US department stores retailer J.C. Penney made a major splash on Monday, 9 May 2016, when it announced that it would be expanding its major appliances offerings to nearly 500 stores in the US and would be offering the products on jcp.com after a trial in February. The new department, which features a dedicated appliance showroom of products from LG, Samsung, GE, and Hotpoint, is expected to begin its expansion in July 2016 and continue into the fall. The announcement by J.C. Penney signals the retailer’s first attempt in more than 30 years to try and make a dent in the US$38 billion major appliance market. J.C. Penney clearly feels that expanding the programme beyond its 22 test markets will yield positive results. The move is a gamble, but one that could pay off handsomely as it signals the first in a series of efforts to present a unified home department that can bolster both online and brick-and-mortar sales down the line.
J.C. Penney entering a competitive market
US major appliances saw volume sales grow 4% in 2015 as more than 60 million units were sold through retail channels. J.C. Penney enters a market that has seen department stores’ once dominant share of sales displaced by non-grocery specialists and internet retailing. Home and garden specialist retailers such as Lowe’s and The Home Depot made up 34% of volume sales for major appliances in 2015, the largest of any channel. On the other hand, the share held by department stores has fallen to just 14% of volume sales in 2015, down from 23% in 2005. Newly installed CEO Marvin Ellison – who has led J.C. Penney since August 2015 – is well positioned to helm the company’s foray into appliances, drawing on his experience as an executive with The Home Depot, now one of the largest retailers of major appliances in the US.
The move to sell major appliances will pit J.C. Penney in a more head-to-head battle with Sears, the historic US leader in major appliances sales. The two department stores have long served as dual anchors for many malls throughout the US. Entering the major appliances market will provide J.C. Penney with an additional avenue to draw consumer traffic from its struggling competitor. While J.C. Penney has managed to turn sales around in recent years, Sears has continued to flounder, losing sales to competitors and closing stores as it attempts to stave off further losses.
Appliances expansion only one part of the strategy
The major appliances market is only one component of J.C. Penney’s attempt to revitalize sales in its home department. The retailer also announced initiatives in window covering, home furnishings, and floorcovering. These announcements include a pilot programme with Ashley Furniture – the leading home furnishings brand in the US by retail value – to sell its Signature Design collection. Through these initiatives, J.C. Penney hopes to present a more unified home department that can drive additional traffic and capitalise on expected growth in the US housing market – which is forecasted to help push home and garden sales up by 10% in constant value by 2020.
New home strategy compliments broader initiatives
The growing presence of big ticket home items in a showroom setting integrates well with recent company initiatives to modernize the face of J.C. Penney through investments in omnichannel retailing and customer loyalty. Providing appliances for sales both online and in stores should help drive additional traffic to the retailer, while J.C. Penney’s store card and co-branded personal credit card should benefit as consumers seek financing for larger purchases. While it remains to be seen if J.C. Penney’s push into major appliances will help it drive sales higher, the retailer’s decision to expand the programme after a successful pilot does suggest that management feels that it can use home department as a springboard to help the brand continue to regain its lost strength.