While this year we’ve seen a lot of retailers learning to ‘love the stores’ again as part of a healthy omni-channel mix, Kevin Mansell, CEO of Kohl’s was a convert to the cause earlier than most. His view has been vindicated, he suggests:
We’ve looked at our business and recognized that our long-term success hinges on our ability to deliver best-in-class omni-channel experience. So that means recognizing that on the digital side of the business, we have to compete with virtual retailers, like Amazon, as well as general merchandize retailers, let’s say, in our private brands, like Target and Walmart, as well as general merchandize department stores who offer similar categories that we do.
But the biggest asset we think we have is our stores. The fact that we’re non-mall based, 95% of our stores are in strip or freestanding locations, gives us a huge advantage to be an omni-channel retailer in the future. And so everything we’re working on is to fundamentally make that happen. Our sense – and we’re probably sounding very optimistic, because we are – is that this is working and it’s delivering.
Operationally, there’s been some canny omni-channel investments made, including building out Kohl’s fulfillment infrastructure, moving much of the tech to the cloud and launching new applications intended to make the customer experience easier, as well piloting concepts like a partnership with Amazon.
There are signs that the mix is about right for Kohl’s, with digital sales enjoying a healthy double-digital year-on-year growth rate as the all-important Holiday’s season kicks in. This is the most important quarter for digital, says Mansell, with the online/offline channel approach put to the test:
The impact of ship from store and by online pick-up in store during in the fourth quarter is, as you can imagine, very high. And in particular, the impact of buy online pick-up in the store as we get closer to the holiday season accelerates really dramatically
That builds on already healthy levels, with online-generated sales up 15% in the past quarter. Stores fulfilled 30% of those sales.
The top priority for Mansell is to drive traffic, both online and in-store:
We feel we’re very well positioned with lean and well-balanced inventories, compelling products, more fully-developed personalization tactics in place and a strong digital business trend going into a period when online demand is at the highest penetration of the year.
Digital marketing plays a major part in driving traffic increases and now accounts for the largest marketing spend, he says:
We’re delivering more specific offers based on customers past preferences and reaching them more directly. So I think that’s a big, big role. Product of course where retailers of product plays a massive role and as we think about driving traffic, having more relevant product in our stores, is a big part of the resurgence in traffic. People are finding what they want more regularly. I would say the third piece is, we’ve made very large investments to be best-in-class from an omni-channel standpoint. And therefore, what we present to customers digitally online giving them access to everything we offer is a big component of this.
Mobile currently accounts for 67% of online traffic. The firm has upgraded its mobile apps and this has increased digital conversion at a low double-digit rate. The focus now is on personalization:
We continue to enhance our capability in using data and analytics to drive our marketing, digital and personalization efforts. In the [last] quarter, we increased our level of personalization and key marketing events, as well as leveraged our new insight based pricing tools to deliver new promotional events that are resonating with our customers. We completed the rollout of Your Price during the third quarter. Your Price shows the personalized price of individual items based on the customer specific offers and provides immediate visibility to the value of those customers receive at Kohl’s.
Our personalized search initiative makes it easier for customers to find what they’re looking for based on shopping preferences from previous online and in-store purchases. And finally, our smartcard application continues to provide customers an opportunity to save more by choosing to pick-up in-store versus ship-to-home on their online orders.
Kohl’s is also pushing ahead with changes to its loyalty program to improve customer engagement, adds Mansell:
Our royalty program includes the Kohl’s Charge, Yes2You Rewards and Kohl’s Cash Elements. The objective of the pilot is to simplify the program, broaden the reach and provide even more rewards to users in a program that already is best-in-class.
With over 30 million unique customers utilizing at least one of the elements of our loyalty program, we believe this next evolution has great opportunity to drive a step change in traffic and sales. The timing of the pilot has now been set for the second quarter of next year and approximately 100 stores will participate. We would then include the learning from this pilot in an expected companywide roll out intended for fiscal 2019.
For all that Mansell’s vision of the important role of the offline store in omni-channel retail can be said to pre-date this recognition by other retailers, the harsh reality remains that the chain is only turning in just-over-flat growth year-on-year. It’s as vulnerable as anyone else to the Amazon threat. Not being as bad as Macy’s is one thing; being guaranteed a long term future is quite another.
Image credit - Kohl's