More than any other retailer, Kohl's (KSS +5.74%) is arguably doing the most to change how we think about department stores in a bid to stave off the threat of irrelevance that's overtaken much of bricks-and-mortar retailing.
In just the last two years alone, Kohl's has launched the following initiatives to transform its stores into a different kind of retailing experience:
- Partnered with Amazon.com to create store-in-store boutiques to sell Alexa-enabled devices.
- Agreed to serve as an Amazon package return center for items bought on the e-commerce website.
- Convinced Under Armor to sell its sportswear in its stores, an outlet that had never been tried before.
- Made a decisive move to separate itself further from shopping malls, closing four more mall-based stores this year, but opening four smaller stand-alone locations (most Kohl's stores are not in malls).
- Shrank the available floor space of some of its larger stores and used the unused square footage in 10 of them to allow discount supermarket chain Aldi to rent out the space.
The latest example of this re-imagination of the department store is its partnering with WW, the new name of Weight Watchers International, to install weight-loss studios in its stores.
Check out the latest Kohl's earnings call transcript.
Image source: Kohl's.
An idea as old as time
The department store really hasn't changed much since 150 years ago, when Harry Selfridge largely created the shopping experience we know today: stores featuring a number defined spaces devoted to a particular category; employees helping customers make a purchase; so-called "bargain basements"; and marketing stores through advertising. We can also thank Selfridge for the phrases "the customer is always right" and "only xx days until Christmas!"
While the stores themselves have barely changed, the habits of consumers have greatly evolved, which explains why the department store and, by extension the shopping malls they anchor, stand on the edge of extinction. There's perhaps no greater irony for the retail industry than Amazon taking over the Rolling Acres Mall in Akron, Ohio, that closed in 2013 to redevelop it into a 695,000-square-foot distribution facility for its e-commerce site.
Retailers have been slow to change, to understand the new dynamic of how consumers want to shop, and that is leading to their demise.
Are you experienced?
Although today we hear more about "experiential" shopping -- a largely meaningless catchphrase a number of retailers have latched onto to separate them from the competition even though there is no one definition for what it means -- we see companies expressing it in odd ways.
Last month, Foot Locker opened its first "power store" in the Detroit area that is intended to serve as a "hub for local sneaker culture, art, music and sport." It also has "activation space" for people or product launches, like the Adidas AM4DET sneaker, a graffiti-covered shoe supposedly inspired by the city.
Samsung will open its three "experiential retail locations," its first true physical stores ever -- that look like a typical Apple store -- where you can test out all of the electronics maker's gear.
Nordstrom opened three Local stores that sell everything but what a customer presumably goes to Nordstrom for (clothes), while high-end furniture chain West Elm opened a half-dozen hotels to subtly sell its products.
Staying within its core competency
Rather than going so far afield, Kohl's seems to be providing consumers with actual new ways to think about what it means to go to one of its stores by playing to its strength and leveraging its physical store space. It's not running away from the fact that it's a retailer, but rather giving customers more reasons and benefits to see Kohl's as a destination.
Former J.C. Penney CEO Ron Johnson sought to remake the troubled retailer into something similar, though he was fired before he could turn his ideas into reality.
Not every Kohl's location will have each of these opportunities, nor will all of them will work. But as the retailer continues to explore the boundaries of what makes a customer want to come to shop and stay, we'll likely see these ideas and more expand into more locations.
While other retailers also experimented with having outside retailers take up residence in their stores, Kohl's could be the one that redefines what it means to be a department store by innovating in ways that are meaningful to its customers and its bottom line.
