Is the future of the Menomonee Falls, Wisconsin-based Kohl’s Corp. in Tacoma, Washington?
Getting as experimental as it’s ever been, Kohl’s has created a “concept” store in Tacoma that rethinks and modernizes the retailer’s brick-and-mortar experience.
The 35,000-square-foot setting — much smaller than the typical 80,000-square-foot Kohl’s box — has set a soft opening for this Sunday but officially opens Nov. 4.
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Potentially, Tacoma could be the prototype for future stores, and elements of it could be applied to existing stores.
“In this world of digital and physical, the bar has been raised. We have to deliver ease and convenience while we are also delivering innovation and discovery. This store is a great manifestation,” Kohl’s chief executive officer Michelle Gass said Thursday afternoon during an online tour of the concept store.
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“A 35,000-square-foot box is the blueprint as we look to expand. We see 100 more stores in our future.
“But importantly, this store is still a concept — an experiment. This is not yet how we have decided to scale to 100 stores,” Gass explained. “We do have a working model” for the smaller stores that will be rolled out. “We actually have several of those that are working in terms of the experience and the economics, and then this [Tacoma] is about taking a white sheet of paper, putting the customer first, using analytics and data, and saying, ‘We are designing a store from scratch. So what is possible?'”
Strolling through the concept store, Gass characterized the setting as “very open and very modern.” The floors are polished concrete and there is an ability to move fixtures and racks around to a greater degree than in the existing, traditional Kohl’s racetrack layouts throughout the chain. Having the flexible fixturing means it’s easier to grow or shrink brands and categories depending on sales trends. The fixtures in Tacoma have an overall more modern look, and the displays and shelving are also updated, with branding now at eye level.
With the assortment, “It has all the great things we are known for but edited,” said Gass, citing Sephora, which has a smaller space than it would have in other Kohl’s locations. As she has stressed repeatedly in the last several months, Gass said Sephora is “working for Kohl’s” and that by next year it will be in 850 Kohl’s locations, and eventually be in all 1,100 Kohl’s stores. Sephora is currently in roughly 600 Kohl’s locations.
Gass emphasized that Kohl’s used data to create “a highly localized experience” in Tacoma and an assortment characterized by a more focused assortment of outdoor gear, e.g. Columbia and Eddie Bauer.
In the concept store, “The way we have flowed the store is different,” said Gass. “In front is the women’s area flanked on both sides. True to this market, it’s all about the active and outdoor lifestyle so because we are into the fall, you see fleece, you see flannel, and you see family” apparel.
“You are hitting customers with product right as you walk in,” said Gass, observing that the checkout area has been moved aside to put the merchandise front and center.
“It’s about inspiration and storytelling. Our customers have told us, ‘I’m time-starved. I want solutions. Help me put outfits together.’ We are mixing brands. It’s not head-to-toe one brand.
“We are using more mannequins,” Gass added. “You will see that throughout. Of note, we have skin-toned mannequins and mannequins of all sizes.”
In May, the company revealed plans to open about 100 small-format stores over the next five years or so in markets untapped by existing Kohl’s stores. The expansion of the small-format stores follows a successful pilot of more than 20 smaller stores, the company said. The average Kohl’s store of around 80,000 square feet is considered too large for many small markets.
“The real estate team has already identified what those markets could look like,” said Gass. “We have a store concept that is working today. It is a more modernized version. The Tacoma store is just a huge step forward, with lots of experimental things, like self-checkout, the way we are doing home, and whether customers like our ‘hallway’ of active and outdoor inspiration.”
Although smaller stores are the key for future expansion, Gass said she doesn’t see a need for downsizing existing Kohl’s stores around the country because they are very “cash-generative and healthy.” Instead, the emphasis would be on adding incremental concepts to the 80,000-square-foot space. “There is a pipeline of innovative ideas the company is working on to make the stores more relevant,” said Gass.
“We are in a big reinvention as it relates to Kohl’s, and it’s all about starting with the customer, about positioning the company to be a leader in the active and casual lifestyle,” said Gass. “Across many tenets of our strategy, thinking differently about the experience is an important part of this transformation strategy. We are doing lots across the store to reflect the new strategy of the active and casual lifestyle.”
While the casual and active push chainwide and online started in 2020, the Tacoma concept store took about a year to create and get up and running. “We really challenged ourselves,” said Gass. “There is going to be a lot we learn in this strategy that will inform new stores going forward [and that we can take] back to our very robust fleet.”
Aside from the reduced square footage, most striking is the greater use of mannequins and more sophisticated display of active, casual and outerwear private label and national brands, such as with the “hallway” format, to tell style and trend stories, and show outfits to encourage multiple purchasing, much more overtly than Kohl’s has typically done.
“The active and outdoor hallway, a true manifestation of localization, the outdoor lifestyle, with Columbia, Eddie Bauer, Nike, Under Armour, Adidas, all for the family, and even merchandising things adjacent like sleeping bags, it’s all based on data,” said Gass. “We worked a lot on creating a scalable model, getting this outdoor and active amplification in this particular store. If this new concept was in the South, you would see something very different displayed on the hallway, probably a lot more shorts, swimwear, tanks, summer-oriented product. It is really about driving relevance, inspiration and easy shop-ability.
“The brands are really chosen based on what this customer is shopping,” said Gass. “In women’s, customers have been drawn to our private brands, such as SO and Sonoma, which means Nine West, which is a big brand for the company, we don’t have in this store. That was the thinking across every single department of the store. It’s much more curated in both types of products and the brands based on the insights from customers.”
The checkout is no longer in front, but off to the side, making the merchandise the first impression when entering the store. Kohl’s is testing self-checkout in the concept, along with having associates handle the checkout.
“The look and feel quite is different than how we usually do checkout,” said Gass. “This is the first Kohl’s store where we put the checkout area not in the front but actually off to the side, so we can have customers walk right into product.” With Tacoma being a relatively small and open store, “It won’t take long for customers to see the checkout area,” said Gass. And the self-checkout, she added, “has the latest hardware and software.
“There is a lot of experimentation that is just so key in the store,” said Gass. “This is a bold step forward for Kohl’s. You get a sense of seeing Kohl’s but it looks and feels different in a good way. We’ll be changing things around as we learn from the customer.”
In other innovations, the home area has a product showroom experience. Product vignettes are seen throughout the floor and customers can shop the entire vignettes right from their phone via QR code.
The Tacoma concept store also has “Discover at Kohl’s,” a shop with dozens of emerging, established, and diverse-owned brands new to the retailer, and already in 600 locations and on kohls.com.
To create the concept store, Gass said the company did utilize some outside design firm “at early stages.…But it really was a Kohl’s team that brought it to life in the totality that you see here.”
Asked how long it would take before deciding whether to roll out the concept or drop it, Gass replied, “Sometimes, if we see it work right away, we might scale it faster, I expect with something like this it will take a little time as we tweak and iterate. There will be a lot of testing and learning. I really view it as a learning lab for Kohl’s.”
Asked whether on a square-foot basis the costs to recreate the concept store in other locations would be more than it takes to develop the traditional Kohl’s store, Gass said, “Ultimately if we were to scale any of this, you can ensure that we will have a great return for the company. We are always flexible as it relates to how long we test things.”
In addition to the new concept store in Tacoma, Washington, Kohl’s is opening three small-format stores this fall in San Angelo, Texas; Morgantown West Virginia, and Lenox, Massachusetts.
Kohl’s is under pressure to reduce drooping sales and profits and is looking to this holiday season to recapture market share, and for some recently implemented strategies to kick in and resonate with shoppers, most notably the addition of its Sephora beauty shops. The second quarter saw a 63 percent drop in second-quarter income and an 8.5 percent decline in sales.
For months activist shareholders have been second-guessing the strategies and demanding changes in management and in the composition of the board. However, the Tacoma concept store reflects Kohl’s willingness to change, and step up efforts at innovation and become more relevant to consumers.