Kohl's Aims for $1B Online in 2011

The word “synergy” picked up a bad reputation about a decade ago, when the bp0511.jpgTime Warner/AOL merger – which had been touted as the triumph of synergy – started to look more like the failed introduction of New Coke. But perhaps it’s time to not only rehabilitate “synergy” but to apply it to the cross-channel strategies of department store retailer Kohl’s.

During fiscal 2010, which ended January 29, 2011, Kohl’s e-commerce sales increased by more than 50%, reaching $720 million. That $720 million represents 3.9% of the chain’s $18.4 billion in total net sales. While just under 4% may not seem that impressive, remember that Kohl’s operates approximately 1,100 brick-and-mortar stores. If Kohl’s brick-and-mortar sales were averaged among those 1,100 stores, online sales would represent approximately 45 brick-and-mortar stores. CEO Kevin Mansell’s projection of $1 billion in online sales in 2011 suddenly doesn’t seem all that far-fetched.

Kiosks Facilitate Online Sales
Kohl’s doesn’t pit its channels against each other, however. The retailer promotes online sales within its stores with kiosks that were deployed chainwide in 2010. These have proved popular enough to justify installing
additional devices in approximately 100  stores. Kohl’s measures the kiosks’ success in part by the number of shoppers taking advantage of the everyday free shipping offered to kiosk users.

“It’s one of the reasons why we know that the kiosks are dramatically outperforming the plan we set, which had aggressive hurdles from an ROI perspective,” said Mansell during a recent conference call.

Digital signage is another key in-store technology investment for Kohl’s. During the fourth quarter of 2010, the retailer deployed digital signage to 50 of its stores, doubling the number of stores equipped with the technology to 100. “We would expect to have rolled the signs to about 500 stores by the end of the year, with the full chain rollout expected to be completed by holiday 2012,” said CFO Wesley McDonald.

In addition to its e-commerce growth, Kohl’s has also been expanding its brick-and-mortar footprint. The chain opened 30 new stores in 2010 for a total store count of 1,089 at the end of the fiscal year, and plans to open another 40 stores in fiscal 2011.

Smart Use of Social Media
Kohl’s has also created a high-profile digital presence while building up its customer database. As part of its Kohl’s Cares program, the retailer donated a total of $10 million to 20 schools nationwide, basing the awards on which schools garnered the largest number of votes on Facebook.

For its investment, Kohl’s received not just good public relations but also the names and e-mail addresses of the two million people who visited the Facebook site – people who can be contacted with promotional and marketing messages in accordance with the retailer’s privacy policy. Essentially, Kohl’s paid $5 per person for extremely valuable customer data.

“We’ve been very aggressive in the digital world and in social media to market aggressively our online business,” said Mansell.
Kohl’s has also broadened its online product selection to create “endless aisles” for several product categories. “We’ve improved the amount of goods that are available online that we either don’t have room for in our stores, extended sizes for instance, or categories and price points that we don’t sell in our stores,” said Mansell.

Perhaps most important, the retailer has put what Mansell terms “a very significant capital investment” into its e-commerce technology, both for improving the customer interface and in fulfillment.

In 2010, Kohl’s essentially doubled its e-commerce fulfillment capacity, opening a second e-commerce distribution center in San Bernardino, CA to join the one operating in Monroe, OH. In March, Kohl’s completed its purchase of a third
e-commerce DC, in Edgewood, MD, which it expects to open in July 2011.
Mansell believes in putting resources into its online efforts: “Investment in our
e-commerce business continues to result in higher sales.”

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