JC Penney moves to have same merchandise in all channels
Under the title “CEO Pinching Penney In a Slowing Economy” the January 31st Wall Street Journal ran a wide-ranging interview with J.C. Penney Chairman and Chief Executive Myron “Mike” Ullman III about topics including preparing for a recession, slowing store growth, and tougher decisions on inventory. The interview ran the same day Ullman announced plans to merge the buying and marketing operations for store and online sales, cutting as many as 200 jobs.
It was reported that Penney’s December same-store sales fell 7.5% compared with the year-earlier period, more than the company expected. Ullman told the Journal, “The precipitous drop in sentiment in the fall is what we feel we need to deal with going forward. We’re assuming no improvement in the trend in 2008.” But, Ullman went on to explain that the decision “to align merchandising for our direct channels [Internet and catalog] with our store channel” is actually more consumer-driven than expense-driven. “Today there are two different organizations, and marketing and media messaging are separate.”
Ullman says he expects this move to have a positive impact, not only in 2009 and beyond, but in 2008—based on some experimentation Penney did last year. The company wanted to find out if it actually increased the overall business, and if it made more sense to the consumer. Ullman says it’s easy to understand why the consumer would expect to find the same items in their catalog, on the Internet and in stores. “And in fact we did more business,” he notes.
Not all of Penney’s products are available from all channels, and there are important differences that will remain. “For example,” says Ullman, “we don’t sell children’s furniture and things like strollers in the stores. It would take a lot of space and we can’t show the whole assortment. We have a very large offering of that on the Internet. But there’s no reason not to buy the same apparel—(though) we might have extended sizes on the Internet. Our largest inventory today of any store is the Internet.”
In our opinion, this merging of channels will be a great benefit to both the customer and to J.C. Penney. Truly having merchandise common across channels will be less frustrating, especially for those who do their purchasing research and comparisons online and then go to a store for pick up or in-store shopping.
J.C. Penney has made many changes since Mr. Ullman took the reins in 2004. This latest move is a good one, even though direct is a minority of Penney’s sales. As Ullman points out, Penney’s Internet business is the largest of any general retailer, at over $1.3 billion, and it’s been growing double-digit. “We’d like to think we can maintain a double-digit increase,” he said, adding, “The interesting thing is being heavy in the catalog business gave us a great head-start on how to be on the Internet.”
From an increased sales point of view Penney has once again validated the definition of synergy—when the result (or, in this case, the combined value of multiple channels) is greater than the sum of the parts. As Mr. Ullman said, “The riskiest thing you can do is not innovate.”
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory management, merchandise planning and benchmarking. Learn more online at: http://www.fcbco.com.