Can E-Commerce Save Flailing J.C. Penney?

On the brink of obscurity, J.C. Penney Co. Inc. (NYSE: JCP) executives finally have a reason to hold their heads up. The struggling retailer produced positive growth of 24.3 percent from its e-commerce division during the third quarter, rising to $266 million. However, this news arrives at a time of great uncertainty within the company, as they are being removed from the S&P 500 Index in favor of the S&P MidCap 400. The S&P decision comes as no surprise, since J.C. Penney continues to turn in quarterly losses, resulting in plummeting stock prices. A string of bad luck, bad decisions, and tumultuous times has plagued the once dominant retailer over the last few years. In November, 2011, then-CEO Mike Ullman announced his retirement. Taking the reins of the company would be Ron Johnson who had previously been an executive with Target Corp. (NYSE: TGT) and Apple Inc. (NASDAQ: AAPL). Johnson’s vision was to reinvent the brand’s image while keeping a target market of mid-level consumers. One month after coming on board, Johnson penned a 10-year, $200 million deal with Martha Stewart Living Omnimedia (NYSE:MSO) to carry Martha Stewart-branded merchandise for its revamped home department. The hopes of a newly enhanced home goods line were quickly dashed as Macy’s promptly sued over exclusivity of its existing contact with the mogul. This marked the beginning of a downward spiral for J.C. Penney. As the Macy’s-J.C. Penney trial raged on through 2012, J.C. Penney saw failures turn into losses. From upgrading stores’ retail technology, to reducing the number of promotions in favor of more of a mini-boutique customer experience, to an overhaul of advertising, it seemed that everything Johnson touched crumbled around him. The end result was a sales loss of 25 percent in-store and 32 percent online - the retailer’s lowest e-commerce performance since 2005. Finally, in April of this year, Johnson was out and Ullman returned to help salvage what was left of his once prosperous company. Talking with Millennials, it is hard to grasp that J.C. Penney was once a prominent retailer. The department store chain seems to have been forced into obscurity by an ever-evolving retail world that favors the e-commerce model. Long gone is the day of stores filled with moms and teens alike, in favor of online marketplaces like Amazon (NASDAQ: AMZN).  Many of J.C. Penney’s stores even seem destined for closure. But don’t count out J.C. Penney yet. It was less than 10 years ago that they became the first retail store to break the barrier of $1 billion in online sales. As they slowly evolve to reconnect with shoppers, it is online that they are finding their stride. Even though J.C. Penney saw eight consecutive quarters of losses in online sales, they began to rebound last quarter. Sales on grew 14 percent in July, 10.8 percent in August, 25.3 percent in September and 37.6 percent in October. J.C. Penney’s online customer experience also is gaining stride, as the retailer was beat out only by Saks Fifth Avenue for shipping and e-mail response times in the third quarter, according to customer measurement service provider StellaService. Plus, the retailer has stepped up its online fulfillment systems. In the third quarter, J.C. Penney’s average delivery time for shipments was 4.8 days, with 89 percent of deliveries arriving in seven days or less, Internet Retailer reported. J.C. Penney’s customer service agents also responded to 98 percent of all customer e-mails within 72 hours, and 69 percent of those e-mails were answered in less than five hours. Importantly, the time for a J.C. Penney customer to reach a live agent on the phone was one minute and 16 seconds on average, representing the highest baseline performance out of all department stores, according to StellaService. The continued growth of service and sales, along with a new – set for a re-launch in March, 2014 – could serve to make up much needed ground. Time will tell the tale if J.C. Penney can leverage its e-commerce momentum and get back to its winning ways. But – if stores like Target and Macy’s are any example – e-commerce is the key to remaining relevant and vibrant in the new economy.