Guess which brick-and-mortar retail business-that is, a business with a physical store-attracts the most customers to its Web site. Wal-Mart? Target? Best Buy? A recent study by Nielsen NetRatings revealed that J.C. Penney attracts more shoppers to its Web site than any other brick-and-mortar retailer. About as many people visit jcpenney.com as visit Amazon.com or eBay. For J.C. Penney, that's over 300,000 unique paying customers per month. What's their secret? J.C. Penney knows how to create synergy between different avenues of sales. Synergy occurs when separate entities combine to create a greater effect than the sum of their separate effects. A common analogy is a peanut butter and jelly sandwich, which tastes better because of combined flavors. J.C. Penney's peanut butter has been its more than 1,000 department stores, and its jelly is its catalog business, the nation's largest. Through these two sales vehicles, J.C. Penney can provide the merchandise customers desire when they desire it. The synergy between J.C. Penney's catalog and store occurs by each supporting the other to meet customers' needs. If an item is unavailable to a customer in the store, the customer is directed to the catalog desk, where he or she can browse through three times the amount of merchandise as is available in stock. By delivering catalogs to tens of thousands of households, J.C. Penney reaches customers that might not otherwise visit their stores. Moving online was natural for this company because it had a long history of experience selling to customers remotely through its printed catalog. The Web provided a more powerful catalog for the retailer, one that reaches millions of potential customers. J.C. Penney integrated its Web presence with its in-store and catalog sales to create more synergy and more retail power. At the turn of the millennium, J.C. Penney's stockholders were concerned about the future of the company. In the late 1990s, Penney's catalog revenues peaked at about $4 billion and started to decline. Catalog sales continued declining over time until in 2006 they reached $1.7 billion. In that same period, J.C. Penney's online sales increased to $1.5 billion in 2007. The total revenue for J.C. Penney in 2007 was $19.9 billion. While the catalog sales have continued to decline, the combined catalog and Internet sales as well as total sales for the business have steadily increased over the past four years. This indicates that the synergy between Internet and instore sales is strong. JCPenney.com is working to lure customers into the brick-and-mortar stores. Like the catalog, JCPenney.com lists three times as much merchandise as is stocked in the stores. Computer terminals are provided at Penney's 35,000 check-out registers to allow in-store customers to shop online for items that they could not find in the store. Listing so many items online provided J.C. Penney with a low-cost mechanism for selling slow-moving items. Online customers can check the availability of items in local stores, allowing them to find what they like from the comfort of their own home and pick it up locally the same day-without incurring shipping charges. Penney's online sales accounted for 6 percent of total sales compared with 4 percent for Sears, and only 1 percent for Wal-Mart. Plus, Penney's online customers are considerably younger than its in-store customers, enabling the company to reach out to the next generation.
Discussion Questions
1. What methods does J.C. Penney use to create synergy between its Web site and brick-and-mortar store?
2. Why was J.C. Penney more adept at moving to the Web than other retail businesses?
Critical Thinking Questions
1. If J.C. Penney's online sales account for only 6 percent of total sales, why is it considered so valuable?
2. What other ways might J.C. Penney take advantage of its Web site to boost its total sales?