JC Penney axes dedicated omni-channel exec role while bigging-up need for omni-channel future

Profile picture for user slauchlan By Stuart Lauchlan March 4, 2018
Summary:
JC Penney needs to build an omni-channel future. That's the priority. So why has it decided to lose the standalone role of EVP of Omni-channel?

JC Penney bag
One-time catalog retail poster child for Middle America, JC Penney has made a major commitment over the past couple of years to building an omni-channel future to try to turn around its ailing fortunes. How successful that has been to date is open to question, especially when the firm's latest move is to eliminate the role of EVP of Omni-channel.

For CEO Marvin Ellison, there’s a straightforward-enough objective for JC Penney:

We continue to be committed to becoming a world-class omni-channel retailer. In my two years as CEO, we’ve been committed to transforming JC Penney from a company focused primarily on the brick-and-mortar business to a true omni-channel retailer...We are very pleased with the overall performance of omni-channel. And what we’re going to do is kind of continue to build on the successes from last year.

He points to various metrics to validate his claims:

In 2017, we increased our online SKU (Stock Keeping Unit) count by 50%, with plans to add an additional 600,000 SKUs in 2018. In addition, in 2017, our team transformed our mobile app from a 1.5 star rated app with minimal reviews to an over 4.5 star rated app, with over 150,000 reviews and counting. In 2018, we’ll continue to invest and enhance our mobile experience.

We’re also pleased that today, roughly 80% of the store’s existing inventory is eligible for free same-day pickup. 100% of our brick and mortar store network is now being utilized to fulfil online orders and over 40% of our dot com orders were fulfilled from a brick and mortar store.

In terms of total sales, online accounts for around 18% and reaches across the JC Penney portfolio, he adds:

From a category performance, it’s really across the board. Our jewellery business is incredibly strong online because the value is so relevant and our assortment is vast from a value customer to a customer that really wants to spend an exceptional amount. We can really serve all of those customer needs. The home business is incredible on online. We have really great strength across all home categories. The apparel business also carries enormous strength online. So, we’re very pleased across multiple categories.

We also understand that the power of retail is going to be how you connect digital and the physical stores in a most effective way. We are very pleased that we could say that roughly 40% of online orders are fulfilled from store which gives us the ability to drive traffic in those stores. And as a really interesting point, almost a third of the customers that go to a store to pick up something that they ordered online, will buy additional item for roughly $50. That’s significant, because traffic is important.

Exec reshuffling

So if all’s so good and upbeat, what’s with last week’s announcement of a senior management reshuffle that’s eliminated the standalone role of head of omni-channel? Therace Risch will assume the combined titles of CIO and Chief Digital Officer, swallowing responsibility for omni-channel retail into her new role.

As a result of this, Mike Amend, EVP of Omni-channel, will be leaving the company. This is a big deal - Amend was one of Ellison’s first hires when he took up the CEO role in 2015. He had been VP of Online, Mobile and Omni-channel at Home Depot, where Ellison had driven a major digital transformation push while CEO there.

In a statement accompanying a disappointing set of fourth quarter numbers and a weak outlook for the coming months, Ellison said:

Therace understands the power of technology, and how it can significantly influence and enhance the way consumers shop and ultimately, be the point of differentiation on where they choose to buy…I would like to thank Mike Amend for his service with the company and wish him well in his future endeavors. Through his hard work, JC Penney has advanced its omni-channel capabilities, laying the groundwork for further innovation and growth.

On top of those changes, the retailer confirmed 130 job cuts at its corporate headquarters in Plano, Texas, and 230 cuts from within stores. That’s going to save around $20-25 million dollars apparently. Ellison says that building success comes with some pain points:

Although change is never easy, we believe the changes we announced today to our omni-channel and IT teams will streamline the organization and accelerate decision-making. Omni-channel will continue to be one of our top priorities in 2018 and into the future…retail in the U.S. is a multi-trillion dollar industry. And we believe there can be multiple winners. Those retailers who can offer their customers the best in-store and online choices while eliminating friction will be the winners.

My take

Bottom line - JC Penney needs to sell more stuff, not fiddle about with the executive line up and shave $20 million off of costs. And to sell more stuff, it needs to have more stuff that people actually want to buy.

In addition, bigging-up the crucial nature of building an omni-channel future grates rather with the elimination of a senior exec solely dedicated to omni-channel. Last year, Amend made two important comments in his JC Penney role. The first:

Culturally, we had to figure out how do you operate a 115-year-old company in a digital era?

The second:

We're not trying to be Amazon.

On the second point at least, JC Penney is succeeding…