It’s been a tough couple of years for Kohl’s Corp., with recession-battered shoppers spending less at Kohl’s stores and increased competition from online retailers, CEO Kevin Mansell told Wall Street analysts yesterday at the company’s annual investor day event in Milwaukee.
But Kohl’s, No. 23 in the Internet Retailer 2014 Top 500 Guide is counting on a three-year, $4 billion turnaround plan that relies heavily on e-commerce, mobile web technology and predictive marketing analytics to achieve Mansell’s goal of becoming the “most engaged” retailer in America.
In the past three years and well into 2014, sales, especially comparable-store results, have been essentially flat at Kohl’s. But e-commerce remains a bright spot. Kohl’s for the first two quarters ended Aug. 4 reported a decline in total sales of 1.1% to $8.31 billion while comparable-store sales declined about 2%.
In comparison, e-commerce revenue for the first two quarters increased 21% to an Internet Retailer-estimated $849 million. Kohl’s won’t break out third quarter sales until Nov. 4 but is already forecasting a drop in comparable-store sales of 1.4% and an increase in e-commerce revenue of 30%. The retailer did not provide a forecast for total sales.
In recent years total sales have stagnated at Kohl’s because lower- to middle-class shoppers, the retailer’s core customer, simply hasn’t been spending as much money in stores, the retailer says. “Consumers are spending quite a bit less income because they have less discretionary income,” Mansell says. Kohl’s also is experiencing stiffer competition from a host of online retailers, especially what Mansell calls “virtual off-price” retailers. “There has been a really big shift in the retail landscape,” Mansell says. “New virtual retailers have emerged and they disrupted a lot of categories.”
To generate annual sales of about $21 billion in 2017 compared to annual sales of $19 billion in 2013, Kohl’s will continue to invest in e-commerce and build on the nearly $1 billion the retailer has invested already in a series of online distribution centers. The retailer will expedite new features such as buy online and pick up in store, which is currently available at about 100 of the retailer’s 1,200 stores, the company says. Kohl’s also over time will increase the number of stores fulfilling online orders from store inventory, from about 800 today to all stores, and use new programs such as Google Express, a same-day delivery service Google rolled out in 2013.
Kohl’s also will invest more in more mobile technology, although the company didn’t release a specific figure. That will start with introducing a better mobile app soon with new features such as completing a purchase for return shoppers in as few as two clicks, faster search. The app also will serve up coupons based on past buying history when a Kohl’s shopper uses the smartphone or tablet app to shop online or when a shopper enters a store. “Mobile lets us engage customers from the start,” Kohl’s chief digital officer Krista Berry told analysts.
Kohl’s know its shoppers well, Kohl’s executive vice president for stores Jon Grosso told analysts. The merchant has detailed shopping history and related marketing data on 75 million shoppers. About 78% of Kohl’s shoppers shop only in stores compared with 18% that shop stores and Kohls.com and 4% just Kohls.com, he says.
Going forward Kohl’s will make a larger but undisclosed investment in more sophisticated marketing analytics and business intelligence software that will help the retailer more effectively target promotions, especially to the 10 million shoppers that have signed up for the retailer’s new “Yes2You” customer loyalty program. The program includes $5 off purchase for every 100 points earned, and lets members share points with friends, receive advance notice of special sales and other perks. “We’re going to be all about the personal connection and more on-on-one,” Mansell told analysts.