LAS VEGAS — Struggling discount department store chain Kohl’s must foster a faster-paced, more agile approach to retailing in order to compete against a broad range of threats including e-commerce and off-price merchants, CEO Kevin Mansell said Tuesday during a keynote interview here at the Shoptalk 2017 conference.
“Success for us is probably going to come by becoming an amazing omnichannel retailer, connecting the physical and digital [channels],” Mansell said. “But for the customer, the experience has to get a lot more engaging to fulfill that mission. We have to move faster. We have not used speed. We’re not as agile as we need to be to be a better competitor [to virtual and brick-and-mortar retailers alike].”
Kohl’s has responded to the challenge by making improvements to its in-store experience, as well as testing smaller-format stores in a number of U.S. cities. Mansell noted that 85% of Americans live within 15 miles of one of Kohl’s 1,200 locations nationwide, with the vast majority of its 70 million customers still shopping in physical environments.
“Convenience and proximity are critical for us looking forward — that’s why so much of our investment is going into stores,” Mansell said. “We think the way we win with the footprint we have is not to shrink the number of stores, but stores themselves likely will get smaller — having much more of a physical presence is a much better path than less stores.”
Kohl’s also has invested about $2 billion over the last years on technology initiatives, efforts Mansell divides into two buckets: Customer-facing improvements and store associate tools. He singled out the Kohl’s Pay mobile application, launched in October, which allows the 25 million consumers who already have the Kohl’s branded credit card to make purchases with their iPhone and Android devices by launching the Kohl’s app and selecting Kohl’s Pay from the menu options to bring up a QR code reader. Customers scan the code, apply any savings offers or Kohl’s Cash within the app, then tap to complete their purchase: The app automatically applies Kohl’s Cash and rewards points, and stores transactions on customers’ mobile devices for easy returns.
“[Kohl’s Pay has been] embraced by customers because it addresses one of their biggest issues — keeping track of savings tools, and getting the best possible price,” Mansell said. “It allows us to eliminate Kohl’s Cash coupons and other discounts and dump them all in a digital wallet, which improves customer confidence and makes the shopping journey simpler.”
Kohl’s is also boosting spending on store associates in order to facilitate smoother, more efficient omnichannel services like returns, ship-from-store and buy-online, pickup-in-store. "We have to be really focused on making the stores we have more productive," Mansell said. “Why are we so focused on being best-in-class on omnichannel? Because that’s where we can win."
While Kohl’s still enjoys intense loyalty from many shoppers, the company has struggled mightily in recent quarters, closing 18 underperforming stores in 2016 after years of aggressive expansion. Kohl’s last month reported fourth quarter net income of $252 million, down 15% from the year-ago period; Q4 sales came in at $6.2 billion, slipping from $6.4 billion last year, with same-store sales declining 2.2% from the year-ago period. Full-year sales could decline as much as 1.3% or rise as much as 0.7%, while same-store sales are expected to remain flat or drop as much as 2%.
While Kohl's was one of many mall and department store retailers that fell victim to negative traffic trends over the holiday season, its problems run much deeper, according to GlobalData Retail analyst Håkon Helgesen. “[We] believe that Kohl’s fell off the radar of many consumers over the golden quarter,” Helgesen wrote in a note emailed to Retail Dive. “The blunt truth is that Kohl’s does not have the pulling power that it once did and needs to work much harder to provide points of differentiation that really resonate with customers.”
