JC Penny might be gone, but the next wave of overseas online retailers is coming

Any Australian retailer feeling smug about the rushed retreat of US giant JC Penny from the local market after just two months should think again.

Rather than breathe a sigh of relief, local retailers should to be very concerned about who the next online competitor will be – because they are coming, and quickly.

While growth in the Australian department store industry is expected to be soft this financial year, with revenue rising just 1.6% to $19.92 billion, another overseas retailer is likely to make its online mark here, says IBISWorld general manager (Australia), Robert Bryant.

“Major local players must expand their online capabilities before another international superstore steps in,” he warns. “Australian retailers should use JC Penny’s departure as a reminder to sharpen up their systems and embrace full transaction facilities as soon as possible.”

JC Penny has more than 1000 department stores throughout the US and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the internet and the nation’s largest general merchandise catalogue business.

The JC Penny Australia site had an extensive range of merchandise at smart prices, with a variety of departments including women’s, housewares, jewellery, men’s, kids and baby, maternity, bed and bath, windows (curtains and fittings) and more. There are also pages devoted to well known and popular brand merchandise.

But the company hit a myriad of problems including a depressed retail sector and problems with distribution. Bryant says that while JC Penny reportedly enjoyed excellent results in the few short months they operated in Australia, there were issues from the start, exacerbated by the financial crisis and plummeting Aussie dollar, which contributed to their downfall.

“The much smaller stock range than the US site, supply chain model, hefty shipping and transaction charges (increasing with weight), lengthy delivery times (12 to 14 days) and products listed with US sizing certainly didn’t help,” he says.

Bryant says there is now significant scope for a major Australian retailer to create a national, even global, online presence, as currently niche and speciality stores are making more of the e-commerce environment.

“We currently have a situation where Australian consumers are online, but many of their favourite retailers are not,” says Bryant. “The fact JC Penny failed means there’s now a gap in the market ready for someone else to make a better executed play for the Australian shopping dollar.”

Bryant says that with greater access to branded products, enhanced buying power, and supplier advertising support, Myer, David Jones, Target and Kmart are well positioned to escalate their online presence. “While JC Penny failed in Australia this time, their site’s capabilities were years ahead of any large Australian retailer, with our big four primarily using the internet as a branding tool and online brochure, but offering extremely limited transaction facilities.

“However, our mid-market retailers, such as Sportsgirl, Witchery and BabyCo are hot on the heels of their American counterparts, with online purchasing facilities to complement their store locations.”

Craig Reardon, who runs the E Team and assists retailers build online sites, says many retailers are in a dark hole. “Sites like Amazon are stealing business from all over the globe. Yet many retailers don’t understand that if they don’t sell online and make it available their competitors will and the longer you leave it the more market share goes to your competition.”

“Unless our department stores ramp up their web offering, another international retailer with strong brand equity – probably from the US, Europe, Singapore or Dubai – will target our consumers, knowing that many Australian retailers’ websites are lagging behind when it comes to functionality and the opportunity to purchase a wide selection of products online,” Bryant says.

Bryant also flagged the “multi-channel approach” as another area for potential development. “This has been successful for numerous retailers in the US, including JC Penny, who have created synergy between their online shoppers and the in-store experience by installing internet-enabled pod terminals within their shops.”