On-line auctions' arrival at mass puts JCPenney in pioneer role - Brief Article - Statistical Data Included

Discount Store News, Feb 21, 2000 by Keisha Rutledge

Sandwiched between discounters and high-end merchants, JCPenney is looking to revive the glory days of mid-tier department stores with its third channel of distribution: an auction on its expanding jcpenney.com Web site. Set to launch in the spring, the site will initially sell overstocked merchandise from its nearly 1,150 department stores and $4 billion catalog operations.

Here's how the auction will work: Consumers can buy a broad assortment of goods in a traditional auction as well as in an automatic markdown format where the seller slashes the prices over a period of days until either the merchandise is sold out or the price reaches a floor preset. JCPenney has partnered with FairMarket, a hosting company that operates an auction network, to implement the service.

JCPenney's new auction feature will compliment the company's comprehensive Web site, which contains a clearance shop, a seasonal department, specialty services, such as fresh flowers, and an on-line vitamin shop that sells Eckerd's private-label vitamins, herbs and minerals. In addition, the site gives on-line shoppers a preview of spring skus and a sneak peak at what's hot in women's and children's apparel, toys, home and leisure and jewelry. Also enhancing the site is a feature Wal-Mart added to its recently launched on-line store: a gift finder that allows shoppers to select an item based on occasion, recipient and lifestyle.

JCPenney has not said how the auction--still in its development stage--will fit into its long-term ecommerce initiative, but the company, which has been struggling to jump start in-store sales, has had admirable success with its on-line operation. For all of 1999, JCPenney estimates e-commerce sales at roughly $100 million, rising more than six fold from $15 million in the previous year. December on-line sales were $36 million, more than twice the total for all of 1998. For the month of December, the site was the third highest ranked on-line apparel merchants, according to Media Metrix.

While JCPenney is tight-lipped about the effort, the project has come to represent the latest venture by click-and-mortar retailers to give more power to consumers to decide how much they will pay for goods and services.

Joining other virtual auction sites such as eBay, Amazon.com Priceline.com and Ubid.com, JCPenney isn't the only bricks-and-mortar operator to delve into the sacred realm of bargaining--pairing eager sellers with potential buyers. The Sports Authority, which launched its thesportsauthority.com Web site in November 1999, has incorporated a consumer-to-consumer auction into is on-line store, allowing consumers to buy and sell used sporting goods in a community-building forum.

Thesportsauthority.com has 14 categories in its flea market for sports enthusiasts: camping/hiking; fitness equipment; cycling; team sports; fishing equipment, skating; golf; sports memorabilia; hunting; tennis/raquet sports; skiing/snowboarding; games; running; and rock climbing. The site recently added a new item to its cyber auction block--a 1995 Ferrari 348 Spider Convertible that at press time had a high bid of $71,000. Although proceeds from the sale of the dream car will be given to charity, the mere mention of the flashy hot-rod does something that the chain hasn't been able to do in its stores: attract consumers and drive traffic. Thesportsauthority.com has consistently ranked high in Media Metrix reports--often times being the only sporting goods site to top the charts. Unfortunately, the retailer has not had that same success with its ailing chain, where December sales dipped 7.4% to $230 million from $248.5 million and comps declined 1%.

Another retailer, The Sharper Image, which sells an eclectic mix of consumer electronics, is taking the same approach as JCPenney and auctioning its products on its sharperimage.com site. Consumers can bid for new, refurbished and repackaged merchandise. And for those with a flare for the opulent, the auction also offers really high-end, one-of-a-kind products such as exclusive art pieces and a $20,000 motorcycle.

The growing on-line auction market has even attracted Wal-Mart and Sam's Club. Last year Wal-Mart listed a job opening on its site that hinted the retail giant may be exploring the concept. And although Wal-Mart has made no formal announcement about adding an auction to its site, the feature could help the company bolster its Web presence and bolster its on-line expansion.