Constructing Greatness: Kohl's Plan to be America's Most Engaging Retailer

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Constructing Greatness: Kohl's Plan to be America's Most Engaging Retailer

By Tim Denman - 05/29/2015
Shopping patterns are constantly evolving. Strategies that drew customers in just a few years ago can be turning them away today. Continued success decade after decade requires a commitment to persistent innovation and a willingness to adjust core business tactics as market conditions dictate.  

For over 50 years Kohl’s has enjoyed continued growth and financial success thanks to its commitment to providing shoppers with name brand merchandise at affordable prices, in a convenient, neighborhood-based, brick-and-mortar experience. In fact, since 1995 revenue has grown from $122 million to over $19 billion, while share prices have increased 13 times over.

While this continued financial success is certainly impressive, Kohl’s growth has slowed in the past few years, triggering a reexamining of the retailer’s business strategy. When the country entered the Great Recession following the crash of the housing market in 2007, the middle class turned to off-price retailers to make ends meet — a trend that continues to this day. Kohl’s core middle-class customers continued reliance on off-price shopping coupled with increased online competition left Kohl’s with flattening sales and a distinct need to reinvent itself.

The department store chain could no longer rely primarily on its merchandise and convenient physical locations to drive sales, instead it would turn its attention to enhancing the shopper experience both in the physical and digital worlds. In 2014 Kohl’s introduced its Greatness Agenda and established a new objective for the retailer: to become the most engaging retailer in America.

“We need to drive the organization to a new place,” CEO and president Kevin Mansell says. “We decided to set the bar pretty high. We’re not mincing any words. When we talk about our Greatness Agenda, we’re setting a pretty aspirational goal. It’s not about what we’re going to do in the first half of next year. It’s not even about what we’re going to do next year. It’s about where we’re headed over a period of years.”

Kohl’s Greatness Agenda focuses on five key pillars: amazing product, personalized connections, easy experience, incredible savings, and winning teams. All five pillars are supporting the overriding goal of becoming the most engaging retailer in the country. While it is certainly a lofty objective it is not at odds with the core values that have been driving Kohl’s for the past decades: brands, value and convenience.
 
To make Mansell’s vision a reality Kohl’s has invested heavily in technology, spending $1 billion over the past three years, with another $1 billion to be outlaid over the next several years. The 10-figure investment in IT is earmarked for building a greater shopping experience and driving innovation and digital transformation at the department store chain.

Assembling Innovation
Becoming the most engaging retailer is not something that happens overnight — it requires a long-term commitment to innovation that goes beyond the immediate need to bolster sales numbers. To help infuse a culture of innovation throughout the IT department, Kohl’s joined retail’s heavy hitters in Silicon Valley with the opening of Kohls’ Digital Center in April 2013.

The Digital Center is an extension of the IT team at the corporate office in Menomonee Falls, WI, but with a unique twist. Technology and innovation teams that would once be separated are now working collaboratively in one centralized location supercharging the retailer’s ability to seamlessly develop new initiatives. In addition, by being situated in Silicon Valley the center is able to attract top digital talent and infuse its IT roster with digital innovators.

“Having the Kohl’s Digital Center in Milpitas, California, allows us to tap into a diverse pool of talent, with backgrounds from companies that are leaders in the tech arena,” EVP of digital innovation and IT Ratnakar Lavu says. “We have more than 250 associates and contractors working out of the center. I consider the office a creative incubator for digital talent. Our associates have impressive backgrounds, coming from places like Apple, Ebay and Yahoo, to name a few.”

With a mandate to enhance the overall customer experience the center has been instrumental in the re-platforming of Kohls.com and developing the retailer’s new feature-laden mobile app, among other customer-facing initiatives. “The center has helped us improve our speed and agility in the digital space,” Lavu says. “We have delivered a lot more capability within the last year as compared to the last three to four years, while continuing to support the growth of the business. These initiatives have helped us provide even greater functionality that enhances the overall customer experience.”

Omnichannel Foundation
In order to become a digital leader a solid foundation to support seamless cross-channel retailing is a necessity. As Kohl’s worked to inject digital capabilities into the enterprise it became apparent that its antiquated e-commerce platform would need to be upgraded to anchor its omnichannel experiences.

Kohls.com had been running on the same platform since the early 2000s and was unable to keep up with the innovation pace needed to fulfill the retailer’s stated engagement goals. To superpower its innovation capabilities Kohl’s selected Oracle Commerce to power its e-commerce engine. The Digital Center worked with Oracle to customize the solution to fit the retailer’s specifications and ensure that the platform was prepared not only for today’s requirements, but tomorrow’s challenges.

The innovators in the Digital Center are developing game-changing advancements to Kohl’s customer-facing offerings, and the new platform helps ensure that those next-gen initiatives are consistent across consumer touchpoints. The goal is to bring new digital enhancements to shoppers quickly and the dependable scalability capabilities of the new platform make seamless deployment across touchpoints a reality.

“When we looked at the technology that we had in place we knew it would not be able to support our vision for omnichannel change and provide the engaging experience we want to provide for our customers. Once we re-platformed we were able to power all of our experiences leveraging that platform.”

Designing Mobile Functionality
In addition to the re-platform of Kohls.com, the Digital Center’s other major contribution to the Greatness Agenda is the newly designed mobile app. The faster, more intuitive app launched just prior to the 2014 holiday shopping season and has been an overwhelming success. The retailer’s previous mobile app had only a few hundred thousand downloads, but the latest incarnation has already tallied over six million downloads since October 2014. The feature-laden application allows users to search, browse and check out; features a mobile wallet; has seamless loyalty monitoring; sports a product scanner; and can provide personalized offers.

A key aspect of Kohl’s mobile strategy is the newly launched Yes2You loyalty program. When the digital teams designed the program they began with a mobile first perspective — to not just embed it in the mobile app but to make interaction with the loyalty program seamless regardless of the touchpoint shoppers chose to engage. The program has all of the loyalty bells and whistles: point accumulation, special offers, point sharing, etc. But where the program stands out from the crowd is in the non-transactional experience.
“Most loyalty programs reward shoppers for the transaction,” Lavu says. “If you spend x amount, you get x number of points. We also reward customers for behavior and non-transactional activity. For example if you like an item on social media or post a review, we give points.”

By rewarding customers for interacting with the brand not just with their wallets but their social engagement, Kohl’s is able to further advance shopper loyalty. Shoppers have embraced the new loyalty program — over 25 million customers have enrolled since it launched in October 2014, 20% more than the retailer’s goal.

Kohl’s is famous for its unique Kohl’s Cash program that gives shoppers $10 in store credit for every $50 they spend. In addition to these savings, the retailer provides shoppers with rewards certificates and product offers which can greatly reduce the pricing of select products. Shoppers are more than happy to accept any and all discounts on their purchases, but with so many moving parts the checkout process can become unwieldy and time consuming.

To address this Kohl’s built a virtual wallet into the mobile application that seamlessly tracks all shopper discounts. When shopping via the mobile app all offers and Kohl’s Cash are applied at checkout without the user having to input various offer or certificate IDs. In-store the customer’s mobile wallet is scanned at the cashwrap and all discounts applied.

In addition, in the physical space the app’s product scanner allows a shopper to view the final price of an item after all discounts and promotions are applied right from the sales floor. By granting customers access to final, out-the-door pricing during the decision making process Kohl’s is able to compete with its online rivals and combat the showrooming threat.

“Providing final pricing is a difficult thing for a department store retailer to solve,” Lavu says. “The in-store price that we show on merchandise is sometimes not as compelling when you look at Amazon and others. But once you apply the offers and promotions it is actually very, very compelling. We solved that by using the mobile app.”

The mobile app is further able to sweeten the bottom line price through personalized offers delivered via the mobile wallet. When logged into the wallet Kohl’s is able to send offers based off of past purchase and browsing history, a strategy that Kohl’s is looking to expand upon.

Blueprint for the Future
Retailers are able to customize the digital shopping experience and are looking to build that functionality in the physical space. Kohl’s is currently able to provide customers with personalized offers via its mobile wallet, and is piloting the use of location awareness technology to bring in-store personalization to the next level.

The 22 store beacon pilot is being conducted in both tech-savvy and tech-naÏve markets to gauge shopper engagement with the technology in varying conditions. Shoppers that sign into the service receive product information and related offers based on their in-store location directly on their personal mobile device. The technology melds perfectly with Kohl’s goal of becoming the most engaging retailer, but of course as with any new technology getting customers to begin using the service requires effort.
 
“One of the biggest challenges with beacon, while it is a promising technology, is how does the customer know what to do when the beacon is there?” Lavu says. “First of all how do they find it? How do they know what to do? That is something that we are actively working on solving.”

Drastic organizational change is hardly instantaneous — it requires a multitude of relatively small impactful improvements that align with an overall business strategy. By announcing to the world that it wants to be the most engaging retailer in America, Kohl’s took a bold stance. With that one simple statement the department store chain realigned its core strategy and announced to the competition and its customers that change is coming. With every dollar spent and new technology introduced Kohl’s takes one step closer to building greatness. RIS