Penney CEO says stores critical to omnichannel push
J.C. Penney CEO Marvin Ellison expects online sales to exceed 20 percent of the company’s total within five years. That’s why he’s reluctant to close any stores. While the idea of keeping stores open as sales migrate online may seem counterintuitive, Mr. Ellison sees physical locations as critical to the chain’s omnichannel strategy.
Speaking this week, Mr. Ellison said a store’s value is determined by measurements beyond what is sold off the floor, The Dallas Morning News reports. He identified store fulfillment of orders placed online as well as product returns as ways physical locations support top line growth while reducing costs.
About 40 percent of customers who come into a Penney store to pick up an online order or to make a return wind up making a purchase, Mr. Ellison said. He also said that customers making returns typically spend twice as much as the price of the item being brought back to a store.
“Only two companies make money from e-commerce, UPS and FedEx,” Mr. Ellison said. “There is not a pure play making money including Amazon on the retail side.”
At the conference, Penney’s CEO conceded the company is currently reviewing individual store performance and would likely have to close a small number. The department store operator has resisted calls by Wall Street to close large numbers of stores under Mr. Ellison and his predecessor Myron “Mike” Ullman. Last year, the chain closed seven stores.
Penney had a tough November and December with same-store sales down 0.8 percent. Mr. Ellison attributed the decline to a slow start in November with sales falling off the first three weeks of the month. Business from Thanksgiving through the end of December was “positive,” he said in a recent update.
Mr. Ellison said he was “encouraged by a very strong performance in our e-commerce business, evidenced by double-digit growth. This validates the strength of our omnichannel strategy as efforts to improve site functionality, expand fulfillment capabilities, offer flexible shipping options and introduce a broad assortment of new product categories were instrumental to this digital sales growth.”
- J.C. Penney CEO: store closings coming, but stores still valuable to online business – The Dallas Morning News
- JCPenney Reports Holiday Sales Update – J.C. Penney Company, Inc.
DISCUSSION QUESTIONS: Do you think criticism of J.C. Penney’s slow pace in closing stores is valid or is it off the mark? Do you approve or disapprove of Marvin Ellison’s omnichannel strategy for the company?