How good of a pal is Amazon to other retailers? That’s the question getting traction over the last few days, thanks to the less-than-stellar holiday sales at Kohl’s.
Ask Kohl’s CEO Michelle Gass about the relationships – which recently occurred at the NRF show – and you’ll get an optimistic view. According to one account of that conversation, via HFN, “the company’s single biggest move over the past few years has been transitioning from a brick-and-mortar retailer into a ‘customer-centric omnichannel business.’” And Amazon has played a big part of that.
“Thinking about its stores differently was what led to Kohl’s recent partnership with Amazon on returns. The move raised eyebrows in the retail community, but Gass said the partnership has paid off. Amazon gets a ‘fantastic, frictionless experience for their customer and we get the traffic,’ she said,” according to that account.
Indeed, Kohl’s has been trying to increase the appeal of its brick-and-mortar retail offerings, partly via a deepening relationship with Amazon. Indeed, in 2019, Gass said in an earnings conference call that the Amazon returns program was seen as a significant initiative and a “great example of our innovative spirit.” (As previously reported, the department store retailer will accept “eligible” Amazon items without a label or box.) The partnership with the eCommerce retailer, Gass noted in the call, reflects the collective strengths of both merchants.
Well before this year’s NRF show, Gass pointed out that Kohl’s has a robust nationwide footprint and best-in-class omnichannel capabilities. Amazon, on the other hand, has an expansive customer reach and world-class digital capabilities. She also noted that the effort aligns perfectly with the company’s top strategy of driving traffic. “The overarching goal of this program is to convert the traffic that comes into our stores into loyal Kohl’s shoppers over time,” Gass said.
Relationship Validation
When it comes to Amazon returns, Gass pointed out that the company finished the nationwide rollout of the program late in Q2.
The retail chain’s third-quarter earnings, released in late 2019, seemed to validate the Amazon relationship. Right after those financials were reported, Gass said the program is driving incremental traffic to its locations, and that the company is “particularly encouraged by the disproportionate amount of new customers.” She also pointed out that the 2019 holiday season would be the first one to see Amazon returns accepted in stores across the country.
But even with digital sales growth and the Amazon returns program in stores across the country, Kohl’s posted third-quarter results that fell short of analysts’ estimates. The retail chain is set to report fourth-quarter and full-year 2019 financial results on March 3.
But its recent report about 2019 holiday season sales has left observers skeptical about the Amazon benefit.
In a statement released on Jan. 9, Kohl’s said that its “comparable sales for fiscal November and December 2019 combined (the ‘holiday period’) decreased 0.2 percent over the same period last year.” That’s not the only bad news Kohl’s gave investors. “Based on the holiday period sales performance, the Company now expects its fiscal 2019 diluted earnings per share to be at the low end of its previously announced guidance range of $4.75 to $4.95.”
Other Initiatives
Kohl’s gave a few details about why holiday sales decreased.
“We continue to see momentum in key areas, including our digital business, active, beauty and children’s, and solid performance in footwear and men’s,” said Gass in the statement. “This was offset by softness in women’s, which we are working with speed to address.”
At the NRF show, Gass talked about more than Amazon’s relationship with the retail chain. “The retailer has also been nimble in balancing national brands with a solid private-label offering, said Gass, citing a few apparel brands, and has fostered a health and wellness point of view to attract families with that mindset,” according to the account of the interview.
That may or may not prove to be true when the next financials are released by Kohl’s. But you can bet that pretty much everyone will be looking for more evidence that working with Amazon can help a retail chain increase its brick-and-mortar appeal.
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