Posts Tagged 'Kohl’s'

Department stores expand off-price concepts

Macy’s reported in its year-end earnings call that it plans to expand its Backstage off-price concept to 100 more stores this year. (And Backstage is located inside existing Macy’s locations.) Here’s what I had to say on RetailWire about the wisdom of this trend:

There is a big difference between what Nordstrom and Kohl’s are doing (building out freestanding Rack and Off/Aisle stores) and what Macy’s is attempting by locating its Backstage concept inside its full-line stores. Either way, department stores are jumping on the off-price bandwagon because it’s a hot segment with the “treasure hunt” experience that some shoppers are looking for. But at what point does the segment get overcrowded?

Macy’s may feel strongly enough about Backstage to roll it into more locations, but from my experience it does nothing to enhance the overall store “brand.” (Bob is dead-on regarding the housekeeping.) And the merchandise content is not compelling, since Macy’s “upstairs” brands feel safer dealing with TJX than having their goods show up in Backstage. From what I’ve observed, there is a lot of closeout product from brands that you might find at JCP or Kohl’s but not on the main floor of Macy’s.


Did L.L. Bean need to change its return policy?

L.L. Bean got plenty of publicity when it announced a change to its longstanding policy of “no questions asked” returns. Apparently the cost of abusive returns (products bought at yard sales, twenty-year-old clothing with normal wear and tear) was an unsustainable cost of doing business — to the tune of a reported $50 million annually. The RetailWire panel discussed whether this was a good strategic move, and here’s my point of view:

L.L. Bean is among the last retailers to abandon “no questions asked” return policies. The company is right that abuses of the policy make it unsustainable. A cost of $50 million per year has been reported, although it’s not clear whether this is the cost of “abusive” returns or all returns. I’ve noticed other companies with generous policies (Kohl’s, for example) tightening their processes, in part to avoid being swamped by e-commerce returns to physical stores.

Loyal shoppers will not be put off by the change, but L.L.Bean took a PR hit because of widespread media coverage. There was a missed opportunity to manage the message more effectively, even if the decision was justified, given that the policy was a central branding message.

Can Macy’s claim a turnaround?

Today’s RetailWire panel focused on Macy’s 2017 holiday results, where they reported a 1% gain for the season. Despite the optimism of their executive chairman Terry Lundgren, most panelists agree with me that the celebration is premature:

As the article points out, Macy’s comp sales of 1 percent paled in comparison to J.C. Penney and Kohl’s, in a season where brick-and-mortar retailers did better than expected. So they actually lost market share during a robust shopping season, and probably ran behind in their physical stores if you assume that most of their growth came from e-commerce.

It’s hard to point out much good news in these numbers, other than being “less bad” than year-to-date. The large number of store closures doesn’t appear to have driven sales to remaining locations, and the jury is still out on the wisdom of the Backstage store-within-a-store strategy. In this panelist’s opinion, it does little to enhance the brand image of the rest of the store.

Another Amazon/Kohl’s tie-up

To follow up on my comment on “smart home” shops at Kohl’s, now comes word that Kohl’s will test Amazon processing locations (pickup and return) in several markets. I agree with most fellow RetailWire panelists that it will drive traffic to Kohl’s but is an even better deal for Amazon as it fills in its physical footprint:

Omnichannel initiatives like BOPIS already put strain on existing store operations, as panelists just discussed in the context of holiday hiring. So Kohl’s ability to process Amazon returns (even unpackaged ones) without affecting their other operating standards will be something to watch. Without payroll support from Amazon, this could be a heavy lift.

As to who comes out ahead in this collaboration, I understand that this will drive even more traffic to Kohl’s stores. (And my usual disclosure that I worked there from 1982 to 2006.) But Amazon picks up as many as 1100 more brick-and-mortar locations (if it rolls chainwide), with the eventual ability to add pickup lockers and even an ordering kiosk if they play their cards right. So it looks like Amazon is the biggest potential winner in this deal.

Amazon and Kohl’s in a “smart home” alliance

Amazon and Kohl’s announced jointly that they are setting up “smart home” shops in 10 test stores in Chicago and Los Angeles this fall, using 1000 square feet to promote items like Echo along with related devices and the home services to set them up. Reportedly (according to RetailWire) the shops will be staffed by Amazon and the revenue will accrue to them. Here’s my comment:

A ten-store test in an 1100-store chain is not significant in the short term, but it’s an interesting alliance. (My usual full disclosure: I worked for Kohl’s between 1982 and 2006.) It’s curious that the sales revenue goes straight to Amazon (with a presumed piece of the action to Kohl’s), compared to the traditional model where somebody walks into the store and uses his/her Kohl’s card to buy an Echo Dot. It’s also a recognition that the “smart home” business needs more hands-on salesmanship.

Amazon look like the winner in this deal, because it potentially leads to another brick-and-mortar tie-up with a much bigger store footprint than Whole Foods, without the cost of a flat-out acquisition. Meanwhile, Kohl’s benefits from increased traffic and a meaningful use of space at a time when it is “right-sizing” about half of its stores. This bears watching.

Second quarter sales show a pulse

The stock market did not react well to most stores’ second quarter earnings, but there were hints of improvement from most retailers. My comment below (from RetailWire) focuses on Nordstrom in particular but several other stores show signs of figuring out omnichannel too:

The results of Nordstrom’s Anniversary Sale (and the “less bad” sales reports from Macy’s and Kohl’s) may point toward a stronger second half than expected. It’s too early to tell if we’re seeing a full-fledged revival of women’s apparel sales (still reported as a weak spot on Kohl’s earnings call), but the Nordstrom numbers are encouraging.

I shopped the Anniversary Sale in a couple of markets, and you’d be hard pressed to find a robust sale offering in men’s or women’s — so there must have been some traffic-driven regular-price selling in the mix. Hats off to Nordstrom for sticking to its promotional discipline, and for continuing to ride the success of its Rack and e-commerce businesses.

Can JCP be a player in toys?

JCPenney recently announced an expansion of its toy business, in time for holiday 2017 selling. RetailWire panelists weighed in on the topic, and here’s my take:

Toys are a double-edged sword for softlines retailers like Penney and Kohl’s who want to strengthen their children’s offerings. It’s hard to avoid carrying toys, but it’s also hard to compete against the dominant space of the discounters and big-box stores. (Not to mention the low margins.) Customers have come to expect the best selection and prices from market leaders like Amazon, Walmart and Target.

The broader risk to JCP is that it becomes a “bunch of stuff” with the addition of new categories (from appliances to toys, from bikes to electronics). Just because the store has square footage to burn doesn’t mean that overassortment is a winning long-term play.