PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
Despite a dismal performance of late for its 1,075 department stores, J.C. Penney has a successful three-year-old Web site. JCPenney.com consistently ranks among the top 10 e-commerce sites in terms of traffic and, according to Nielsen/Net Ratings, is the leading apparel and home e-tailer. Much of the credit belongs to Paul S. Pappajohn, president of J.C. Penney E-Commerce, based in Plano, Tex. Recently, BusinessWeek Dallas Correspondent Stephanie Anderson Forest talked with Pappajohn about J.C. Penney's future plans for its Web site. Here are edited excerpts from the conversation:
Q: Coming out of the dot-com crash, which e-commerce business model or models do you think will succeed now?
A: There are certainly challenges for pure plays and the multiple-channel retailers. Not only have they had to build their infrastructures, customer-service centers, distribution centers, but they've had to build their brands as well, while working to achieve profitability in a condensed time period. Many have failed. On the other hand, our integrated multichannel strategy is proving to be successful. We've been able to leverage what others have had to build from scratch.
There will continue to be hardships in the industry. The hardships have nothing to do with consumers and their online behavior. People are still coming online for their information, entertainment, communication, and shopping needs. Online e-commerce traffic increased more than 30% over the holidays, according to Nielsen/Net Ratings. And they're accessing the Web in multiple ways, through high-speed connections and broadband access. We're moving beyond the PC to Web-enabled phones and PDAs. We expect this trend to continue.
Q: What was it about JCPenney.com's business model that clicked with consumers?
A: We leveraged the brand awareness of the fifth-largest retailer, and the assets and infrastructure of the largest cataloger in the Western Hemisphere, to drive significant incremental sales through JCPenney.com. We've been able to streamline costs and are extremely careful to avoid redundancies in roles, staffing, and efforts, to accelerate profitability.
Q: How does that compare to many of your competitors' approach?
A: A few years ago, J.C. Penney bucked the industry trend of spinouts, instead pursuing a fully integrated multichannel strategy that leverages in-store, catalog, and online efforts. We call this "3-Tailing." After a few years of experience championing 3-Tailing, we're seeing a positive impact on the bottom line.
Q: What role did the JCPenney.com catalog play?
A: No doubt about it, the catalog infrastructure has been instrumental to our online success. J.C. Penney entered the catalog business in 1963. We built 14 telemarketing centers to take orders and provide customer service. We built five distribution centers from where we process approximately 68 million direct-to-consumer orders each year -- more than 1,000 orders per minute during the busy holiday season. Next, we found a way to efficiently publish the extensive content from our catalog online. Simultaneously, we focused on a next-generation customer experience that drives incremental growth.
Q: How are you managing growth now?
A: We may be online, but we're a 98-year-old retailer. We didn't get caught up in the hype. Our focus will continue to be on customers and how we can better serve their needs by making the right merchandise easily accessible.
Q: How are you dealing with the economic downturn?
A: Over the past 98 years, millions of consumers have developed a deep trust for the J.C. Penney brand. This emotional connection with our customers translates into instant credibility on the Web and into credit-card security and dependable shipping. When consumers order something from JCPenney.com, they know we're going to deliver. But they're also coming to us for value. And our suppliers know that JCPenney.com is a gateway to American consumers online. So they're coming to us with key product offerings and interesting promotional ideas as well.
Q: Are you cutting back on investing in the site?
A: Considering that we just [in March, 2001] relaunched the site, we don't plan to invest as much this year as we did last year.
Q: When do you expect to be profitable?
A: We expect to be profitable this year. Our goal is to reach about $400 million in sales this year. Our sales in 2000 were $294 million, an increase of 188% over 1999. [The company doesn't divulge profit figures for this unit.]
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
