JCPenney online sales to top $500M

Carole Sloan, October 6, 2003

Plano, TX — Internet sales for JCPenney should exceed $500 million for this year, more than double the 20 percent increase the channel produced in 2002.

Within a few years, the Internet will be a billion-dollar business "and the return on investment will be enormous for us," predicted Allen Questrom, chairman and ceo of JCPenney. Currently, he added, "we make money" on the Internet business.

There also has been a major shopping shift, Questrom explained. "Two or three years ago, 70 percent of the Internet business was coming off the delivery of the catalog. Today, about 40 percent comes from the catalog, and 60 percent are direct customers."

And referrals from its retail stores will be increasingly important for both its catalog and Internet business, said Vanessa Castagna, chairman/ceo of JCPenney stores, catalog and Internet. At an analysts meeting here last week, Castagna pointed to the certification process that every store sales associate is trained in both for catalog and Internet referrals.

It is a mandatory program, she explained, "and we track the program by associate, by store." To date, she related, some stores' sales associates are 100 percent certified, others are 70 percent; but by Nov. 1, the objective is 100 percent.

One of the beneficiaries of this program is Penney's strong window coverings department, which long has seen referrals from the store to the catalog as a significant factor in its size and color range offering, said Charlie Chinni, executive vp, home, fine jewelry and shoes.

Soft window coverings, Chinni added, are pulling "high-single-digit growth for the third year in a row." In hard window covers, "we are really growing — double-digit increases."

Discussing product winners in its department store business, Castagna pointed to the entire down category. Noting that when Chinni joined the company "our down business was very insignificant, just a few items here and there." Last year, she said, down represented a $50 million business, and today "we have six or eight comforters, private label, national brands, a pillow business we didn't have before and down blankets, which are one of the best items we have."

While pointing out the company's strides in the first half of its five-year turnaround, Questrom also admitted that "we have the lowest sales productivity of any of the majors in the mall. We need to execute our strategy better to pick up the people who are shopping in the mall but not in the Penney store."

As for the catalog, which has been struggling with its strategy and declining sales for several years, Questrom insisted "the combination of the catalog and the Internet are still relevant." He pointed to the curtain and drapery business — "and we're the only one in the malls that carry them" — as an example. The catalog "complements what we don't have in the store."

While the catalog circulation base has been purposely reduced, its profit contribution has increased.

Penney also will open four off-the-mall stores this year, one each in Minneapolis, Dallas, Indianapolis and DeKalb, IL.

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