as a strength he's inheriting.

More than 100,000 women have created and saved virtual models of themselves on Penney's "Just4MePlus.com" Web site for plus-sized women. Penney has 3 million plus-size customers, so many more shoppers are likely to use the site. In August, Just4MePetite.com and Just4MeTall.com were added.

It has also added an auction site for clearance items called Red Alert, where prices drop daily.

This fall, JCPenney.com will be revamped with new technology Penney developed with PricewaterhouseCoopers. Mr. Pappajohn says it will make it faster to add photos and descriptions to the site.

"This system enables us to manage content on the Web site from what would take weeks down to days," he said.

But all the Web sites, including JCPenney.com, need to make improvements in how they work, Ms. Ferrara said.

In a Gartner Group functionality study of the top 50 consumer shopping sites, even the most popular e-tailers have only average execution when it comes to customer service on the Web.

No site rated excellent or even good, Ms. Ferrara said. Twenty-three percent were average, 73 percent were fair and 4 percent were poor in the results released last month.

The Web research analyst has a pet peeve. Almost all sites have to improve their search capabilities, including JCPenney.com, she said.

Maybe Mr. Questrom will want to add that to his to-do list.