It’s hard to be a department store in the digital age. Once-touted names like Lord and Taylor and Barneys ended up in the graveyard, while others like JC Penney, Sears and Neiman Marcus went bankrupt.
Squeezed by fast fashion and online shopping, most major stores have downsized their network and built their online platform in an attempt to claw back dollars from companies like Amazon. But Kohl’s, currently the largest store in the United States with more than 1,000 locations, plans to open 100 more over the next four years.
It might 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 lies in new, smaller branches and more suburban locations.
A different department store
It’s not that shoppers no longer need physical stores, according to Kohl’s. It’s that they need a different type of store. Each new Kohl’s store will be hyper-localized, meaning the location offers different products based on the needs of shoppers in the area.
“Using data science, Kohl’s can deliver a more localized, market-specific assortment in these smaller stores,” said Dana Telsey, CEO of Telsey Advisory Group.
In retail, there has been a move away from the flagship department stores of large urban centres. While this type of store justified its heavy expenditure by also doing marketing, it makes less sense because the pandemic has caused an exodus from the big cities and tourists have not yet returned in force.
Casual dress is the new normal
The new store strategy is part of an overall overhaul of Kohl’s business, which is still operating at a loss (pdf). Kohl’s is focused on casual apparel as people spend more time away from the office, aspiring to become “the retailer of choice for the active, casual lifestyle,” CEO Michelle Gass said at the investor meeting. company earlier this week.
It is also working to recruit new, younger customers, one of the industry’s biggest historical challenges. Last year, Kohl’s replaced its own in-house beauty aisles and brought Sephora to a few hundred of its locations, attracting Millennials and Gen Z shoppers. This partnership extends to most , or 850, of its locations this year, with management expecting the partnership to generate $2 billion by 2025. It also generates new customer traffic by processing Amazon returns at its stores and offering shoppers flexibility with self-service. pickup and returns.