J.C. Penney CEO focused on building customer loyalty

DALLAS - Crowds are following Marvin Ellison around these days.

When the J.C. Penney CEO spoke to a gathering of Dallas retail executives on a Wednesday night in September, the turnout was a couple of hundred people, more than the local industry group usually gets.

The same thing happened earlier last month at the Goldman Sachs Annual Global Retailing Conference. The half-empty room filled up when it was Ellison's turn at the podium.

Ellison is spreading the word about what's next for J.C. Penney after his predecessor, Mike Ullman, stabilized a company that had been on the brink of disaster.

"We have not arrived, but we have left," is the way he phrases where Penneys stands in its turnaround efforts.

Perhaps Penneys, based in suburban Dallas, has been too broad in defining who its customer really is, he said. "If you don't know where you are going, any road will take you there."

His point is that retailers can dilute their focus, and Penneys may have done that as it tried to be "the favorite department store for middle America."

Some 87 million customers that Penneys had before former CEO Ron Johnson's attempt to reinvent the department store have returned. But other shopping habits they acquired during 2012-13 when Penneys lost $6 billion in sales are hurting the chain now.

Ellison calls that period "18 months in the wilderness" and said he was shocked to find that local store data about product assortments had been wiped out and systems had been unplugged.

Creating a seamless shopping experience across stores and Penneys' online business was ignored.

The company has a massive network of distribution centers, a legacy from its catalog days, but Ellison said he found systems that don't talk to each other and other technical issues. That's hurting the company's plans to make shopping more seamless for the customer, both online and in stores.

Penneys is behind, he said, on online shopping conveniences like same-day, in-store pickup for online purchases.

Penneys' customers are shopping less frequently, and when they do come into the store, they buy less, Ellison said. These days, everyone has a loyalty program that rewards customers for spending.

Ellison plans to change Penneys' program, which he says is "very confusing, costs us a lot of money and the customer hates it."

A new one will be launched next year, he said.

In the stores, the company is rebranding its salons with In Style magazine and adding more beauty brands and products. It recently created a private brand to compete with fast-fashion retailers.

Penneys this month opened a new in-store concept, branding its plus size department the Boutique. Twelve stores are testing the Boutiques, which range from 3,000 to 5,000 square feet. The chain plans to add it to more stores next spring.

"It's an underserved market, and we're good at it, but we can be even better," Dougherty said.

Ellison also wants to work on the middle of the stores. The Sephora shops can feel like an oasis, he said. Penneys wants to position neighboring departments in a way that makes sense to that shopper.