J.C. Penney seeks to net Canadians
By MARINA STRAUSS
Monday, July 25, 2005 Updated at 3:54 AM EDT
From Monday's Globe and Mail
U.S. department store giant J.C. Penney Co. is stepping up efforts to bolster its on-line presence in Canada, cashing in on the favourable rate of the dollar against U.S. currency.
The retailer this month launched an advertising campaign in Canadian newspapers across the country, offering 25-per-cent savings on a special link at jcpenney.com/canada.
If successful, Plano, Tex.-based J. C. Penney will intensify its marketing efforts, eager to grab even more business here, said Kevin Gebhardt, a vice-president of the chain's catalogue and Internet division.
"Customers are rapidly adopting this type of shopping," he said in an interview. "We're excited about the potential," he added
For years, U.S. department stores, including J.C. Penney, have scouted the Canadian market for possible expansion, but backed away because of the challenges involved.
Now, a growing number -- J. C. Penney being one of the bigger ones -- are being lured to e-commerce in Canada, partly because of the strong Canadian dollar as well as consumers' growing acceptance of on-line shopping.
"I've had quite a bit of work helping bring some U.S. retailers to Canada via their e-commerce channel," said Jim Okamura, a senior partner at retailing consultancy J.C. Williams Group in Chicago.
He said merchants ranging from home furnishing specialist Crate and Barrel -- a U.S. company now controlled by Germany's Otto Versand Gmbh --to clothier L.L. Bean Inc. of Freeport, Me., and lingerie chain Victoria's Secret, a unit of Columbus, Ohio-based Limited Brands Inc., have enjoyed a lift in their on-line business in Canada in the past year or more.
Canada Post has also played its part in enticing U.S. e-tailers, said Paulina Sazon, marketing manager at Canada Post's Borderfree division. It works with U.S. retailers, trying to help them ease their way into what can be a complex Canadian market, she said. It walks them through the duty and tax laws, shipping practices and marketplace idiosyncrasies.
Canada Post's research has found that there could be room for $15-billion worth of Internet and catalogue business for U.S. retailers in Canada, she said.
Mr. Okamura said a number of U.S. retailers have used e-commerce as a testing ground for rolling out bricks-and-mortar stores in Canada. He cited cosmetics giant Sephora -- the popular cosmetics chain owned by France's luxury powerhouse LVMH Moët Hennessy Louis Vuitton -- which now operates in Canada, and Crate and Barrel, which wants to open stores here. J.C. Penney has done a good job of improving its core U.S. business over the past few years, emerging as one of the few winners in the troubled department-store sector, he added.
It has focused on a mid-market, mid-income customer, emphasizing strong private labels and boosting its home décor offerings.
But J.C. Penney and other foreign e-tailers still have a challenge in doing business in Canada because of the delivery and duty hassles, he said.
Mr. Gebhardt acknowledged that the extra charges can add as much as 20 per cent to the price of J.C. Penney's on-line purchases.
But he argued that the retailer offers great value and does the calculation for the customer, tallying up the order total, including taxes, duties and shipping costs. It delivers within seven to 10 days.
He said Canadian customers have generally bought the same types of goods as their U.S. counterparts. But the company will closely follow the shopping patterns to see whether there are any ways it can tailor its offerings to Canucks.
"The Internet has the ability to reach out to customers wherever they are. We have an established business in Canada that we see growing on the Internet site . . ."
J.C. Penney spokesman Quinton Crenshaw said the retailer has no plans to enter Canada with conventional stores. Rather, the chain has been concentrating on its core U.S. department-store business, and selling off non-core assets such as Eckerd's drug stores.
In Canada, department store retailers Hudson's Bay Co. and Sears Canada Inc. both run e-commerce sites. Sears recently partnered with Seattle-based Amazon.com Inc. and last week started to broadcast infomercials on its site in a bid to strengthen the business.
HBC and Sears, both based in Toronto, have struggled to make overall financial gains, and analysts say they could be takeover targets.