Kohl's Focus on Localization, Loyalty and Merchandising Leads to Improved Sales
As Kohl's continues its lofty goal of becoming the nation's most engaging retailer it is doubling its efforts on its customer-centric initiatives. While sales continue to slump year-over-year the retailer saw an improvement in Q2 thanks to a host of new strategic initiative focused on putting the customer first.
The retailer is two years into CEO Kevin Mansell's Greatness Agenda and although the overall retail market is currently soft the retailer's continued commitment to customer engagement is positioning Kohl's for future success. Although, the retailer's recently released Q2 sales numbers show a 1.8% comp sales decrease year-over-year there is cause for optimism as those figures are greatly improved over the 3.9% decrease the retailer endured in Q1.
In a recent earnings call with analysts Mansell and his executive staff gave updates on the brand's Greatness Agenda as well as outline some strategic initiatives the retailer has planned for 2017 and beyond. Kohl's current focus is centered on personalization/localization, new product offerings, loyalty and merchandising. Below is a quick look at the latest developments in these four key areas:
Personalization/localization. Kohl's is working towards localizing assortments in all of it stores. In the locations that currently are localizing assortments the retailer is experience around 70 basis points lift in comp, with a 40 basis point reduction in inventory.
"Our localization efforts are proving out and 2016 will be the year that all of our planning efforts for unique assortments by store will come to life in 90% of our assortments across all stores," Masell said. "As we exit the second quarter, approximately 70% of the assortment is already localized. We saw a modest lift in the spring season, achieving higher sales and lower inventory per store versus our control groups, but would expect the effect to improve as we gain more experience and enter key transitional periods by quarter two into quarter three, where localized assortments should have a much bigger impact."
Product. Thanks to some ongoing initiatives focused on right-sizing its inventory, Kohl's has been able to decrease inventory dollars per store by 6% from the second quarter of last year. While overall inventory is shrinking, the brand's commitment to providing the brands its customers' demand continues to be a top priority.
In Q1 Kohl's launched Stride Rite in children's shoes and relaunched New Balance in the active area and both product plays continue to pay dividends. In addition Nike continued to perform very well with double-digit comp growth in the quarter, in fact, the active and wellness category is not 18% of the retailer's total business.
To complement its Nike offering Kohl's will be adding Under Armour to its successful sportwear offerings in 2017. "We're incredibly excited to add Under Armour to our active and wellness category in early 2017," Mansell said on the call. "We've already established a strong leadership position in the active and wellness area. And adding one of the most sought-after brands to our portfolio of offerings will allow us to project that leadership even more fully."
We started to do this with our SO brand in Juniors, and we're achieving double-digit comps this spring on less inventory than last year. Michelle is working with our product development teams to reduce the end-to-end cycle on our private and exclusive brands by 25%, on average, and we have a goal of approximately a 40% reduction in Women's.
We'll be opening six smaller-format stores in the third quarter, adding to the two 35,000 square foot smaller stores we opened in the first quarter. Even more importantly than in our standard prototype stores, we've seen the importance of flexibility and localization in our offerings, as each trade area is unique, due to both the small trade area and small store size. In 2017, we'll be looking for a small number of these stores to open in more populated markets to ascertain the potential and the possible use as a tool to serve trade areas where our full-size stores have too much square footage.
Loyalty. The key aspect of Kohl's loyalty strategy is the power of its branded credit card, Kohl's Cash, mobile app, and Yes2You Rewards program all working in conjunction to drive increased engagement and loyalty. The brand's mobile app is being used by over 12 million customers, and the recent additional capacity of using Apple Pay with the Kohl's charge has increased its firepower.
"I think from a loyalty perspective, we got a very nice lift last year," Wesley S. McDonald , SVP and CFO said. "Our learnings from the second year is that we have to continue to create new ways for folks to get excited about loyalty. We started to do some events. We just did one the last week of July, where we combined our Friends and Family Event with the triple points for loyalty customers."
Merchandising. On the merchandising front Kohl's is focused on improved its speed and agility across the entire enterprise, particularly on women's apparel. For instance the merchandising team is working to reduce the end-to-end cycle of its private and exclusive brands by 25% on average with the stated goal to reduce women's by approximately 40%.
The retailer is two years into CEO Kevin Mansell's Greatness Agenda and although the overall retail market is currently soft the retailer's continued commitment to customer engagement is positioning Kohl's for future success. Although, the retailer's recently released Q2 sales numbers show a 1.8% comp sales decrease year-over-year there is cause for optimism as those figures are greatly improved over the 3.9% decrease the retailer endured in Q1.
In a recent earnings call with analysts Mansell and his executive staff gave updates on the brand's Greatness Agenda as well as outline some strategic initiatives the retailer has planned for 2017 and beyond. Kohl's current focus is centered on personalization/localization, new product offerings, loyalty and merchandising. Below is a quick look at the latest developments in these four key areas:
Personalization/localization. Kohl's is working towards localizing assortments in all of it stores. In the locations that currently are localizing assortments the retailer is experience around 70 basis points lift in comp, with a 40 basis point reduction in inventory.
"Our localization efforts are proving out and 2016 will be the year that all of our planning efforts for unique assortments by store will come to life in 90% of our assortments across all stores," Masell said. "As we exit the second quarter, approximately 70% of the assortment is already localized. We saw a modest lift in the spring season, achieving higher sales and lower inventory per store versus our control groups, but would expect the effect to improve as we gain more experience and enter key transitional periods by quarter two into quarter three, where localized assortments should have a much bigger impact."
Product. Thanks to some ongoing initiatives focused on right-sizing its inventory, Kohl's has been able to decrease inventory dollars per store by 6% from the second quarter of last year. While overall inventory is shrinking, the brand's commitment to providing the brands its customers' demand continues to be a top priority.
In Q1 Kohl's launched Stride Rite in children's shoes and relaunched New Balance in the active area and both product plays continue to pay dividends. In addition Nike continued to perform very well with double-digit comp growth in the quarter, in fact, the active and wellness category is not 18% of the retailer's total business.
To complement its Nike offering Kohl's will be adding Under Armour to its successful sportwear offerings in 2017. "We're incredibly excited to add Under Armour to our active and wellness category in early 2017," Mansell said on the call. "We've already established a strong leadership position in the active and wellness area. And adding one of the most sought-after brands to our portfolio of offerings will allow us to project that leadership even more fully."
We started to do this with our SO brand in Juniors, and we're achieving double-digit comps this spring on less inventory than last year. Michelle is working with our product development teams to reduce the end-to-end cycle on our private and exclusive brands by 25%, on average, and we have a goal of approximately a 40% reduction in Women's.
We'll be opening six smaller-format stores in the third quarter, adding to the two 35,000 square foot smaller stores we opened in the first quarter. Even more importantly than in our standard prototype stores, we've seen the importance of flexibility and localization in our offerings, as each trade area is unique, due to both the small trade area and small store size. In 2017, we'll be looking for a small number of these stores to open in more populated markets to ascertain the potential and the possible use as a tool to serve trade areas where our full-size stores have too much square footage.
Loyalty. The key aspect of Kohl's loyalty strategy is the power of its branded credit card, Kohl's Cash, mobile app, and Yes2You Rewards program all working in conjunction to drive increased engagement and loyalty. The brand's mobile app is being used by over 12 million customers, and the recent additional capacity of using Apple Pay with the Kohl's charge has increased its firepower.
"I think from a loyalty perspective, we got a very nice lift last year," Wesley S. McDonald , SVP and CFO said. "Our learnings from the second year is that we have to continue to create new ways for folks to get excited about loyalty. We started to do some events. We just did one the last week of July, where we combined our Friends and Family Event with the triple points for loyalty customers."
Merchandising. On the merchandising front Kohl's is focused on improved its speed and agility across the entire enterprise, particularly on women's apparel. For instance the merchandising team is working to reduce the end-to-end cycle of its private and exclusive brands by 25% on average with the stated goal to reduce women's by approximately 40%.