Gass Opens Up About Fam­ily Val­ues, Kohl’s In­no­va­tion

WWD Digital Daily - - News - BY SHARON EDEL­SON

Kohl's Corp. chief ex­ec­u­tive of­fi­cer Michelle Gass took the reins of the $20 bil­lion re­tailer in the midst of a mar­ket reshuf­fling fu­eled by e-com­merce and dig­i­tal gi­ant Ama­zon and a frac­tious po­lit­i­cal cli­mate that's left con­sumers emo­tion­ally ex­hausted.

Gass is ap­proach­ing these and other chal­lenges by dou­bling down on Kohl's rai­son d'être: pro­vid­ing value for the en­tire fam­ily in key ar­eas such as ac­tivewear and well­ness, while in­dulging her ap­petite for ex­per­i­men­ta­tion and cut­ting- edge tech­nol­ogy.

"The premise, from the be­gin­ning, has been sim­ple," Gass said. "It's all about serv­ing the fam­ily." Gass said the frame­work for this strat­egy was laid by her pre­de­ces­sor, Kevin Mansell, who in­tro­duced to the com­pany the Great­ness Agenda, which asked, "Why do we ex­ist?," she said. "To serve fam­i­lies."

The Menomonee Falls, Wisc.-based re­tailer took an if you can't beat 'em, join 'em ap­proach to Ama­zon, part­ner­ing with the on­line be­he­moth to ac­cept re­turns of pur­chases from the Seat­tle-based e-tailer at more than 100 stores. Kohl's has also been sell­ing Ama­zon Echo and smart home de­vices at spe­cial sta­tions in 20 units. "The part­ner­ship with Ama­zon is in­trigu­ing. It's still in the pi­lot phase. We know we're driv­ing peo­ple into the store. It has to be good eco­nom­i­cally for both of us," Gass said.

"Ev­ery year, we get that much smarter, more agile and more cre­ative," she added. "The premise from the be­gin­ning has al­ways been about serv­ing fam­i­lies with great value and sav­ings, and build­ing loy­alty."

Kohl's jux­ta­poses pow­er­ful na­tional brands such as Nike, which boasts the high­est sales of any of the re­tailer's ap­parel brand part­ners, with pri­vate brands such as Sonoma Goods for Life, Croft & Bar­row and Apt. 9. The three la­bels re­port­edly do $1 bil­lion apiece in an­nual sales. House brands ac­count for a lit­tle more than 40 per­cent of Kohl's to­tal busi­ness. "The pro­pri­etary brands were strug­gling a bit and needed a cat­a­lyst for change," Gass said. "We re­duced the time­line by 40 per­cent. We've taken not days and weeks, but months out of the process."

Sprin­kled on top of the na­tional and pri­vate la­bel brands are long­time ex­clu­sive de­signer part­ner­ships such as LC Lau­ren Con­rad and Sim­ply Vera Vera Wang. Gass said she's def­i­nitely in­ter­ested in do­ing more de­signer hook-ups.

"We did de­signer col­lec­tions, and we'll do col­lab­o­ra­tions ev­ery six months," Gass said. "That's an op­por­tu­nity."

Kohl's core cus­tomer is be­tween 35 and 54 years old. "We love this cus­tomer,"

Gass said. "Some would de­scribe [Kohl's cus­tomer] as be­ing in the mid­dle — mid­dle in­come, mid­dle Amer­ica. The way I think about it, we can be fa­mous for the mid­dle, by be­ing more things mid­dles want.

That in­cludes be­ing as­pi­ra­tional with ac­ces­si­ble price points. We're look­ing for ways to bring that as­pi­ra­tional [prod­uct] to cus­tomers." An ex­am­ple is Sim­ply Vera Vera Wang, Gass said.

"It's not enough to serve ex­ist­ing cus­tomers," Gass said. "We need to be rel­e­vant to Mil­len­ni­als." The re­tailer is lean­ing in on Mil­len­ni­als and over­looked con­sumer groups such as large sizes. Pop­Sugar at Kohl's is an ex­am­ple of the for­mer, and plus-size house brand EVRI, the lat­ter. "We see an op­por­tu­nity to ad­dress the $14 bil­lion plus-size mar­ket," Gass said, adding that "67 per­cent of women are size 14 or larger."

Kohl's is stak­ing a claim to ac­tivewear. So bullish is the re­tailer on the cat­e­gory, it's dou­bled in size over the last four to five years, Gass said.

The re­tailer in 2016 an­nounced it would launch Un­der Ar­mour to strengthen its ath­let­icwear of­fer­ing. Gass said at the time, “You'll see Un­der Ar­mour across ev­ery part of the store, in­clud­ing ap­parel for men, women and kids, footwear, ac­ces­sories and health de­vices.” Gass re­vealed that to­day Un­der Ar­mour is Kohl's num­ber-two brand be­hind Nike.

The re­tailer doesn't ask con­sumers to choose be­tween na­tional brands and pri­vate la­bels, and when it comes to store size, it's not one size fits all. In ad­di­tion to the tra­di­tional 90,000-square-foot unit to smaller-for­mat 65,000- and 35,000-square­foot units have opened. No, the com­pany is not schiz­o­phrenic, it's sim­ply em­brac­ing the du­al­i­ties that ex­ist in its busi­ness.

"Great brands with huge reach is an op­por­tu­nity," Gass said, not­ing that Kohl's is en­gaged in a pi­lot part­ner­ship with gro­cery store Aldi. In March, the re­tailer con­densed in­ven­tory to clear out space in about 300 of its 1,000 stores. The com­pany told an­a­lysts that “the size of the op­por­tu­nity in our eyes is the 500 stores that — by the end of this year — we would have moved from a stan­dard foot­print to a small foot­print.”

"We're right-siz­ing stores, from 90,000 square feet to 60,000 square feet," Gass said. "We want to bring in neigh­bors who can drive traf­fic." The smaller units of­fer an el­e­vated ex­pe­ri­ence, ex­panded as­sort­ments and are post­ing dou­ble-digit growth.

Kohl's has suc­ceeded by be­ing con­trary. For ex­am­ple, Kohl's in the Six­ties es­chewed shop­ping cen­ters in fa­vor of off-the-mall lo­ca­tions. Gass be­lieves the strat­egy was pre­scient con­sid­er­ing that some depart­ment stores to­day are in the process of rein­vent­ing them­selves or clos­ing doors. "While ev­ery­one was mov­ing into malls, we took the op­po­site path. About 95 per­cent of our stores are [free­stand­ing].

“In the early years, Kohl's de­signed its stores dif­fer­ently. The moves we made then are help­ing us now. I landed here five years ago, and dur­ing that time, Kohl's has be­come a ma­jor player, with 1,150-plus stores and 140,000 em­ploy­ees. About 85 per­cent of the U.S. pop­u­la­tion is in close prox­im­ity to one of our stores.”

Gass, who in May, was el­e­vated to ceo, joined Kohl's in 2013 as chief cus­tomer of­fi­cer af­ter spend­ing al­most 17 years at Star­bucks. "When I ar­rived, it was a pretty piv­otal time with lots of pres­sures. What do cof­fee and ap­parel re­tail­ers have in com­mon?" Gass asked rhetor­i­cally. "Both or­ga­ni­za­tions put their cus­tomers first and have a real ap­petite for in­no­va­tion. Star­bucks al­ways keeps you guess­ing. Both com­pa­nies have amaz­ing cul­tures. If you first take care of your peo­ple, your peo­ple will take care of your cus­tomers."

“There were new com­pet­i­tive en­trants nip­ping at our heels," Gass said about one of the chal­lenges she faced when she moved into the c-suite. "The big­gest dis­rup­tive force was the dig­i­tal trans­for­ma­tion that was oc­cur­ring in the re­tail in­dus­try. In some ways, we were a lit­tle be­hind. The head­winds were pretty fierce. I knew it wasn't go­ing to be an in­cre­men­tal [change] that would get us there. It had to be trans­for­ma­tive.”

Gass said she set goals for Kohl's, in­clud­ing striv­ing for op­er­a­tional ex­cel­lence. "It's work­ing," she said.

Iden­ti­fy­ing the on­line and dig­i­tal rev­o­lu­tion, Gass de­cided to have Kohl's re­de­ploy $250 mil­lion to cus­tomer-fac­ing ini­tia­tives and chal­lenged the team to work dif­fer­ently. "We're sur­gi­cally go­ing in with a lo­cal strat­egy and plan and are man­ag­ing in­ven­tory. Turns have im­proved at a very rapid rate and prod­uct is fresher, and that's a core ca­pa­bil­ity," she said. New busi­nesses in­clude mak­ing a push in out­er­wear, and de­vel­op­ing footwear with the up­com­ing launches of Sam Edel­man and Steve Mad­den, along with the in­tro­duc­tion next year of Nine West.

In ad­di­tion, Drew and Jonathan Scott, whose pop­u­lar home im­prove­ment show is "The Prop­erty Broth­ers" on HGTV, an­nounced re­cently that they'll launch an ex­clu­sive home life­style col­lec­tion at Kohl's in fall 2019, which will in­clude in­door fur­ni­ture, decor, tex­tiles and bed­ding. "We're mak­ing a big com­mit­ment to prod­uct and mer­chan­dis­ing and re­ally serv­ing her well," Gass said.

“We're be­gin­ning to put a mas­sive fo­cus on reach­ing younger cus­tomers,” Gass said. "We're also rein­vent­ing the ex­pe­ri­ence in stores. We're ex­per­i­ment­ing with a new check­out process on­line and self-check­out in stores." About 40 per­cent of all dig­i­tal or­ders are ful­filled by stores. Dur­ing the hol­i­day sea­son, it's half of all or­ders.

"We do have mo­men­tum," Gass added. "Our sales and earn­ings are grow­ing and we have a strong bal­ance sheet. That's al­ways been a hall­mark of Kohl's. The bal­ance sheet al­lows us to in­vest in the fu­ture. Based on the ad­di­tional cash we've been able to buy down some of our debt."

"From Seat­tle to Lon­don to Wis­con­sin, I'm re­ally glad I made the move to Kohl's," Gass said. "I see even a bolder and brighter fu­ture for the com­pany. We can ac­cel­er­ate lever­ag­ing our strengths to iden­tify new op­por­tu­ni­ties.

"We'll con­tinue to in­vest," Gass said. "We have to out­pace [com­peti­tors] and for the mod­ern­iza­tion of the brand. We're very re­sults ori­ented. We're a car­ing cul­ture. I'm com­mit­ted to our stores, and also com­mit­ted to dig­i­tal. I take a long-term view."

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