JCPenney Unplugs All Customer Wi-Fi. Should It Plug Some Back In?
Is JCPenney (NYSE:JCP) taking out customer Wi-Fi just out of spite or because customers really aren't using it? This week the struggling department-store chain confirmed to BuzzFeed that Penney's had cut off customer access to in-store Wi-Fi. (BuzzFeed used the word "removed," but the Wi-Fi is still available for associates to use with mobile POS.) The chain's official explanation: "There was little use by customers." The word from inside sources: CEO Mike Ullman doesn't think it's worth the cost, and besides, ex-CEO Ron Johnson called it "fundamental architecture" so it must be junk.
That's an exaggeration, of course—even Johnson couldn't turn a really good idea into junk. But the cost-savings numbers being floated around—Penney's only spent $12 million to install the Wi-Fi but will save $7 million a year by not letting customers use it—suggest the chain needs to actually get about $10 million a year in additional profit to cost-justify free user Wi-Fi. Spread across 1,100 stores, that's possible, but it still requires that Wi-Fi at least look like it's helping to move the needle on sales.
And that, realistically, is a hard sell. In shiny city and suburban malls, JCPenney may actually be able to pull in younger customers doing their omnichannel shopping with one eye on their phones. (That, after all, was Johnson's plan, and customer Wi-Fi fits in with that notion reasonably well.)
But out into small-town America, standalone Penney's stores depend on much more traditional shopping habits. It really is likely that middle-aged women looking for sale-rack bargains just weren't using the Wi-Fi. Or, when it came to shopping, using their phones at all.
Those standalone stores also aren't buried under the tons of concrete and steel that block cell service in shopping malls, which means Wi-Fi is less necessary for any smartphone users who actually want to visit a website. That's what data plans are for.
In practice, that means customer Wi-Fi probably has been an unused feature in many (most?) JCPenney stores. If it's a slap at Ron Johnson, it's because Johnson dismissed all those untrendy standalone Penney's stores anyway.
Of course, there are still ways that Penney's could make good use of customer Wi-Fi. Remember, it's still in place in every JCPenney store where it was installed. The money is gone (although Penney's is still in legal hot water over whether Wi-Fi installation bills have been paid). It may still make sense in some stores. Why not use it?
One reason is that ROI problem. But suppose Penney's replaced the signage that was still in stores after the customer Wi-Fi shutoff ("Enjoy free Wi-Fi!") with new signs in, say, just mall stores that say "Ask us about free Wi-Fi!" When a customer asks, that means the Wi-Fi desire has generated a face-to-face encounter with an associate. And the associate can pitch free Wi-Fi as a loyalty-program benefit.
Will that generate $10 million in profit a year? First, it doesn't have to if customer Wi-Fi returns only in mall stores—fewer stores mean lower costs. Second, it's really hard to place a value on CRM data, which means its contribution to ROI can be, let's say, estimated optimistically. ("Inflated" is such an ugly word, don't you think?)
And third, it really does give those younger, omnichannel customers a chance to commit to JCPenney as a brand. That was the goal of Johnson's big, expensive plan. The plan failed, but the opportunity is still there (and so is the money those customers might spend). If JCPenney can find a way to get more real value out of the Wi-Fi it has already paid for, it won't matter that it's part of Johnson's legacy. After all, for JCPenney the real rejection of Ron Johnson's legacy is just surviving.