JCP.com is linchpin in JCPenney's multichannel strategy

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JCPenny is setting benchmarks for how large a gap merchants can bridge between channels and drive sales and customer loyalty. And babies are playing a big part.

Hoping to encourage in-store shoppers to purchase more at JCP.com, JCPenney devised a program to take advantage of the complementary nature of the retail and direct assortments in its newborn/infant/toddler business, where 90 percent of in-store sales come from apparel and 87 percent of online sales are generated by furniture and strollers.

The pilot was launched during the third quarter of 2006 in 40 stores with several in-store displays featuring signage communicating the expanded department available online. Shoppers could also pick up a catalog highlighting baby furniture or learn about JCPenney's Baby Solution microsite, where pregnancy advice and tips for decorating a nursery are available.

Results from this multichannel strategy were encouraging enough that JCPenney is planning to roll it out nationwide. Referral sales in the test stores increased 107 percent, meaning that twice as many customers placed an order for an item not found at retail with a store associate in the stores that had displays compared to those that didn't. JCPenney also saw a 30 percent increase in orders placed through the Internet or over the phone for these stores.

JCP.com is "an underlining architecture that drives growth throughout JCPenney," says Rich Last, VP/director of new business development at JCP.com.

Not only is JCP.com the fastest-growing channel at JCPenney - e-commerce sales surpassed $1.3 billion last year and are expected to overtake catalog sales this year - but it is also "an invaluable tool for our customers and associates," Last adds.

For example, by installing Internet-enabled point-of-sale terminals in all its stores last year, associates are now more knowledgeable about JCPenney's entire breadth of merchandise and can be more helpful in customers' buying decisions, Last says.

Brand-expansion strategies

This kind of cross-channel synergy can also prove helpful during the launch of private-label or exclusive brands, something JCPenney is featuring more of these days.

Using a synchronized approach across channels "is how we launch a brand today," says Last, pointing to the introduction earlier this year of JCPenney's new fashion-forward lingerie concept Ambrielle as an example. In addition to in-store, print and electronic-media elements of the launch, "the Internet was the underlying hub that tied the pieces together," Last explains. An Ambrielle microsite features ads for the brand, links to product and a bra-fit tool.

Another way of converting in-store shoppers to JCP.com is through a feature recently introduced that enables an online shopper to determine whether a desired item is in stock in a selected size or color at a nearby store.

None of this is to suggest that JCPenney doesn't still value its direct mail heritage. While JCPenney has been reducing its direct mail circulation over the past few years in favor of less-costly e-mail communication with customers, it still drops more than 70 catalogs yearly, including one of the few remaining Big Book catalogs, available upon request. In 2006, the company's catalog sales were also over $1 billion. However, that number is down from a reported high of $4 billion in the late 1990s.

In addition to JCP.com, JCPenney is focused on the Internet because the chain is also pursuing a strategy of introducing more smaller, off-mall stores.

Smaller stores, bigger footprint

JCPenney is planning to add 250 new stores by 2011, nearly 80 percent of which will be in off-mall locations.

The stores typically are on one level, come in at around 100,000 square feet and feature wide aisles and central checkouts to enable customers to come and go quickly. The company has reported that its off-mall stores average $250 in sales per square foot compared to $160 per square foot for all JCPenney's stores. However, since they won't be able to offer the full assortment of merchandise found in a larger store or even online, programs like the one in the infant department and tools like the new point-of-sale terminals with Internet access will help bridge that gap.

Of course, none of this would mean anything if JCPenney's merchandise assortment and marketing message weren't hitting the mark with customers.

"Being the leader and knowing our customers is essential because it's the basis for everything that we do," Mike Boylson, JCPenney's executive VP/CMO, said during the company's analyst meeting in April. He added that the company's "customer intelligence, data, insight, measurement tools, scorecards, customer-file management and purchase behavior is a strategic advantage that is hard to replicate."

For example, mining its wealth of data, the company recently tested making customer selections for its direct mail campaigns based on who would drive the most profitable sales, not who was most likely to respond. Results have been positive, with higher total sales.

To gain further customer understanding, JCPenney last year combined its intelligence with data about how consumers feel about brands from Saatchi & Saatchi, the chain's new agency of record, to try to connect on a more emotional level with customers. The strategy bore its first fruit in recent weeks with a targeted approach, launching an integrated marketing campaign intended to extend the multichannel merchant's emotional connection to kids and teens. This latest campaign follows the spring launch of JCPenney's new tagline, "Every Day Matters," and an accompanying marketing campaign.

Forging emotional connections

JCPenney aims to continue developing deeper, more emotionally driven relationships with younger customers by using webisodes on a microsite where teens can create their own content, and other nontraditional marketing tactics.

"While traditional marketing remains an important part of our approach, we are focused on incorporating new components into this year's back-to-school campaign that will truly reach youth in an authentic way," Boylson said in a statement.

The series of webisodes is hosted by twin designers Chip and Pepper Foster, who are launching an exclusive line at JCPenney. Their Flipped reality series explores the concept of image in high school by featuring four teens who are taken out of their own clique and placed in one that is much different. The microsite will include fashion tips, style ideas and ways to create their own content.

The Mix It Up Challenge in-store promotion encourages teens to combine JCPenney's variety of looks to create an original back-to-school outfit and then digitally upload a photo of it for voting and to share with friends. An eight-page ad in the August issues of Seventeen, Cosmo Girl and Teen Vogue will be tagged with a call to action to enter the contest.

Other elements of the integrated campaign include TV ads, mobile and guerrilla components, and key sponsorships.

Affordable luxury

JCPenney is also mining its data to help it develop more stylish private-label brands such as the new Ambrielle lingerie line. Combined with a focus on reasonably priced, exclusive lines from well-known designers, the store is hoping to bring more excitement to its merchandise assortment and make its stores a shopping destination.

Next year, JCPenney will launch its biggest brand ever, American Living, a lifestyle concept developed in conjunction with Polo Ralph Lauren's Global Brand Concepts. Earlier this year, it also introduced an exclusive deal with beauty retailer Sephora for contained shops within JCPenney stores. Sephora has a presence in 21 JCPenney stores and will be in 50 by the end of the year.

JC Penney's private-label strategy appears to be paying off. The company reports that private label brands and exclusive designer labels represent about half of its business. Plus, eight "power brands" generate 80 percent of private-label sales: Ambrielle, Arizona, a.n.a, Chris Madden for the JCPenney Home Collection, Cooks, St. John's Bay, Stafford and Worthington.

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