Pen­ney ex­pands plat­form on Web

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - MARIA HALKIAS

DAL­LAS — Mike Amend likes to say he heads a startup business in­side 115-year-old J.C. Pen­ney.

The di­vi­sion he leads as ex­ec­u­tive vice pres­i­dent of om­nichan­nel is housed in newly con­verted space in­side Pen­ney’s sub­ur­ban Dal­las head­quar­ters. The gray-fabric cu­bi­cles are all gone.

Amend, 39, who in his LinkedIn pro­file sum­mary refers to him­self as a “Fu­ture CEO,” has a stand­ing desk on one side of the large, open of­fice. It’s staffed with rows of data sci­en­tists, site re­li­a­bil­ity en­gi­neers, page de­sign­ers and prod­uct man­agers. Up­hol­stered fur­ni­ture set­tings are mixed in for small groups to meet. There are phone rooms for pri­vate calls.

An­other large, L-shaped space has glass walls, white­boards and the depart­ment’s only large con­fer­ence ta­ble. Around the cor­ner are foos­ball and in­door basketball ta­ble games.

The set­ting “re­leases our ca­pa­bil­i­ties,” Amend said, and is in­tended to re­flect a new work­flow with em­pow­ered teams com­plet­ing twoweek im­ple­men­ta­tions of de­ci­sions that are driven by

data. “Sure, we still have one, two- and three-year vi­sions and strate­gies, but we have to break up the ex­e­cu­tion into chunks.”

Hav­ing a strong dig­i­tal plat­form is even more im­por­tant as Pen­ney has been clos­ing stores. Chief Ex­ec­u­tive Of­fi­cer Marvin El­li­son has said more could shut down. But for now, Pen­ney still has 875 stores, and those lo­ca­tions have been im­mersed in the on­line business.

Amend spoke con­fi­dently about progress in Pen­ney’s on­line oper­a­tion dur­ing in­ter­views last month, at about the same time Ama­ and Sears were an­nounc­ing that they’re work­ing in tan­dem to sell Ken­more ap­pli­ances. Just a year ago, Pen­ney started sell­ing GE, LG and Sam­sung kitchen and laun­dry ap­pli­ances, first on­line and then in 600 stores.

In a sec­ond punch, Nike con­firmed that it’s work­ing with Ama­zon on a lim­ited as­sort­ment. Pen­ney ex­panded its Nike mer­chan­dise ear­lier this year and carved out 500 square feet of prom­i­nent space in 600 of its stores for Nike men’s shops. Then Ama­zon of­fered to buy items in high de­mand from tens of thou­sands of its third-party mer­chants and U.S. re­tail­ers for full price. Ama­zon con­firmed to CNBC that it made the offer be­cause it wants to be able to de­liver those goods faster from its own ware­houses.

Asked about the daily bar­rage of new chal­lenges, Amend said niches of com­pe­ti­tion are con­stantly spring­ing up. Pen­ney is in the mat­tress business fight­ing with new on­line-only sell­ers Casper and Helix, “just two of so many home-goods com­peti­tors,” he said.

“There are hun­dreds of mil­lions of cus­tomers out there. We fo­cus on our cus­tomers,

and we’re not try­ing to be Ama­zon. They are do­ing in­ter­est­ing things and hav­ing suc­cess,” Amend said, “but we have a huge cus­tomer base, and we can serve them bet­ter and get more of their wal­let.”

And Pen­ney cus­tomers may not fit the typ­i­cal high­er­in­come cus­tomer pro­file of an Ama­zon Prime mem­ber, he said.

Re­search from comS­core tells Pen­ney that it has one of the low­est cus­tomer over­laps with Prime mem­bers of any mass re­tailer and depart­ment store.

Pen­ney had sales of $12.5 bil­lion last year, proof that there are cus­tomers out there. Sears still has a lot of cus­tomers, too, and they are up for grabs as Sears ac­cel­er­ates its store clos­ings. Sears has been shrink­ing for more than a decade, and many an­a­lysts pre­dict it will go bank­rupt soon. Last year, Sears had re­tail sales of $19.2 bil­lion.

“Our cus­tomers have house­hold in­comes of $60,000 to $90,000, and they tend to be hard­work­ing, two-in­come fam­i­lies liv­ing both in ru­ral and ur­ban set­tings,” Amend said. “They don’t have the dis­cre­tionary in­come to com­mit to mem­ber­ship fees.”

In June at a Piper Jaf­fray con­fer­ence, El­li­son said it was im­por­tant to state clearly where Pen­ney stood.

“There was no re­tailer our size as be­hind the curve on ecom­merce and om­nichan­nel,” El­li­son said. “We were woe­fully be­hind in every re­spect.”

El­li­son brought in Amend, Mike Rob­bins as ex­ec­u­tive vice pres­i­dent of sup­ply chain and Ther­ace Risch as chief in­for­ma­tion of­fi­cer. Amend had worked with El­li­son at Home De­pot. Amend was vice pres­i­dent of on­line, mo­bile and om­nichan­nel when Home De­pot re­ceived in­dus­try ac­co­lades for build­ing its on­line business. The home im­prove­ment

re­tailer’s on­line sales grew to $3 bil­lion.

In 2015, still sta­bi­liz­ing its business from a failed at­tempt to rein­vent the depart­ment store by for­mer CEO Ron John­son, Pen­ney lacked a ba­sic on­line shop­ping ser­vice: the ca­pa­bil­ity to buy on­line and pick up in stores. That was just added a year ago.

“That’s ta­ble stakes,” Amend said, a poker term that’s come to mean the min­i­mum a business needs to be in the game.

Pen­ney is still catch­ing up. Last month, Pen­ney added the abil­ity to ship from all its stores, which im­me­di­ately made about $1 bil­lion of store in­ven­tory avail­able to on­line cus­tomers and cut the dis­tance for de­liv­ery.

About 80 per­cent of a store’s in­ven­tory is el­i­gi­ble for free same-day pickup.

In July, it of­fered free ship­ping to stores with no min­i­mum pur­chase price. Large items like re­frig­er­a­tors and trampolines are ex­cluded.

JCPen­ now stocks four times the as­sort­ment found in its largest store by work­ing with other brands and man­u­fac­tur­ers. More than 50 per­cent of its on­line as­sort­ment is drop-shipped by sup­pli­ers and doesn’t go through Pen­ney’s dis­tri­bu­tion. Added cat­e­gories in­clude bath­room and kitchen hard­ware, sport­ing goods, pets and toys.

New mer­chan­dise is be­ing added weekly, in­clud­ing ex­panded sizes. Pen­ney be­lieves it can serve big and tall and plus-sized cus­tomers by giv­ing them a re­li­able fit with its pri­vate and ex­clu­sive brands.

Peo­ple are look­ing for on­estop shop­ping on­line, too, Amend said. It works well with the com­pany’s new re­wards pro­gram to have more items that peo­ple can buy to earn points.

“Cul­tur­ally, we had to fig­ure out how do you op­er­ate a 115-year-old com­pany in a dig­i­tal era?” Amend said. “We’ve moved from a tra­di­tional re­tailer to a more tech­nol­ogy-cen­tered or­ga­ni­za­tion.”

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