Features, Leadership, Strategy and Operations

Kohl’s and Amazon: Just the Beginning

Just when you think you’ve heard enough from me about Kohl’s; you haven’t. You’d think that CEO Michelle Gass has a weekly calendar that reminds her every Monday to come up with this week’s daredevil disruptive innovation. Just a couple of weeks ago, I labeled her Kohl’s chief “daredevil,” declaring that her vision is limitless. Gass coming to Kohl’s from Starbuck’s (whose middle name is innovation) has it embedded in her DNA.

On top of a bunch of serial disruptions, she recently inked a deal with Amazon transferring them out of a successful test program to spread the partnership across the entire 1155 store fleet. Simply said, Kohl’s will accept Amazon returns. The traffic building synergy is awesome. According to some analysts, Kohl’s test of the model in the Chicago area spiked comp store sales about nine percent vs. one percent elsewhere. Out of all shoppers who returned Amazon products, 56 percent were new Kohl’s customers or customers who had not been to the stores for nearly a year. Furthermore, Kohl’s sells Amazon-branded products in its store, transitioning from the store within a store concept to a wholesale relationship with Amazon.

Oh…and let me slip in another potential daredevil move. “Anonymous sources” say that Kohl’s is eyeing At Home, the home furnishings super-store based in Plano Texas for a possible acquisition. More on this if we see a further pursuit.

Anyway, back to Amazon. They were given a warrant to buy 1.7 million Kohl’s shares as a part of the deal. If that doesn’t indicate a strong commitment on both sides, nothing does. One could also speculate, as I did, that this may be the first step in an Amazon strategy to acquire Kohl’s. The reasons for such a strategy are obvious, as explained in this article. If that were to happen, Bezos would be smart to give Gass whatever it would take to keep her as CEO of the physical platform.

There’s that word “platform” again, as the 21st-century replacement of the words, “retail store,” a mindset barrier which I have added to the four other barriers to transformation. Simply, when we hear retail store, our mind automatically triggers an image of a building full of stuff. It’s a paradigm that retail chiefs must leap beyond if they want to envision and transform their businesses in this new world where the old-world POS has been flipped on its head. The consumer is now the POS, and the platform must be wherever and whenever she wants it. Going to the retail store is no longer necessary, so those buildings full of stuff must convert to buildings full of experiences, compelling enough to become desired destinations. And as the physical space continues to shed goods that are selling better online, the opportunity for great innovative ideas to fill that growing space abounds.

Building a Portfolio

I don’t know if there’s something in the water out there in the Midwest, but Gass is moving ahead of the curve with her vision of a physical and digital experiential platform upon which anybody and anything, or any service can operate (even competitors) as long as they are compatible to Kohl’s core consumers. In this hyper-competitive, over-stored marketplace, in which there are thousands of equally compelling brands, Kohl’s is seeking brand exclusivity and their own private brands for differentiation.

New Brands

  • PopSugar at Kohl’s: Launched in September 2018, PopSugar at Kohl’s is an innovative new apparel collection that expands the retailer’s millennial brand portfolio It combines trends, media and an agile merchandising model that uses data and analytics to incorporate millennial customer intelligence.
  • EVRI: Launched in March 2019, EVRI is Kohl’s new women’s private-label plus brand. It stands for Easy, Versatile, Real (Value) and Inspiring. As an answer to an unmet shopping need in the workplace, EVRI offers modern, size-inclusive apparel for women and positions Kohl’s as a go-to destination for shoppers looking for stylish plus apparel.
  • Fanatics: Kohl’s is expanding its partnership with Fanatics, the global leader for licensed sports merchandise. It will significantly broaden the fan gear assortment for Kohl’s customers shopping online beginning this fall. Hundreds of thousands of items across team apparel, jerseys and additional merchandise categories will give Kohl’s customers access to a deeper selection of products from major professional sports leagues and collegiate properties.
  • Nine West: This fall, Kohl’s will launch the iconic Nine West brand in all stores nationwide and on Kohls.com. Kohl’s will carry Nine West footwear, handbags and outerwear, as well as debut a new women’s apparel collection.
  • Scott Living at Kohl’s: Kohl’s is partnering with the Scott brothers to launch an exclusive home lifestyle collection, Scott Living at Kohl’s, in October 2019. The Scott brothers, twins Drew and Jonathan Scott, draw millions of viewers and fans through their multiple HGTV programs focused on home renovation and transformation. Scott Living at Kohl’s will feature modern home basics and décor, including furniture, bedding and bath, kitchen décor, and more.
  • Elizabeth and James: Kohl’s is partnering with Elizabeth and James to bring the brand, founded by Mary-Kate and Ashley Olsen, to Kohl’s stores nationwide and Kohls.com this holiday season. Kohl’s will be the exclusive retailer of Elizabeth and James apparel, handbags and accessories.
  • Jason Wu Holiday Capsule: Kohl’s is collaborating with globally-renowned designer Jason Wu to create an exclusive, limited-edition women’s apparel capsule at Kohl’s stores and Kohls.com this holiday season. Inspired by classic Hollywood glamour, the Jason Wu holiday exclusive designs for Kohl’s will be available this November and feature signature pieces for holiday dressing, including dresses, jumpsuits and jackets

And now imagine a platform of experiences to increase productivity, optimizing the freed-up space. New initiatives include Planet Fitness, Total Wine and WW (formerly Weight Watchers, (a collaborative initiative in test to learn more about the two brands’ shared interest in family health and wellness and what they can create for customers). The biggest initiative, in my opinion, is Kohl’s potential of doing some kind of collaboration with Aldi grocers. Talk about a traffic builder! Wow!

So, at the end of the day, is Kohl’s a “retail store?”

From Preemptive Distribution to Platforming

Gass’s predecessor, Kevin Mansell, brilliantly strategized the concept that I later coined in the early 2000s: preemptive distribution, which became one of the three strategic principles for success along with neurological connectivity and value chain control, as defined in my co-authored book, The New Rules of Retail.

Mansell was a pioneer of this imperative strategy to survive in an enormously over-stored market. Basically, the principle states that the competitor that gets to the consumer first, faster and more often than the hundreds of equally compelling competitors, wins. On the other hand, if you don’t, you will lose. Kohl’s off-mall neighborhood preemptive distribution strategy won share away from JC Penney all during the 90s. JCP of course, lost. Read more on this.

Now Kohl’s is once again ahead of the curve in platforming. And by the way, Kohl’s preemptive distribution and their 1155 platforms in consumers’ neighborhoods, likely made the Amazon deal attractive to both.

The following quotes from Michelle Gass says it all with powerful clarity.

“We’re certainly unique. We’re positioned so differently. We go against the competitive [grain]. The whole idea of location relative to traditional department stores is different because we’re located off the mall. We drive home the notion of ease and convenience. Digital has put the world at the customer’s fingertips. I say that I want things to be strategically surprising. We really take advantage of all the data we have and being true to the customer. We’re making all the bold, unexpected, disruptive moves we can make to keep the customer interested.

“We’re also thinking of ourselves as a platform to bring in customers who are focused on aspiration, inspiration and accessibility, for bringing exciting ideas and scale. What Kohl’s brings to the table is its brand DNA. Kohl’s is a great operator. We know how to operate in a cost-effective way, and that’s hard. Think about what that says about all the new entrants and new digital native brands. We can push it further. Could Kohl’s be a platform for brands to get exposure? We have that kind of reach. I think we’re uniquely positioned to do that. We have to have a growth mindset. We’re wired that way, for curiosity, excitement, celebration, people and bringing big ideas.”

As I said, the vision of Michelle Gass is limitless, and I believe she is today’s visionary daredevil.

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