Inside A JC Penney Co. Store Ahead Of Earnings Figures
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J.C. Penney Making Its Loyalty Program Far More Generous

Jul 11, 2017

J.C. Penney (jcp) shoppers are about to get more bang for their buck as the struggling retailer looks to wring more sales out of existing customers.

The department store chain on Tuesday unveiled a new loyalty program that among other things lets customers roll points they've earned from one month to next rather than see them expire, and gives shoppers visiting its Sephora shops the ability to rack up Penney points there too.

The overhaul comes at a time Penney is trying to get back to sales growth after three straight quarters of comparable sales declines and is facing competitors with more developed loyalty programs. The revamp of Penney's program has been in the works for a year and is a centerpiece of Penney CEO Marvin Ellison's stated goal of getting more sales from each customers, a tacit admission of the retailer's challenges in attracting new customers. Last quarter, comparable sales fell 3.5% at Penney in an unexpectedly large drop.

Some of the changes include eliminating the one-reward limit on the number of $10 rewards a shopper can earn in a month. Loyalty members can also take advantage of member-only prices and invitations to exclusive shopping events where they can earn rewards more quickly, tactics that mirror those of hyper-successful programs at retailers like Nordstrom (jwn) and Ulta Beauty (ulta). What's more, shopping going to any of the 650 or so Sephora shops with Penney stores can earn both Penney points as well as rewards at Sephora, a major Ulta rival.

"Customers didn’t like having a limit on how many $10 rewards they can earn or that points expired," Sherina Smith, vice president of loyalty and customer relationship management, told the Dallas Morning News, which first reported the new loyalty program. "That’s not a way to drive loyalty."

Loyalty programs are becoming ever more central to retailers hanging on to customers in this tough retail environment. Ulta's "Ultamate" program has 24.5 million active members, which generate more than 80% of sales at the booming beauty retailer. Kohl's, (kss), one of Penney's most direct rivals, reinvented its own loyalty program in 2015 and now has 30 million members, a boon for a retailer also struggling to stem sales declines. Such programs allow retailers to better plan inventory, know which stores to close and which ones to keep, mine customer data on what works and what doesn't in terms of promotions, and lessens the risk of shoppers straying to other stores. And they also offer a potential buffer to Amazon.com (amzn) and its Prime membership.

Just look at Kohl's. A survey released on Friday by Fung Global Retail & Technology found that Kohl's is by far the preferred the favored destination for women's wear, with 16% of shoppers saying it was their top destination, well above Macy's (m) and Penney. What's more, the report found that Kohl's Yes2You program was the third most-mentioned reason Kohl's customers cited for shopping there, a higher ranking than at other chains.

For Penney, as it works to transform its merchandise assortment to become less reliant on apparel and build up its still new appliance business, getting more people signed up to the program is crucial. (Store cardholders will be entered automatically.) Penney said cardmembers, who currently generate about 40% of sales, spend about 2.5 times as much as non-Penney cardholders. Purchases made on the Penney store card will earn a shopper twice the points as other types of payments. And some two-thirds of company sales come from rewards customers. The more loyal they are, the better Penney's prospects in a brutal retail environment.

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