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Kohl’s Doubles Down on Store Experience

by News Desk

Kohl’s is reinvesting in its four-wall footprint and trying to modernize it.

The Menomonee Falls, Wisconsin-based retailer is accelerating the opening of smaller store formats that have successfully been piloted; introducing what it calls “zones” for diverse, female-owned and emerging brands; testing self-serve return drop-offs; testing self-checkout, and reflowing key active and casual brands such as Calvin Klein, Draper James RSVP and Under Armour, in proximity to the in-store Sephora shops for better exposure.

The company is also continuing to roll out self-serve stations for picking up online orders and already offers the ability to drive up and pick up packages and make Amazon returns.

There’s a lot that can be said about Kohl’s stores. They are conveniently situated in off-mall locations, closer to where many people live and where you can park right by the entrances. They’re one-level, easy-to-shop stores that offer good value. It’s an efficient, basic shopping experience that works without much flair. Promotions trump fashion pizzazz.

“Our strong and productive off-mall store base can continuously evolve with our customers’ expectations and demand, and we see substantial opportunities to leverage our real estate in producing long-term growth,” said Mark Griepentrog, Kohl’s chief property officer. “Kohl’s began with roots as a brick-and-mortar company, and these 60 years of experience have set the company up to become a leading omnichannel retailer,” Griepentrog said.

Kohl’s stores this year have come under the spotlight, with several parties bidding to acquire the company and activist investor, in particular pressuring Kohl’s to make changes to enhance shareholder value. Activists have proposed that Kohl’s consider sale leasebacks of properties, spinning off the e-commerce into a separate company, and selling itself.

Kohl’s is currently evaluating the bids, with the help of Goldman Sachs, but has rejected the idea of sale leasebacks or spinning off the

“Kohl’s is deeply committed to its retail footprint and is evolving its real estate approach to match the changing industry landscape and customer needs,” the company said in a statement Wednesday. “Over the next three years, Kohl’s will increase its investment in store strategies that will improve the store experience for customers and associates, and over the next four years, about 100 new, smaller format stores will open in markets previously untapped by Kohl’s physical presence.”

The company indicated that in 2021, 99 percent of its fleet of 1,165 stores were four-wall cash flow positive and about 95 percent generated more than $1 million in four-wall cash flow.

The company also said 80 percent of Americans live within 15 miles of a Kohl’s store.

By 2023, Sephora at Kohl’s will be introduced to 850 locations. At the end of 2021, there were over 200 Sephora shops installed. Kohl’s sets Sephora in the front of its stores and uses the opportunity to reset surrounding areas with greater space for active and casual brands.

Kohl’s said its new zones for diverse and female-owned companies will provide an element of “discovery” to its stores. It will also offer some differentiation from the preponderance of major national brands and private brands. Kohl’s emerging brand program started in 2019. Since then, over 70 brands new to Kohl’s have been introduced, the company said.

The average Kohl’s store of around 80,000 square feet is too large for many small markets. By introducing smaller format stores, most at about 35,000 square feet, Kohl’s gains “flexibility” to enter new neighborhoods, the company noted.

This June, Kohl’s will open a scaled-down store in Bonney Lake, Washington, and in the fall, four additional new small-format stores will open in San Angelo, Texas; Morgantown, West Virginia.; Tacoma, Washington, and Lenox, Massachusetts. These new stores will also be among the first to test Sephora at Kohl’s in smaller store formats.

Officials said the scaled-down footprint will provide “a hyper-localized experience to cater to the community’s needs.” Kohl’s uses information technology to determine how to localize an assortment. For example, the new Tacoma store’s merchandise will cater to the active lifestyle customer in that market by offering a more focused assortment of outdoor gear.

In total, these new stores represent a more than $500 million sales opportunity as they ramp to full productivity.

Kohl’s self-serve buy online, pick up in store service will by the end of the year be available in all stores. Self-serve returns is being tested in over 100 stores, but there are more planned through the next 18 months. The self-return experience is unique to Kohl’s, offering a simple in-store drop-off process.

In other store-related statistics, Kohl’s indicated that about 40 percent of its digital orders are currently being fulfilled by stores, and that shopping Kohl’s across channels are at least four times more productive than store-only or digital-only shoppers.

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