For J.C. Penney, e-commerce is no easy fix

Wed Feb 26, 2014 12:04am EST
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By Phil Wahba

(Reuters) - First the good news for J.C. Penney Co Inc (JCP.N: Quote): online sales rose 26.3 percent during the holiday quarter.

Now the bad: the surge mostly reflects how far the one-time e-commerce pioneer has fallen.

The U.S. department store chain started offering e-commerce in 1995, long before most large retailers, the benefit of also operating a big catalog business until 2011.

But after reaching $1.52 billion in 2011, online sales fell by about a third in 2012, while rising 41 percent at the likes of Kohl's Corp (KSS.N: Quote) and Macy's Inc (M.N: Quote). Penney lost its lead because of management missteps and inadequate investment in the website and other technology.

"Sadly they've gone from being a leader to a laggard," Lauren Freedman, president of the e-tailing group, a consulting firm, said about Penney. "They've failed to keep up."

Penney now gets some 8 percent of sales online, compared with 15 percent, including catalog sales, a decade ago. E-commerce sales at Macy's Inc (M.N: Quote) and Penney were about equal in 2010. Two years later, Macy's were three times larger.

On-line sales started improving last summer after Chief Executive Myron Ullman returned to the company and brought back merchandise that had been discontinued even though it was popular with online shoppers, and began to integrate buying and planning teams for both e-commerce and stores to support what retailers call "omnichannel" shopping.

But a lot of work remains to be done.   Continued...

A woman checks her phone outside the entrance of a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid