Department Stores Are Struggling — But Kohl’s CEO Sees Big Opportunities in Small Brands

Amid digital disruption and a so-called retail apocalypse, it’s no secret that traditional brick-and-mortar stores have had to adjust.

One way Kohl’s is evolving to meet changing consumer tastes is by bringing smaller, niche brands into its stores. Through its Curated by Kohl’s program, which rolls out Oct. 10, the Wisconsin-based company is bringing product from emerging labels into 50 of its 1,200 stores.

“We’re super excited about this,” said CEO Michelle Gass today at the Consensus Great Brands Show in New York, where she delivered the keynote address. “In my mind, we’re not stopping at 50 stores. We just want to get our bearings.”

For a newly launched brand, getting product into Kohl’s — a chain that does $20 billion in sales annually — is huge. But the Curated by Kohl’s program doesn’t just benefit emerging labels, Gass explained.

“Partnering with new, emerging brands is great for our customers, since they’re discovering something new, and for brands, Kohl’s can be a stage,” she said. “It’s really a win-win in my mind.”

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To find the smaller brands, Kohl’s has teamed up with Instagram and parent company Facebook. Gass said she’s been “thrilled with the partnership … both from a marketing perspective and for finding brands.”

Both Curated and the social media partner arrive as Kohl’s rolls out new tools to woo millennial and Generation Z consumers; the latter, in particular, has a well-documented affinity for niche labels. As part of its push for younger customers, Kohl’s has added new brands like Nine West and Elizabeth and James; it also is working with Popsugar.

“We realized that we had to pick up the pace and were trying lots of things,” Gass said.  “My goal is to get everything we do to be faster, more nimble.”

Kohl’s has also beefed up its online business and expanded the activewear category, which tends to skew younger. Today, online shopping accounts for 20% of Kohl’s purchases, and the activewear category is one of its strongest, making up 20% of online sales.

While Amazon is often viewed as an enemy of traditional retailers, Kohl’s rolled out a national partnership with the e-tailer this summer, allowing customers to return unpackaged items purchased on Amazon.com for free.

“We’re still in the early days of our national partnership,” Gass said. “For us, we’re getting traffic, we’re getting people coming into the stores. … We might compete in certain channels, but there’s plenty of market share to be had.”

Combined with a solid back-to-school shopping season, the Amazon partnership led to better-than-expected earnings for Kohl’s for the second quarter of 2019. The company reported a boost of $1.55 per share, beating analysts’ estimate of $1.53.

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