How Kohl’s is staving off department store death to open 100 new stores

It’s tough to be a department store in the digital age. Once vaunted names like Lord and Taylor and Barneys have ended up in the graveyard, while others like JC Penney, Sears, and Neiman Marcus have gone bankrupt.

Squeezed by fast fashion and online shopping, most department stores have shrunk their network, and built out their online platform to try to wrest back dollars from the likes of Amazon. But Kohl’s, currently the largest department store in the US with over 1,000 locations, is planning to open 100 more in the next four years.

It could seem counterintuitive — given how the pandemic has accelerated the shift to e-commerce — but the company is betting that the future of the department store is new smaller branches and in more suburban locations.

A different kind of department store

It’s not that shoppers don’t need physical stores anymore, according to Kohl’s. It’s that they need a different kind of store. Each new Kohl’s store will be hyperlocalized, meaning the location carries different products depending on the needs of the shoppers in the local area.

“By utilizing data-science, Kohl’s can offer a more localized assortment that is market-specific in these smaller stores,” said Dana Telsey, ceo of the Telsey Advisory Group.

Across retail, there’s been a move away from large flagship stores in major urban centers. While this kind of store used to justify its hefty expense by doubling as marketing, that’s made less sense as the pandemic caused an exodus from big cities and tourists have yet to return in full force.

Casual dressing is the new normal

The new store strategy is part of an overall revamp of Kohl’s business, which is still operating at a loss . Kohl’s is focusing on casual dressing as people spend more time away from the office, aspiring to become “the retailer of choice for the active and casual lifestyle,” its CEO Michelle Gass said at the company’s investor meeting earlier this week.

It’s also working to recruit new and younger customers, one of the biggest challenges historically for the sector. Last year, Kohl’s replaced its own in-house beauty aisles and brought in Sephora at a few hundred of its locations, which has drawn Millennials and Gen Z shoppers. That partnership is expanding to most, or 850, of its locations this year, with management expecting the partnership to generate $2 billion by 2025. It’s also driving new customer traffic by processing Amazon returns at its stores, and providing shoppers flexibility with self-serve pickup and returns.

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