J.C. Penney JCP has made a lot of progress in undoing the sales carnage that resulted from a failed attempt to become a cooler retailer a few years ago. The department store has brought back popular house brands, improved its e-commerce, and gussied up its stores.
But with annual sales expected to be only $12.3 billion in the fiscal year ending in late January, it is clear Penney still has a long slog ahead to get back to where it was. (Penney’s sales exceeded $20 billion a decade ago.)
Penney CEO Marvin Ellison, who took the reins in August, told the WWD Apparel and Retail CEO Summit in New York on Wednesday, that the retailer has moved past the phase of “patching holes” from a turnaround strategy that could have put Penney out of business and is now in rebuilding mode.
But a lot of the fixes to come will barely be visible to shoppers. They have a lot to do with unsexy things like implementing better demand planning technology, supply chain improvements, and improved database management. A case in point is the mounds of data Penney has from its customer base of tens of millions of people but doesn’t take advantage of.
“We have tons of customer data, we just don’t do anything with it,” Ellison said.
And those kinds of insights--the kind that can help with everything from demand forecasting, to personalized offers based on a shopper’s specific buying patterns, to better negotiating prices with vendors--will be key to fixing a still damaged business. Last quarter, Penney’s comparable sales rose 4.1%, besting its major competitors, but it’s a tough world for department stores.
And as Ellison pointed out, Penney has 86 million shoppers, as many as before its 2012-2013 misadventure under former CEO Ron Johnson. That proves that customers who defected are back, yet annual sales are $6 billion lower. So getting more business out those shoppers is key, and deeper data is essential.
Ellison’s comments echoed those of other retail CEOs, who are emphasizing the importance of back end operations. Target TGT is grappling with serious out-of-stock problems due to inadequate inventory management systems.
Kohl’s CEO Kevin Mansell told Fortune this week he wants to use tech to help each of his 1,166 stores adapt its assortment to micro-local needs. And Walmart WMT plans to spend more than $2 billion on tech in the next two years.
It’s all fine and good to improve the merchandise in a store and how they look. But tech can help a retailer avoid underbuying and overbuying, and get real insights into customer behavior.
“We are heavy on art and not good at science,” as Ellison put it. And his plan calls for balancing that out.
