What the hell is the matter at Kohl’s?

The big mid-market retailer – practically the poster child for successful retailing for at least the past two decades – has very suddenly and just as shockingly hit a major wall, with all the lackluster financial and performance trimmings.

Sales are off, comps are off and, guess what: The bloom is off too.

Kohl’s has done a terrific job over the past 20 years of staking out its place at the heart and soul of the American middle-income shopper.

Sure, some of that success was based on timing. The ongoing death spiral at Sears, uninspired merchandising at Penney, and a Macy’s that has taken forever to find its way after countless rounds of consolidation confusion all contributed to creating the void that Kohl’s very adroitly filled, thank you very much.

But Kohl’s has not just been a lucky recipient of being in the right place at the right time. It has done very many things very right:

• Kohl’s real estate strategy has been brilliant. While its competitors were anchored down in big dumb malls, it was siting stores in easy-to-get-in-and-out-of strip centers, where its customers shop.
• The stores themselves preached the gospel of easy shopping. Each store had two entrances, the quicker
• to get to from your car, especially in the cold-weather climates were Kohl’s was born.
• Inside, the stores were designed for effortless shopping, with a simple racetrack layout and low sightlines so you could practically see the back of the store from the front door.
• Central checkouts, a feature pulled from the discounters at the other end of the strip, were a welcome relief for shoppers used to making their purchases at sometimes hard- to-find and always-hardly-ever-manned cash register locations scattered wherever.
• The merchandise assortment itself, a carefully crafted mix of national and private brands, was well-edited and focused on key core categories: footwear, the cornerstone of the old department store model; jeans and casual wear, what America actually wears; and soft home, a traffic builder that has proven its worth for generations.
• And finally, there was the promotional strategy. Taking another page from Retailing 101, Kohl’s made that page bigger, splashier, shinier, bigger still and, most importantly, overflowing with giant numbers with enough percentage signs to fill up a semester of high school calculus.

So, where did it all go wrong? Well, before we go any further, let’s get one thing straight: It hasn’t all gone wrong. We’re not talking about a total meltdown here or an irreversible catastrophe. I’ve interviewed Kevin Mansell, now the President and CEO of Kohl’s, over the years and he’s a smart, competent guy who, along with his management team, will fix whatever’s broken there.

But, using home as a microcosm for the store in general, it’s clear that they have some work to do to get back to where they want to be. It’s going to take a little time.

But if I were living and working up in Menomonee Falls, Wisconsin, these are some of the areas I’d be looking at:

Promotional Fatigue

Kohl’s has been crying wolf on sale for decades and it’s quite possible the consumer is starting to see through all of those percentage signs. In a recent flyer, Kohl’s touted the following promotions: 50% Off 1-Day Sale; Extra 30%, 20% or 15% Off Everything when you used a Kohl’s credit card; Up to 80% Off on Gold Star Final Clearance; 60-70% off on Further Reductions Taken; and $10 Kohl’s Cash for Every $50 Spent. AND THAT WAS JUST ON THE FRONT PAGE OF THE CIRCULAR!

Every shopper loves a deal and it’s been at the heart of the Kohl’s strategy forever, but even an insane shopper eventually starts to question the legitimacy of a store’s prices when there’s so much promotional noise. It’s what Ron Johnson is counting on to save Penney, though he may find the other extreme doesn’t work either.

Kohl’s has hinted in recent public announcements that it could be doubling down and getting even more promotional as a way to pull itself out of its slide. Frankly, I’m not even sure how that is possible, but clearly something has to be done to bring some credibility back to the store’s pricing policies. Kohl’s Kash ain’t going to kut it forever.

Product Development

Like many successful retailers, Kohl’s is increasingly starting to believe its own propaganda, I mean press, about how good it is and how it knows better than anybody else, including its suppliers. The same thing happened a few years back at Target with a very similar result. By becoming so insular and closed to merchandising suggestions from the outside, Kohl’s is missing out on opportunities that a broader base of resources and knowledge can bring to it.

Vendors have their own agendas and frankly they are not always right on what a store needs. But when the merchants at Kohl’s keep saying no to new ideas, those new ideas are brought someplace else instead and some of them work quite nicely once they’re there – at Kohl’s competitors.

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The Brand Mix. Right now Kohl’s is very heavily into private and captured brands, especially in home. That was not always the case over the years as the store balanced national labels with its own.

Maybe that ratio needs to be rejiggered again. JLo might work wonders in junior sportswear but maybe not so much in sheets and towels. Are there stronger alternatives out there for Kohl’s? Maybe, but it’s certainly worth listening to what suppliers have to say.

In housewares, national brands are the building blocks of categories like small electrics and cookware. Yet Kohl’s has invested heavily in proprietary labels like

Food Network and Bobby Flay

Those are both great brands and the understanding is that they do well for the store. But perhaps a broader balance might work better.

Ease of Shopping

Kohl’s has become a little less easy to shop these days. The aisles are little more crowded, the housekeeping not quite as fastidious and it sure looks like some of the fixtures are higher than they used to be. I’m even seeing some Kohl’s these days with just one entrance.

This is all the more the pity, because Kohl’s is not just competing against other stores when it comes to making the shopping experience easier. Now it has to go head-to-head with Amazon and the rest of the online guys who are quickly clicking their way into the heads of customers looking for the easy way out.
And with a resurgent Macy’s and a restrategized Penney both making the middle of the market a much more competitive place, Kohl’s no longer has soft stores to go up against.

None of these things are retail life-threatening. There are lots of operations out there that wished this were all they needed to fix.

But fix them is exactly what Kohl’s has to do if it wants to regain its luster.

The back page of that Kohl’s circular I mentioned before has 17 lines – that’s more than 500 words – of small print explaining, qualifying and generally confusifying all of the promotions mentioned in the big type.

If you need that many words to explain yourself to your customer then maybe sour cheese is not the only thing that smells bad coming out of Wisconsin.