In the dynamic retail landscape of 2024, Kohl's stands out as a traditional retailer successfully adapting to shifting consumer behaviors and preferences. By leveraging strategic partnerships, optimizing store layouts, and enhancing customer experiences, Kohl’s is repositioning to set the stage for long-term growth. How can brands tap into Kohl’s evolving strategies to unlock substantial opportunity?

CPG by MPG Sales Director Jaspreet Kaleka provides her actionable insights for brands looking to win at Kohl’s. Through longtime buyer relationships and smart strategies, CPG by MPG is driving placement and growth for multiple clients across categories that include hydration, consumables, kitchen appliances, personal care, hair care, outdoor bedding, and tech, among others.

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Understanding Kohl's Current Strategies

Kohl’s has been making strategic moves to strengthen its business this year and lay the groundwork for future success. While the tough consumer market has affected the core aspects of their business, Kohl’s is still seeing robust performance in significant growth areas like Sephora, home decor, gifting, and impulse purchases. Using data analytics is crucial for optimizing performance at Kohl’s. Understanding customer preferences and market trends can help tailor your product offerings and marketing strategies.

TIP: Leverage Kohl’s sales data and customer insights to make informed decisions about product assortment and promotional strategies. Regularly review performance metrics to adjust your approach as needed.

Keen Focus on Value

Economic pressures have made consumers more discerning about their spending. Kohl’s customers are spending less, but the company has seen an increase in new customers and overall transactions. Kohl’s is messaging around lower price points, is leveraging real customers and influencers to showcase value and enhanced product offerings, and continues to lean into Kohl's cash as a value differentiator. Promotions will continue to be a key component of delivering value to these middle income consumers. Brands that emphasize value through exclusive deals, loyalty rewards, and bundled promotions are more likely to resonate with Kohl’s customers.

TIP: Develop compelling value stories that address consumer concerns about cost without compromising on quality. We expect the Q4 promotional environment to be very intense. Highlight the value of your products through strong strategic promotions and loyalty program deals for the consumer.

Sephora Partnership a Key Growth Driver

One of Kohl’s most notable strategies is its partnership with Sephora, which began in 2021. With close to 40% of Sephora shoppers at Kohl’s new to the store, the partnership has been a game-changer, integrating Sephora’s expansive beauty product range into Kohl’s stores. In this second half of the year, Sephora at Kohl's will further expand with an additional 140 shops opening. The Sephora integration has driven a 45% boost in beauty sales and has spurred cross-category purchases, making it a key growth driver.

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Reaffirming Commitment to Families

Recently, Kohl’s announced it is undergoing a rebrand to emphasize its dedication to families. The new brand platform, “Where Families Come First,” aims to highlight authentic everyday moments that make life special. This positioning is to be reflected through Kohl’s diverse product range, including brands like Babies ‘R’ Us and Sephora, and will focus on significant life experiences and milestones. To that end, Kohl’s has launched an omnichannel campaign, “When Life Gets Real, Start Here,” which weaves product stories with genuine, unfiltered moments such as family gatherings and celebrations. It is celebrating its new brand journey with special promotions, including instant Kohl’s Cash coupons and exclusive deals. 

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Kohl’s understands the purchasing power of new families, and how their average spending naturally increases as they grow. By focusing on the major milestone of welcoming a new baby, Kohl’s aims to attract new parents to their stores. This strategy not only taps into the immediate buying needs of new families but also fosters long-term loyalty, further building the retailer’s already-high shopper loyalty and creating a valuable lasting relationship that drives continual growth.

Promising New Babies 'R' Us Collaboration

Building on the success of Sephora, Kohl’s has partnered with Babies ‘R’ Us to expand its footprint in the baby category. This collaboration features approximately 200 in-store baby shops and an enhanced online presence, targeting younger customers and families. The initial results have been promising, with noticeable sales growth in baby gear and furniture. This move indicates Kohl’s commitment to catering to the needs of families and younger shoppers.

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The Babies 'R' Us partnership offers rich opportunities for brand marketers. This expansion taps into the growing market for baby products, which has seen increased demand as families prioritize quality and convenience.

To leverage this partnership, consider:

• Targeted Product Lines: Develop exclusive or co-branded baby products that align with the Babies ‘R’ Us assortment.

• Family-Centric Promotions: Launch targeted promotions and discounts tailored to families shopping for baby essentials. Special offers such as bundle deals or loyalty rewards can attract budget-conscious parents.

• Enhanced Online Presence: Ensure that your products are prominently featured online. Invest in high-quality images, detailed descriptions, and customer reviews to drive engagement and sales.

TIP: Keep an eye on seasonal trends and upcoming parenting needs. Plan product launches and promotions around key parenting milestones and holidays to maximize impact.

Enhancing Customer Experience

Kohl’s is also focused on creating a tailored shopping experience in-store. Inventory management remains a key focus. By managing inventory efficiently and reducing lead times on trending products, Kohl’s is looking to cater to the preferences of younger, trend-conscious consumers. At the same time, Kohl’s will continue collaborating with celebrity brand partners to offer curated collections. Work closely with Kohl’s to understand which products are trending and align your offerings accordingly. Effective inventory management and quick response to trends can significantly enhance your sales performance.

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Expanding Underpenetrated Categories

Kohl’s operates 1,181 stores today across the nation. Already an $18B company, they see another $2B opportunity in under-penetrated categories such as home, gifting, impulse, and baby. To drive incremental sales, the retailer has significantly expanded its holiday gifting offer and added impulse queuing lines to 50+ stores – which drove a 70% increase in impulse sales. For brands in these sectors, there’s a significant opportunity to expand product offerings and align with seasonal trends. What new innovation or items in your existing assortment might benefit from this type of placement?

TIP: Consider how your products fit into Kohl’s growth categories and tailor your offerings to meet emerging consumer demands. Focus on seasonal and trend-based products to capitalize on peak shopping periods.

Omnichannel Integration and Enhancing Customer Engagement

As Kohl’s noted in its most recent earnings call, it's important to drive traffic across the Kohl’s omnichannel platform. In Q2, digital sales outperformed store sales, increasing transactions in both channels. They continue to increase personalization and view social commerce as an important way to reach a younger audience. Building strong customer relationships can foster brand loyalty. Engage with customers through Kohl’s marketing initiatives, social media, email newsletters, and loyalty program to strengthen connections and drive repeat purchases.

TIP: An omnichannel approach is essential for maximizing brand reach. Ensure that your brand’s online presence is robust, with detailed product descriptions, high-quality images, and customer reviews. Consider online promotions and social commerce campaigns to drive traffic and sales.  Create content that resonates with Kohl’s target audience and showcases how your products enhance their lives. Use Kohl’s marketing campaigns to align your brand with key customer touchpoints.

Managing the Cost of Doing Business with Kohl’s

It’s important to know that Kohl’s targets a 35%-50% GM depending on the category, and they have started to exclude many categories and brands from coupons over time in order to achieve this. However, while certain brands might be excluded from coupons, customers can earn and redeem Kohl’s Cash on any brand, which is what keeps customers returning. 

Suppliers should keep in mind that Kohl’s requires product to be pre-ticketed, and participation in a third-party UPC catalog, OpenText or Intertrade is a must.  Depending on the mark-up structure, expect to see 5%-12% coming off invoice to support defectives and profit assistance. Profit assistance covers Kohl’s Cash erosion and any promos they might run on their own. Brands also need to be prepared to help fund any additional promotions they want to participate in to drive sales.

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Kohl’s strategic initiatives present a wealth of opportunities for brand marketers. By understanding their current strategies, taking a data-driven approach and omnichannel integration, and a commitment to enhancing customer engagement, it’s possible to unlock significant potential at Kohl’s.

Is there an opportunity to accelerate your brand growth at Kohl’s?

Reach out to Jaspreet at jaspreet@thecpgretail.com for a conversation.