| September 17, 2018
The WARC news email brought to my attention that Kohl’s department store appears to be one of the retailers who have discovered the secret to thriving, not just surviving, in the age of Amazon. But what really drives that success?
Kohl’s recent strong earnings report indicates that the brand is doing well, particularly as sales at Kohl's stores open for a year or more were up 3.1 per cent, ahead of expectations. Looking at last year’s BrandZ data finds that Kohl’s stands out from its obvious competitors as meaningfully different. The comparison with struggling Sears is particularly notable. Whereas Sears underperforms on almost all key metrics, Kohl’s overperforms on meaning and difference. The fact that Kohl’s underperforms on salience represents an opportunity to further extend its offer to new customers.
So, what drives the perception that Kohl’s is different? One of the most obvious things is the commitment the company has made to e-commerce. Kohls.com opened back in 2001 and today the company offers a mobile app, digital wallet and mobile payment. In 2015 Kohl’s implemented its free in-store pickup for purchases made online and by 2017 25 per cent of online orders were filled by a store, rather than a distribution facility.
Quoted in Fortune Kohl’s Chief Executive Kevin Mansell states,
“We have to be willing to make investments for the long term when others can’t and suck it up in the meantime while the sector is weak.”
In the three years running up to 2017 the company is reported to have invested $2 billion in technology and $1 billion in its stores.
As the WARC article notes, Kohl's is unusual in partnering with Amazon. Last year Kohl’s reached an agreement with Amazon to sell that company’s branded devices within designated "experience spaces" inside select Kohl's stores and a pilot test is underway that allows people to return items bought at Amazon at some Kohl’s stores.
Particularly at a time when people find e-commerce more convenient than shopping in physical stores, the buy online and pickup/return strategy is a smart move because it helps bring more people into the store. It puts a different twist on convenience and makes it more likely people will buy something additional while they are there. That opportunity could be wasted if Kohl’s did not also focus on the in-store experience. Technology is just part of the solution to making shopping as easy and enjoyable as possible.
One other thing that Kohl’s is doing that is different from the competition is downsizing stores rather than closing them. Again, this seems like a good move because the stores themselves act as a salience driver as well as a distribution centre for faster e-commerce fulfilment. Fortune reports that JC Penney and Macy’s both found that e-commerce sales dip in areas where they have closed stores.
Like Best Buy, Kohl’s has found a way to play to its strengths in the age of e-commerce. But what do you think makes the store different from others? Please share your thoughts.