Kohl’s Is Betting on Amazon Returns to Drive Sales
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It says volumes about the challenges facing brick-and-mortar stores that the “single biggest initiative” Kohl’s this year, according to the national retailer’s chief executive, is that it will now accept and process unwanted orders from Amazon.
Kohl’s said on Monday that it was now accepting Amazon returns at its more than 1,100 stores after running a pilot program in 100 locations. The retailer, which will pack, label and ship the returns for free, expects the program to benefit millions of shoppers along with bringing more people into their stores, Michelle Gass, the company’s chief executive, said in a statement.
The retailer, based in Menomonee Falls, Wis., tested the program, which has been closely watched by the industry and has elevated Ms. Gass’s profile, for about 18 months. It timed its national rollout to the back-to-school shopping season.
“It’s an interesting marriage because what Kohl’s needs is store traffic, and what Amazon needs is to make customers happier with a place to return their items,” said Oliver Chen, a retail analyst at Cowen. “The dream is that it’s a fair but attractive split where that shopper will come in and purchase other items.”
National chains have been devising a plethora of ways to accommodate new digital shopping habits, particularly of younger consumers, beyond simply managing their own online pickups and returns at stores.
Nordstrom recently established an urban chain of stores, called Nordstrom Local, that do not carry any merchandise.
The locations, which are about the size of a Lululemon or Dunkin’ Donuts, are mainly hubs for online pickups and returns, and have attracted a younger crowd compared with Nordstrom’s average shoppers.
Retailers are also looking to accelerate the delivery of items to consumers. Walmart, in its own competition with Amazon, shared plans in May to expand next-day delivery to 75 percent of the United States this year.
Kohl’s is unique in embracing Amazon, the nation’s e-commerce behemoth. The chain, which has tested its Amazon return strategy in Chicago, Los Angeles and Milwaukee, has also been increasing the number of its stores that carry Amazon products smart home devices.
While Kohl’s has shared little about how the partnership works, it said on a May earnings call that it expected its expenses to increase because of store staffing and logistics for the returns program.
Ms. Gass, who took the reins at Kohl’s just over a year ago, emphasized on the call that working with Amazon was a “long-term bet” and beneficial for both companies.
“What’s really key and what our data would suggest is that we’re also bringing in a new customer and we’re bringing in a younger customer,” she said. “That is significant.”
The company, best known for selling apparel and accessories to families, reported revenue of $20.2 billion last year and net profit of $801 million. It doesn’t separate its store sales from its internet sales. Most locations are in strip malls or free standing.
Kohl’s has also been trying to increase store traffic by selling and leasing space to neighbors Planet Fitness and the grocery chain Aldi, Mr. Chen said.
“You sort of see this revolution happening on the basis of footfall,” he said. “Kohl’s wants to be working from a position of strength where people will still need groceries and still work out and definitely still shop at Amazon.”
He added, “They’re using their assets to their advantage.”
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The Kohl’s-Amazon partnership is great news for Kohl’s—and even better news for Amazon
Kohl’s is officially in bed with Amazon. The American department store chain announced yesterday (April 23) that it would start accepting returns on behalf of the e-commerce giant at its 1,150-plus locations beginning in July. Kohl’s shares, which have struggled alongside other American department stores in the past several years, ticked up 12% on the news.
Per a Kohl’s press release, the service will allow customers to return “eligible Amazon items” for a refund, no box or mail-label necessary. The companies didn’t specify what would be deemed ineligible, although the Verge speculates it means “no oversized items or other illogical things to push onto a store” or products from third-party Amazon sellers.
The Kohl’s-Amazon partnership began in 2017, when the department store started selling Amazon-branded knick-knacks the Fire TV and Echo Dot in some stores. It also handled returns in 80 locations, a program that recently expanded to 100, and is now selling Amazon products in 200 stores.
Kohl’s CEO Michelle Gass told CNBC that the partnership is part of the company’s bigger plan to “drive traffic” into stores and “bring more relevance” to shoppers.
Indeed, Kohl’s, alongside other bastions of the retail industry, have struggled to compete with e-commerce companies (aka Amazon) and direct-to-consumer businesses.
While Kohl’s has fared better than former behemoths Bon-Ton and Sears, which have filed for bankruptcy, it too has shuttered some locations.
But Amazon might be getting the sweeter deal here. The e-commerce giant, which announced last month that it would shutter all of its pop-up shops, isn’t giving up on its physical retail presence, and seems to be doubling down on it by partnering with a store that “80% of America lives within 10 miles of,” Gass says.
But in addition to its returns service, the Kohl’s-Amazon partnership could go even deeper.
Kohl’s stores tend to be standalone or located in strip malls, which means they have more flexibility in terms of how they use free space than if they were in traditional malls.
Last year, former Kohl’s CEO Kevin Mansell told CNBC it planned to rent out excess store space to “well-capitalized companies… preferably ones that have high traffic in grocery and convenience.”
Amazon, it seems, would be a good candidate.
In addition to its Whole Foods division and its cashier-less Go Technology, which is now beta and in 11 brick-and-mortar locations across the US, it was revealed last month that the company plans to open dozens of grocery stores across the US. Launching as early as next year, the stores would serve shoppers at a lower price point than Whole Foods, the Wall Street Journal reports (paywall). Its locations are yet unknown.
At this point, a Kohl’s-Amazon grocery play is speculation, as neither company has mentioned that particular strategy. That said, if Amazon were to roll out low-cost (perhaps checkout-free) grocery locations in Kohl’s locations, it’d be fulfilling a years-long initiative to expand its physical grocery presence.
“,”author”:”Sangeeta Singh-Kurtz”,”date_published”:null,”lead_image_url”:”https://cms.qz.com/wp-content/uploads/2019/04/RTR214D9-e1556122801870.jpg?quality=75&strip=all&w=1400″,”dek”:null,”next_page_url”:null,”url”:”https://qz.com/1603536/kohls-will-now-accept-amazon-returns-in-all-its-stores/”,”domain”:”qz.com”,”excerpt”:”The fusty department store and the e-commerce giant can solve problems for each other.”,”word_count”:483,”direction”:”ltr”,”total_pages”:1,”rendered_pages”:1}