A little over a year ago, I wrote an article, “Kudos to Kohl’s CEO Kevin Mansell – Greatness Agenda Kicks In“. It was entitled rightfully so, as Kohl’s Chief Mansell deserved kudos for leading his teams to successfully implement the strategies framed in the Agenda, which broke five years of flatlining revenues, yielding a 7 percent jump in the 2017 holiday season (a 30 percent online increase).
However, larger kudos should be sent his way for hiring his successor, Michelle Gass, in 2013 as Chief Merchandising and Customer Officer. She was tasked with architecting the Greatness Agenda. She became CEO in May of 2018. Mansell knew what he needed as Kohl’s was entering its slow growth period. As reported in a Fortune article, “he and the board agreed, they needed someone who could sustain Kohl’s left-brain discipline on pricing and inventory management – but who could also tap into his, or her right-brain, creative daring side.” Talk about “right-brain daring,” Gass is a daredevil. Coming from Starbuck’s where she built the Frappuccino into a billion-dollar business, she is daring to innovate on all fronts, essentially reimagining the traditional department store model in tradition-breaking directions. This is the type of leadership necessary for transformation into a successful 21st Century model.
The Consumer as Point-of-Sale
First, she totally gets the consumer part, no doubt heightened by her P&G gig (considered by many to be the world’s greatest consumer marketing company). She developed Crest for Kids toothpaste while there, and then went on to Starbuck’s, which is obsessed with satisfying consumers. Now running Kohl’s and understanding what I coined as “positioning drift,” Gass knows Kohl’s must not drift older as its current core consumer base of 35-55-year-old moms are retiring out of core. Kohl’s must evolve to serve the NextGen cohort who are tech-infused and have entirely different value and shopping expectations.
Second, Gass knows the consumer is the new point-of-sale, wherever they are and whenever they want to shop. And she knows that since they have the world’s largest marketplace packed into their mobile devices, Kohl’s must create compelling reasons for this time-starved young consumer to physically come into Kohl’s stores.
So, Gass partners with Amazon and now houses 30 of their shops operated by Amazon personnel, selling smart home technology. Kohl’s is also testing offering Amazon returns in 100 stores. Since 85 percent of the U.S. population lives within a 15-mile radius of a Kohl’s store, returns are convenient. Both the smart shops and easy returns are traffic builders. Kohl’s further incentivizes Amazon returns with a discount offer for its own merchandise. This new traffic-building strategy in addition to Kohl’s BOPIS program results in impulse purchases when the customer is in the store, estimated to add 20-30 percent to the transaction.
The Amazon partnership is still in its test phase, however in my opinion, the strategy will eventually roll out to the entire fleet. It’s a win-win synergy for both.
Pop Culture Style
Next up: With more than a million of NextGen women following the PopSugar media platform, Kohl’s made a deal to create an apparel collection that leverages PopSugar’s propriety data analytics. The PopSugar line is also central to Kohl’s speed to market initiative, which reduced the supply chain cycle by about 40 percent. They launched Scott Living Drew and Jonathan Scott, the twins whose “Property Brothers” programs on HGTV has a following of millions of viewers and fans. And, as the plus-size market continues to grow, with 60 percent of women being size 14 or over, Kohl’s launched the EVRI brand.
Active and wellness are two lifestyle priorities of the new young consumer culture. Check that one as well. Gass has increased the activewear space by 40 percent, and its footprint is a whopping 25 percent of total floor space. Nike and UnderArmour dominate. Speaking of wellness, Gass dared to create another out-of-the-traditional-box idea. Working with another daredevil, Mindy Grossman, CEO of WW (formerly Weight Watchers), they placed an 1800 square-foot space in a Chicago area Kohl’s which sells WW Healthy Kitchen products and host WW Wellness Workshops for local WW members. There is also a specially curated WW space for Kohl’s customers and associates. It’s still in test, but I opine they will roll this concept across many of their locations. Is it a stretch to imagine WW yoga and exercise classes, complete with a WW active wear line?
Am I forgetting technology and e-commerce? Not a chance! As counterbalance to Gass’s marketing daring side, she has a President, Sona Chawla, who came from Walgreen’s in 2015, where she was CMO and President of Digital. She is all things technology and e-commerce, upgrading Kohl’s tech infrastructure throughout the enterprise.
According to the Fortune article, early experimentation with tech’s gizmos like holograms for product display and augmented reality mirrors at beauty counters didn’t yield any measurable lift. Chawla is focusing on innovating and testing in areas that can result in immediate and efficient results. For example, RFID tags on merchandise enable associates and shoppers to find an SKU wherever it may be — from distribution centers to all of their stores — so the product can be picked and delivered to the customer. This is a part of an overall inventory optimization process, driven by AI and data analytics. This capability drives a demand-driven flow of goods. Thus, as sales are increasing, their inventory has been decreasing. Furthermore, it enables localized assortments based on consumer preferences in each of their locations. Not only does this tech and data driven precise inventory flow reduce markdowns, while increasing margins, it also frees up space for compatible traffic-building partners like Amazon and Weight Watchers. They are also testing of Aldi grocers (in 10 stores). Finally, the remaining space occupied by Kohl’s locally assorted goods will have greatly increased productivity.
Other tech initiatives are a price-checking app that cuts through all of the discounting confusion to get the bottom-line price, a smart cart discount or rewards for online orders to be picked up in store and “wait-less” handheld checkout devices to break up bottlenecks at checkout counters. They are also testing a Service Center concept in two pilot stores, testing self-checkout kiosks, BOPIS lockers, a new centralized customer service concept and a new merchandising approach for an impulse zone at the front of the stores.
Kohl’s: A Physical and Digital Entertainment and Distribution Platform
In an interview with WWD, Gass explained how she believes Kohl’s proposition is different from other retailers. She said, “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.”
I used this quote to emphasize Gass’s use of the word “platform,” vs. “retail store,” which is a mental barrier to envisioning anything other than a building full of stuff. Gass can envision the platform as a model to share all kinds of partners and even competitors. How about gyms, restaurants, and on and on? She also envisions smaller platforms, localized assortments in neighborhoods and potentially free-standing specialty platforms, perhaps focusing on single product categories.
Michelle Gass’s vision is limitless, and having had an interesting conversation with her, I believe she is today’s visionary daredevil.