J.C. Penney’s Black Friday Strategy? Better Tech to Avoid Out-Of-Stock Disappointment
Ordering four times as many boots for the holiday season as last year may seem like an odd strategy for a major retailer that wants to outmaneuver the competition.
But that’s exactly what J.C. Penney (JCP) did heading into the Black Friday period and through the Christmas season, as it looks to avoid a repeat of last year’s woes. In 2014, the department store left a lot of sales on the table when it was out of stock of key items customers had been snapping up during the busiest shopping period.
Penney Chief Executive Marvin Ellison told Fortune in an interview on Friday that the strategy was paying off.
“We’re off to a good start,” he said of Thanksgiving and early Black Friday business. “We had customers in line early, which is always a good sign. And we had strong sales in store and strong sales online.”
Ellison, who took the reins as CEO in August after 10 months as president, has made it his top priority to improve the “science of retail” at Penney, meaning improving its internal tech and e-commerce operations. The “art,” on the other hand, consists primarily of merchandising.
Last year, as Penney was still recovering from its failed attempt to get hipper under former CEO Ron Johnson, the retailer’s website was still in a shambles. That was a major handicap for Penney, given the increasing importance of integrating between online and in-store retail operations.
The retailer is paying a price for its late response to retail tech trends. While Macy’s (M) and Kohl’s (KSS) can offer shoppers the option to place an order online then go to a store to pick up their purchases that day, Penney is offering that service at only a handful of stores, though it will roll it out across all stores next year.
It’s easy to see why Ellison has made tech his top priority: Adobe said that e-commerce sales rose 19% between Thanksgiving and Saturday, reflecting how aggressive everyone, from Macy’s to Walmart (WMT) to Target , has been about online sales in their fight with Amazon.com (AMZN).
“The interplay is important, because if I go back to just a year ago on Thanksgiving weekend, we did not have a strong online presence. We had functionality issues and we didn’t have the depth of assortment that we really wanted,” Ellison said. In the past year, Penney has worked hard to improve the jcp.com’s performance, upgrading its mobile app, among other efforts.
Last year, after a successful Black Friday weekend, many Penney stores were out of stock through Christmas in key items like boots, small kitchen appliances, sheets, towels, and some consumer electronics, leaving the retailer flatfooted during the most important quarter of the year.
So this year, Penney purchased four times more units of a pair of $19.99 boots than it did last year, among other big investments in beefing up its inventory. This will be key to sustaining Penney’s sales pace. Last quarter, the retailer handily outpaced Macy’s and Kohl’s with comparable sales growth of 6.4%.
“For December, we’ll keep the momentum going because we’ll have depth of inventory,” Ellison said. “We will have items to sell. It sounds very basic, but I’m telling you it was a huge miss for us last year.”