JCP Gets Traffic Back to 2011 Levels, Eyes Opportunity in Shoes

J. C. Penney is switching gears from defense to offense this year, CEO Mike Ullman announced in the retailer's first-quarter analyst earnings call.

Crediting the Sephora shop-in-shop partnership for its critical role in driving store visits and boosting both conversion and average unit retail, the department store company says foot traffic has returned to 2011 levels of roughly 87 million active in-store shoppers. The Sephora offering, Ullman explains, differentiates the retailer from its competitive set and also creates an "emotional connection" with consumers, so much so that traffic to the JCP locations is outpacing general mall traffic. "We're more of a destination in some respects than the inline retailers," he notes.

The retailer is looking to leverage existing infrastructure investments in omnichannel technologies as shoppers continue to blur the lines across channels. "We already have years of experience in buying, planning and allocating merchandise between stores and dot-com," Ullman says. "Not only does this give us a competitive advantage in the way we run our business, but it also allows us to better meet customer demand."

What's more, the retailer is able to reduce its CapEx spending on omnichannel initiatives in large part because it's focusing on digitizing the infrastructure in place from its catalog business, rather than building from scratch, notes Marvin Ellison, JCP's CEO designee. Being behind the curve with some of these technologies can be both a blessing and a curse. "The good news is being a second-mover can give you a second-mover advantage because the technology changes so dramatically," Ellison explains.

Even if its tech platforms still need to catch up, JCP is eager to leverage its knowledge base. "We know when and how to offer congruent assortments and promotions between stores and, and when to have extended sizes, colors and styles available," continues Ullman. "This capability and expertise is what gives us confidence in our omnichannel growth initiatives."

These omnichannel efforts seem to be paying off. The number of shoppers buying online and shopping to store ticked up in the quarter, with these customers snapping up additional merchandise 20 percent of the time when they head to the store to retrieve their e-commerce purchase.

JCP isn't satisfied with its current footwear business. Research revealed that just 26 percent of its female shoppers purchase shoes from the retailer; pilots conducted last year expanded the women's shoe section with a mix of sit-and-fit and open-sell environments; shifted men's shoes into men's department in a fully open-sell environment; and created fully open-sell environments in smaller store formats. All shoe departments are being converted ahead of the back-to-school season.

Earlier this week, a federal judge gave the go-ahead to a class action lawsuit against JCP over "phantom discounts," prices the retailer allegedly artificially inflated in order to mark down to offer the appearance of significant savings.

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