J.C. Penney Co. (JCP) plans to grow its online sales by at least $1 billion in the next few years as the retailer restructures itself into a digital marketplace.

While the company isn’t giving up its roots as an operator of brick-and-mortar stores, J.C. Penney’s undertaking involves traditional online efforts, tie-ins with mobile devices, social-networking websites and structuring the more traditional stores as virtual shops. “We see JCP.com now as our flagship experience, our largest store,” said J.C. Penney Chief Executive Mike Ullman at a Goldman Sachs e-commerce conference Tuesday. “This is the growth engine in the company and it plays a key role in our merchandise initiatives.”

The plan, to post $2.5 billion in online sales annually within five years, comes as Penney is playing a bit of catch-up. The retailer helped pioneer brick-and-mortar online selling, but expansion slowed in part because different systems handled what it sold in stores and online. Operations are now working much more closely in tandem.

At $1.5 billion, online sales accounted for less than 10 percent of J.C. Penney’s $17.5 billion in revenue last year.

The effort to step up online operations “is on the verge of maniacal,” said J.C. Penney Executive Vice President Thomas Nealon. “The digital platform is the single biggest investment we’re making as a company.” J.C. Penney declined to provide a figure.

J.C. Penney is taking on competitors such as Target Corp. (TGT), which has a large online presence; Macy’s Inc. (M), which is growing its online operation; and Kohl’s Corp. (KSS), a less-established presence whose online sales were $500 million last year. Retailers are finding it necessary to build digital operations to try to keep pace with the future of retailing.

U.S. mobile commerce alone is projected at $2.5 billion to $5 billion  this year and  $10 billion to $15 billion annually in the next five years, said Nealon, who called the projections conservative.

But not all has gone smoothly as J.C. Penney makes its transition. The retailer next week is launching a customer-order system on which it has been working for almost two years. The system became necessary because of the unwieldiness of running its online business through the catalog system.

The overall goal of the digital effort is to let customers steer their shopping experience rather than be directed by a defined program, Nealon said. He spoke of customers by August being able to quickly tailor their shopping experience down to the cut and color of the sweater for which they are looking.

J.C Penney also plans to provide kiosks in stores, especially smaller ones, to offer  online access to all products. It also plans to begin sending personalized offers to customers’ phones.

To help reach teens in back-to-school season, J.C. Penney will be deploying iAd mobile advertising service operated by Apple Inc. (AAPL) on iPhones and the iTouch, Ullman said.