Will Kohl's stores sprout new life with grocery?
Industry experts agree that larger stores need to slim down and boost foot traffic, but many are skeptical that adding grocery is a logical choice.
To some, 2017 was a year dotted with dramatic store closures and space reductions. To Kohl's CEO Kevin Mansell, it was a period of "right-sizing."
At the ICR Conference in Orlando earlier this month, Mansell said the discount department store is looking to lease or sell extra space in many of its full-size stores — and is eyeing the bountiful grocery sector.
"If we had our preference, we are going first after well-capitalized companies, and preferably ones that have high traffic in grocery and convenience," Mansell told CNBC, declining to say whether Whole Foods is among those. Kohl's has a partnership with Amazon in 82 stores, with Amazon concessions at certain locations and Kohl's staff taking Amazon returns.
Acquisitions aren't out of the question either, Mansell said. "Kohl's is not taking anything off the table. We have a healthy balance sheet and we can actually act," he told CNBC.
While most industry experts agree that sprawling Kohl's stores need to slim down and find ways to boost foot traffic, many are skeptical that grocery is a logical partner. The discussion forum RetailWire asked its BrainTrust panel of retail experts the following questions:
Do you think Kohl’s is on the right path with its plan to lease space within its stores to grocery and/or convenience store partners?
What do you see as the challenges with such an arrangement?
Are there companies that you think would make ideal partners for Kohl’s?
Here are nine of the most provocative and insightful comments from the discussion. Comments have been edited by Retail Dive for length and clarity.
1. New or redundant?
Nikki Baird, Managing Partner, RSR Research: When you look at most discount retailing, it has some combination of grocery and soft goods. But they don’t have the assortment to drive the frequency of purchase you get from having groceries.
I think this is a smart move. I think a harder question is about Kohl’s location strategy and whether this will be net-new (and enough of a draw as a stand-alone format) or redundant (where Kohl’s has located in a strip mall area where there is already a national grocer, maybe even one of their partners). Are there enough Kohl’s out there where this doesn’t face an established competitive situation? I don’t know the answer to that one.
2. A bold structural shift
Shawn Harris, Global Innovation Strategy Lead, Zebra Technologies:
The shifts in retail are structural, not cyclical. This move by Kohl’s would be a bold structural shift. I applaud the deliberate strategic decision-making and emergent testing and learning they have been doing.
3. Short-term solution
Joy Chen, Chairman & CEO, H2O+Beauty: Kohl’s strategy to share space is a short-term solution not a long-term sustainable strategy. It will improve traffic in the short-term but not provide a sustained differentiated positioning for Kohl’s long-term growth. Retailers that makes sense for Kohl’s would be grocers that have strong awareness where Kohl’s stores are located.
4. Ask Target how well that will work...
Cynthia Holcomb, Founder & CEO, Prefeye Preference Science Technologies Inc:
Kohl’s with groceries, they mean like Target groceries? Somehow, buying fresh produce and meats in an apparel, soft goods environment steals one’s taste buds. Ask Target. I do think adding convenience items would be interesting if done with a "fresh" viewpoint, not a commoditized offering, but through the filter of Kohl’s POV offering. An opportunity to add new depth to the Kohl’s brand, in an authentic, modern twist to the brand.
5. Do you want eggs with your jeans?
Ken Lonyai, Consultant, Strategist, Tech Innovator, UX Evangelist: There aren’t too many occasions where someone will choose a store to buy clothes because getting milk and eggs will be convenient too. So, overall, I see this as a stretch, that probably won’t be good for most tenants in the long-run and a further dilution of Kohl’s brand identity, which has started already via the Amazon partnership.
If Kohl’s wants to be acquired by Amazon, as has been postulated, having unrelated grocers in their footprint might quash their appeal via the Whole Foods conflict.
6. Finding the right partner
Stuart Jackson, Managing Director, Regency Analysis: There has been a surge of such co-location partnerships over the last year in the U.K., albeit via acquisitions, and it seems to tap into the customers’ growing desire for convenience.
These two brands are a great fit — they’re both going after the same target market, middle-class shoppers, and they share similar values in terms of quality. And I think that’s the key for Kohl’s going forward. They must ensure that whoever they partner with shares their customer base, ethos and values. If they can do that then it’ll be a very lucrative move.
Phil Chang, Retail Influencer, Hubba: Grocery? And to spin into a supercenter? That’s weird.
A local market might be more interesting. Local chefs cooking up some-kind-of-wonderful might be a really cool idea for starters, or pop-up designers that use products from the store to help consumers maximize their purchases is another. Perhaps it’s just wording, but supercenters aren’t the way to go.
8. Why can't Kohl's fill Kohl's space?
Neil Saunders, Managing Director, GlobalData: It seems a shame that Kohl’s focus is on third parties. It’s an easy option, but not one that will provide sustainable differentiation. Is Kohl’s incapable of developing its own offers, ideas and concepts to occupy excess space?
9. Bad move
Zel Bianco, President, founder and CEO Interactive Edge: Bad move. Some ideas should just be shut down before they do more harm than good. Let’s see, I need some socks and t-shirts, and I might as well pick up some eggs with that while I’m there. It will hurt the brand. Kohl’s is doing some good things. This is not one of them
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