Kohl’s has learned it’s better to treat Amazon as friend rather than foe.
Spurred by the overall decline of retail sales, 82 Kohl’s stores across Chicago and Los Angeles began allowing customers return their Amazon packages in store late in 2017, and the move appears to have paid off.
The idea was that giving customers a convenient drop-off point for their returns would increase foot traffic to Kohl’s stores—and maybe consumers would linger and browse. Sure enough, by early 2018, Kohl’s revenue growth in the Chicago region was up 10 percent, compared with 5 percent growth across the rest of the country.
The move to work with Amazon, a company widely credited with leading the rise of online shopping (and consequently, the deterioration of traditional retail), was a play for relevance on the part of Kohl’s. The 56-year-old department store chain was looking for a way to revive sales and bolster interest from millennials, one of its highly-coveted consumer groups.
Richard Schepp, chief administrative officer at Kohl’s, said the partnership allowed the brands to leverage each other’s strengths, citing the retailer’s significant “store portfolio and omnichannel capabilities” along with Amazon’s “reach and loyal customer base.”
Data from Earnest Research showed the Amazon returns did indeed spur growth for Kohl’s. Not only was revenue up 10 percent in the Chicago stores mere months after the launch of the partnership—the area’s sales, transactions and customer growth outpaced the same metrics nationwide in 2018. And most notably, the number of new Kohl’s customers in the Chicago area grew by 9 percent last year, compared with 1 percent growth for other Kohl’s stores across the U.S. Kohl’s is now expanding the partnership with Amazon beyond Chicago and Los Angeles to its hometown of Milwaukee, where the brand was founded in 1962.
The success of the collaboration has Kohl’s thinking about more ways to leverage it’s sizable retail footprint, Earnest Research noted. With 1,158 stores across the country, there’s a lot of square footage to work with—much of it standing empty as the need for in-store inventory recedes with the rise of online shopping. But Kohl’s is looking to fill that space—and quickly. Last year, the retailer announced that it would be partnering with German grocer Aldi on a pilot initiative that would see five to 10 Aldi stores move adjacent to Kohl’s stores. A similar partnership with Planet Fitness will see up to 10 locations opened next to Kohl’s locations.
The retailer said in announcing its store optimization in March, “Kohl’s will continue to seek out strong partners during this pilot phase for existing rightsized locations that are well-capitalized companies and will drive traffic to our stores.”
These partnerships, according to Earnest Research, offer Kohl’s access to “a new base of customers who, in ﬁnding a quality gym and/or grocery store, are very likely to make repeat visits to those locations.”
As with the Amazon experiment, the report noted, “This is a situation where, potentially, everybody wins.”