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Penney’s Tries For Better Reception

DALLAS -- Why would a company that lost approximately $40 million or more on a home shopping venture only a few years ago pour more money into various forms of electronic retailing today?<BR><BR>When the company is J.C. Penney Co., the reason is a...

DALLAS — Why would a company that lost approximately $40 million or more on a home shopping venture only a few years ago pour more money into various forms of electronic retailing today?

When the company is J.C. Penney Co., the reason is a strong belief in new technology. The company is testing no less than five forms of electronic retailing.

A longtime innovator in the use of technology, Penney’s developed and operated its own interactive TV shopping network, Telaction, in 1988. It lasted a year.

J.C. Penney Television Shopping Inc., a fashion channel, was disconnected in 1991, after two years of lackluster sales. Penney’s still owns the network and licenses the cable access to about 6 million homes to QVC.

Penney’s said that if it learned anything from the experience, it is that owning and operating a network is not a cost-effective proposition for a retailer. It also concluded that home shopping will succeed only when interactive technology is widely in place.

“Telaction was back in the Eighties,” said Al Bell, director of strategic planning for Penney’s catalog division. “Because the format at one point doesn’t click with customers doesn’t mean it won’t today. We think it’s likely enough that we want to test it.

“Obviously, TV has good potential because HSN and QVC are each doing $1 billion in sales,” said Bell. “It’s shown a pretty rapid rate of growth so it certainly is an alternative and something J.C. Penney continues to consider and look at.”

Much has changed since Penney’s launched its home shopping services.

While Penney’s network was available in 12 million homes nationwide in 1989, market research at that time showed about 75 percent of Americans saying they wouldn’t shop through TV.

Today, QVC and HSN are household words, and the idea of armchair shopping no longer seems quirky.

“Interactive technology has developed a lot faster than any of us thought it would,” Bell said. “The cost has changed significantly. To make [Telaction] work, we had to put a box on a telephone pole behind the customer’s house to serve a small number of customers — less than 20. Today a small box at a telephone switch room might serve tens of thousands of customers.

“Telaction programming was all still frame pictures, no full motion video, so that has changed,” Bell continued. “The interface was through a touch-tone telephone rather than remote control, so from a customer viewpoint it was clumsy, not instantaneous.

“The whole basis of home shopping is built on the convenience,” Bell said. “That’s what leads us to believe that if this becomes a significant shopping format, it’s going to have to be interactive.”

In addition, he noted, “The consumer climate has changed enormously. The consumer is much more value-driven today than in the last decade. Our experience is that all kinds of merchandise sells. I don’t think there is anything about TV that makes it inherently more difficult to sell tailored clothing than through a print format.”

Thomas H. Tashjian, managing director of First Manhattan, said Penney’s strong surge and profit growth over the last few years has put it in a position of generating more cash than it needs over the next several years.

“As a result, at some point they’ll have plenty of money to invest in additional avenues of growth and home shopping certainly could be one of them.”

With that in mind, here’s what Penney’s is doing:

Offering products on CompuServe and Prodigy computer networks. Consumers can also order products from Penney’s catalog through the computer services, or order the catalog itself.

Selling catalog goods on the Interactive Network, a TV cable network, as part of a test scheduled to begin this month in 150 homes outside Dallas. Developed by IT Network here, the system allows viewers to select merchandise and place orders through a remote control.

Planning to sell its catalog on a new interactive TV network operated by Eon Corp. of Reston, Va. Eon’s technology allows viewers to access product information or order instantaneously by activating symbols that appear on the TV screen.

Working with United States Satellite Broadcasting Co., which operates a new satellite-based entertainment network and has contracted to use Penney’s telemarketing network to sell its 18-inch satellite dishes. While USSB has not indicated it will offer shopping on the network, the system is another potential sales vehicle for Penney’s to evaluate.

Selling about 100 products for the past year on MicroMall kiosks. The electronic kiosks, which show photos of products on compact disc, are in office buildings and hotels. Last week, MicroMall said it would sell its shopping programming on a national interactive television system run by ICTV.

“The spectacular success of automatic teller machines shows people are very comfortable with technology now,” said Penney’s Bell. “It could well be that people will also be comfortable with making transactions through TV. That’s what these trials are about.”