Fundamentally, retailing is about merchandising, and companies that sell goods that customers find appealing tend to do quite well. Of course, there are many ways to slice and dice product selection; almighty Wal-Mart
Off-mall department store operator Kohl's
Highly recognizable brands
One of Kohl's first forays into partnering to develop an exclusive national brand was the 2004 launch of a Daisy Fuentes line of clothing and related accessories. The brand initially accounted for less than 1% of total company sales, but Mansell stated that "we're now running at about 9% of our total sales behind exclusive national brands," meaning the initiative is starting to make a meaningful impact on Kohl's top line.
Two recent endeavors include Simply Vera Wang, in cooperation with wedding-fashion icon Vera Wang, and a just-launched partnership with Food Network in the housewares division. Mansell also cited an existing deal with Elle magazine and the creation of a New York design office to "give us better proximity to our resources."
Mansell also touched on delivering "superior value" in the company's exclusive brand focus, which boils down to selling customers quality, fashionable goods. Quality comes from controlling production and making sure the right suppliers are chosen, and fashion is enhanced by not only finding popular styles, but reducing cycle times and best ensuring that products make it to store shelves as quickly as a fashion trend is discovered. Kohl's mentioned it has reduced cycle times somewhere between 30 and 60 days across its entire business.
Kohl's has had an impressive run of same-store sales increases and years of rapid growth via new-store expansion. But even the most storied retailer eventually succumbs to a fashion faux pas or two, and at some point down the road, Kohl's will saturate the domestic market with its freestanding or strip-mall-based department stores. Thus, it has identified a "cross-shopping opportunity" by which it is looking to improve the penetration of its traditional customer base.
Mansell estimates that average transaction size runs about $50 at Kohl's, and that the average shopper hits Kohl's five to six times per year. Furthermore, "those transactions occur with purchases in only one of our six major lines of business," which includes the men's, women's, and children's clothing sections; footwear; home; and accessories. So what better way to double or triple transaction size than by finding ways to entice consumers into multiple business lines?
Moves to drive cross-selling include expanding brands "across the whole store," such as selling Simply Vera Wang in the women's and home sections, for instance. A partnership with Ralph Lauren
Co-developing brands has proven quite lucrative at Kohl's, but it also pursues its own private-label brands, which tend to carry even higher profit margins, as well as the sale of outside brands such as Nike
We already touched on inventory management in reducing cycle times, and Mansell talked of moves for "improving allocations and receipt flows" and striking the right inventory balance among stores. There is also a regional focus on product management to account for differences among climate and consumer tastes across the country.
The Foolish bottom line
When it works, retailing appears straightforward, and Kohl's success may appear little more than a common-sense approach to selling what consumers demand. But if it were that easy, firms such as Bakers Footwear
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Fool contributor Ryan Fuhrmann is long shares of Nike, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.