It didn't work for J.C. Penney (NYSE: JCP ) , but one market research group says free in-store Wi-Fi is exactly what retailers need to increase sales.
Accenture's Acquity Group took the pulse of more than 1,500 smartphone owners and came to the conclusion that Wi-Fi "is a worthy investment for retailers."
Half of those smartphone owners said they would feel more confident making a major purchase at retailers with free Wi-Fi because they would have the ability to perform in-store research. Thirty percent of surveyed mobile users were more likely to browse for additional items not on their shopping list, while 20% would be more likely to stay longer in the store. Moreover, having Wi-Fi access would also help support the 46% of shoppers who would make more purchases online if they had a more consistent user experience.
Sounds good in theory, but as noted above, J.C. Penney tried that and it did nothing to stem the mass exodus of customers from its department stores.
The retailer spent $12 million last year installing the free, publicly accessible Wi-Fi system and still ended up losing $985 million. As returned CEO Myron Ullman undoes all the work of his predecessor, the free Wi-Fi access was eliminated for a savings of $7 million. That's chicken feed in comparison to the near-$1 billion loss, but when you're digging around in the couch cushions for whatever spare change you can find, it was a luxury the retailer couldn't afford.
Yet many other retailers have already implemented the systems. Target, Kohl's, Saks, and Wal-Mart all have free Wi-Fi, as do Macy's, Sears, and Nordstrom. It could be Penney's was the exception that proved the rule, and only because it was hemorrhaging cash and customers at such an alarming rate that nothing would have helped.
If that's the case, then perhaps J.C. Penney shot itself in the foot by removing the Wi-Fi. Although Penney said its customers weren't using the system, perhaps they just didn't have time because they were running for the exits. Now that they're starting to return, they just might be looking for that seamless online shopping experience.
Yet there's also been concern among shoppers about the ability of stores to track customer movements. Nordstrom, for example, killed its tracking program after shoppers complained. And though the Wi-Fi service can facilitate "showrooming," or in-store comparison-shopping, Wal-Mart has come to embrace the concept with mobile apps and price-matching policies. Others are following suit, including Target and Best Buy, which had been the poster child for the devastating impact showrooming could have until it too learned to love it.
In the grand scheme of things it seems like a small thing, and nickel-and-dime cost-cutting policies of retailers like J.C. Penney may come back to cost them real dollars in the end. I wouldn't be surprised, though, that if the troubled retailer can gain its bearings we'll see it reintroduce Wi-Fi as a means of generating those heretofore elusive benefits.
An opportunity worth waiting for
While J.C. Penney's turnaround has been slow, for investors with patience it could still prove lucrative.
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