J.C. Penney uses ‘experiences’ to ‘reimagine retail’
It is not easy for a 100-plus year-old retailer to reimagine its retail strategy, but J.C. Penney is doing just that.
To stay relevant in today’s competitive marketplace, Penney is changing its focus and creating programs that address how its consumers shop in the digital revolution. The company’s executive VP of omnichannel, Mike Amend, provided an insider’s look at how Penney is transforming the customer experience in a presentation at Shop.org’s “Retail’s Digital Summit 2016“ event last week in Dallas.
“The biggest barrier of change is being unwilling to change,” said Amend. “Most companies are reluctant to change unless there is a disruptor or turmoil within the company.”
Penney knows this roadblock too well as the company faced a downward spiral due to leadership changes, as well as unprecedented — and harmful — business models and marketing decisions, all of which contributed to continually sinking sales. Following leadership changes and a renewed focus on the shopper, Penney is now knee-deep in its recovery.
At the helm of this change is the chain’s ability to empower consumers to research, navigate and shop their favorite brand in a different way. To set this plan in motion, Penney had to reach back into its roots.
“Our brand was built on delivering extreme value to customers,” Amend explained. “This means we can no longer focus on pushing specific products to shoppers. Instead, we need to combine products and services, and deliver ‘experiences’ that meet our shoppers’ needs.”
This new mindset prompted the company to deliver a single sales presence versus siloed channels. To support the transition, the department store chain launched a buy online, pickup in-store (BOPUS) pilot.
The service, launched in less than nine weeks, was introduced in the first quarter of 2015. Almost six quarters later, the service is now available in approximately 775 stores, and has a 94% fulfillment success rate, Amend reported.
“We are expediting orders through our stores, and getting merchandise into our shoppers’ hands faster and cheaper,” he added.
Penney took a similar approach when it merged its channels to create a “prom experience.”
“We want shoppers to know prom is not just about the dress, it’s an experience,” Amend said.
The experience begins online, where many young shoppers begin their journey exploring dresses, Amend explained, Penney’s website now includes recommendations for accessories available in-store. Once the shopper enters the store to try on or pick up their gown, the retailer extends the prom experience with signage highlighting the services available at its in-store hair salons (across 800 stores) and Sephora makeup studios (available in 570 locations). Prom-goers can also take pre-prom photos at in-store portrait studios, and find ideas to save these memories at the chain’s Pinterest page.
“Our focus is to grow business, increase convenience and leverage our digital capabilities to make our physical channel even better,” Amend said.
NRF, ICSC both predict solid increase in holiday sales to rise 3.6%
Two major retail organizations delivered some early holiday cheer to retailers.
The National Retail Federation and the International Council of Shopping Centers issued their annual holiday forecasts on Tuesday, and both predicted holiday shoppers will spend more this year than they did last year.
According to the NRF’s annual holiday forecast, holiday sales (November and December, and excludes autos, gas and restaurant sales) will increase 3.6% to $655.8 billion in 2016. The increase is significantly higher than the 10-year average of 2.5%, and above the seven-year average of 3.4% since the economic recovery began in 2009, the NRF said. Holiday sales in 2015 increased 3.0% over the previous year.
Additionally, NRF forecasts non-store sales (includes online, direct-to-consumer and kiosk sales) to increase between 7% and 10% to as much as $117 billion.
The ICSC forecast predicts 3.3% year-over-year growth sales at physical stores this holiday season. Including online sales for physical retailers, ICSC predicts sales will rise 3.5%.
“Consumers have seen steady job and income gains throughout the year, resulting in continued confidence and the greater use of credit, which bodes well for more spending throughout the holiday season,” NRF chief economist Jack Kleinhenz said.
He added a note of caution, saying that that increased geopolitical uncertainty, the presidential election outcome and unseasonably warm weather are the main issues still at play with the greatest potential to shake consumer confidence and impact shopping patterns.
“However, the economic spending power of the consumer is resilient and it should never be underestimated,” continued Kleinhenz.
NRF’s holiday sales forecast is based on an economic model that factors in several indicators including, consumer credit, disposable personal income and previous monthly retail sales releases.
The NRF forecast is more or less in line with other industry forecasts from Deloitte, and AlixPartners and the International Council of Shopping Centers.
ICSC: Physical, digital retail will converge to entice holiday shoppers
Physical stores still play a crucial role in holiday shopping.
That’s one of the major themes of the International Council of Shopping Centers’ annual holiday forecast, which emphasizes that, more than ever before, shoppers will expect an omnichannel experience this season. The report predicts 3.3% year-over-year growth sales at physical stores this holiday season (compared to 2.2% increase in 2015). Including online sales for physical retailers, ICSC predicts sales will rise 3.5%.
With holiday shoppers planning to spend an average of $683.90 this year, in-store purchases will continue to dominate, with 91% of holiday shoppers planning to spend at physical stores.
In other findings, 85% of holiday shoppers will research online before making purchases in-store. Also, 39% plan to utilize click and collect, up from 32% last year, with 83% of these shoppers making additional purchases in-store when picking up their online order.
“Throughout 2016, consumers have demonstrated a tendency to shop across both digital and physical retail,” said Tom McGee, president and CEO, ICSC. “Even shoppers who purchase online favor retailers with a physical presence and an increasing number of consumers are buying online and collecting in stores. Consumer intentions show that this digital/physical convergence will be critical for the health of the industry as we close out the year.”
According to ICSC, gift cards/certificate will dominate holiday spending (64%), followed by apparel and footwear (51%), toys and games (not including apps or video games) (46%), men’s/women’s accessories, cosmetics, fragrances (39%) and electronics (any type) (38%).
With intentions to shop at physical stores high, consumers cite the following reasons for why they favor in-store holiday spending:
• The ability to see, touch or try on merchandise (52%)
• The ability to get the item immediately (50%)
• Not wanting to pay for shipping (42%)
• Ease of returning/exchanging the item (35%)
• Convenience of one-stop shopping (31%)