Why Kohl’s Is Ditching its Off-Price Experiment

Kohl’s Corp. has decided to end its experimental off-price clearance concept centers.

According to the discounter’s annual report filed in March with the Securities and Exchange Commission for the fiscal year ended Feb. 2, 2019, Kohl’s operated four Off/Aisle clearance centers. All four of the stores—three of which are in Wisconsin and one in New Jersey—are scheduled to close on August 3.

And, according to Kohl’s, it was ultimately an inventory problem that led the company to its decision.

“We appreciate all we’ve learned during the Off/Aisle test about inventory management, operational efficiency, store experience and nimble, empowered store leadership,” a Kohl’s spokesperson said. “We also learned that our strength and ongoing improvements in inventory management across the company does not allow us to appropriately stock Off/Aisle stores at scale.”

Kohl’s first tested the off-price concept in 2015, targeting women who shopped discounted merchandise, but counted T.J. Maxx or Marshalls as their go-to options. The aim was to snag some of that market share. Former Kohl’s chairman and chief executive officer Kevin Mansell started the pilot, and the centers are believed to have averaged around 25,000 to 35,000 square feet in size.

The Off/Aisle test also came at a time when Amazon had started making a greater foray into apparel and accessories, and when consumers started shifting their shopping preferences as they discovered the online channel.

Inventory initially stocked at the Off/Aisle centers primarily consisted of goods that had been bought at deep discount at Kohl’s, but then later returned. While that was a way for Kohl’s to maximize the profitability on returned items, inventory at the the pilot stores was later broadened to include special buys and traditional returns.

As the Kohl’s spokesperson noted, associates from the four Off/Aisle locations will have the opportunity to work at nearby Kohl’s stores.

Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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