When you discuss the concept of providing convenience to the consumer in an effort to gain a competitive advantage and hence market share, you’re really dealing with two issues. First are the physical locations of the stores, in comparison with the competition. In today’s time-pressed world, the time it takes to travel between home and the shopping destination has become an increasingly important factor in the decision-making process. The second part is the convenience associated with the shopping experience itself.
Back in the day, when life was less hectic, people had TIME to shop. They would go shopping more frequently, and stay in the stores longer. Customers loved the “pop and sizzle’ of Macy’s, where they would stop and look at the mannequins and the often ornate displays. In other words, going shopping wasn’t just a means to an end, it was also a leisurely pastime. It was the difference between eating merely because you need to in order to survive and dining at a gourmet restaurant, savoring the elegant ambiance and fine food.
Over the years, changes in consumer shopping behavior continued to reinforce the attractiveness of the Kohl’s ‘convenience’ emphasis. Market research indicates that the shopping frenzy of the late 1990s peaked in 2000, followed by a significant reduction in the time and frequency consumers shopped. By 2002, American adults shopped an average of 1.9 stores per week, down from 2.9 only two years before. Clearly, Kohl’s had tapped into the habits of the modern American lifestyle, and took advantage of this knowledge for all it was worth.
Another aspect of convenience is the location of your stores. I can best describe the Kohl’s real estate strategy, and it’s inherent competitive advantage with respect to convenience, by looking at the two primary ‘rings’ that retailers have created around metropolitan areas over the last 50 years or so. The first ring were the major shopping malls built from the 1960’s to the mid 1980’s or so. These are the malls that had Penney’s and Sears as primary anchors, along with the national department store players.
The second ring of retail has taken place more in the last 15-20 years, as a result of urban sprawl and the expansion of suburbia into what used to be pastures and countryside. These new centers are more about big-box strip centers, housing the Wal-Marts, Home Depots, Costcos and Targets of the world, than they are about ‘all under one roof’ shopping malls. Customers can easily visit the store of their choice, without all of the hassles of today’s shopping mall experiences. In effect, this second ring of retail, now surrounding most metropolitan areas some 10-20 miles from the heart of a downtown, provides an “intercept factor” for customers living in areas outside the outer circle, now experiencing some the largest growth rates in the country. These customers are “intercepted” by this newer, cleaner and safer centers of retail before they are able to travel to a mall.
Kohl’s growth strategy has relied heavily on this second ring and the company has developed a genuine aversion to going into malls. Says Larry Montgomery, “It’s very difficult for the customer to come in (to malls) today and fight all the traffic, park in a parking deck, and shop in stores that are more difficult to (navigate) than what we offer.”
As a result of a real estate strategy that has primarily focused on building stores in power strip centers, Kohl’s has been part of a new consortium of big box retailers that allow shoppers to make fast, quick trips and take care of a number of errands. Having other retailers right in the same parking lot is not a bad thing. In fact, it works to the advantage of both. Kohl’s and Target, for example, tend to complement each other. At Kohl’s, the merchandise is about 80% soft lines; at Target, they’re about 65% to 70% hardlines, with hardly any national brands. The two companies complement each other quite nicely.
The idea of in-store convenience has always been an integral part of the Kohl’s business model. The company has placed major emphasis on selling floor standards and maintenance. This is much easier said than done, of course, and it’s always a journey, never a destination. But the atmosphere, at least for those working in the stores, was very different from the traditional stores. They had set up a culture where you were always getting ready for the entourage visit of key leaders who would arrive with much fanfare by helicopter, like a general inspecting the troops….then you could let your guard down. At Kohl’s, these kind of visits by ‘corporate’ were far less frequent and certainly less showy. There was simply an expectation that stores looked good all the time, recognizing that following a major weekend sales event, there was a brief time needed for stock replenishment and selling floor recovery. Emphasis was placed on store cleanliness, and keeping them well-lit and uncluttered.
While always an important part of the big picture equation, starting around 2000 Larry Montgomery started to position ‘convenience’ higher on the overall marketing message to the consumer. By this time it was becoming increasingly evident from market research and focus groups that our core customer had even less time than ever on her hands and that Kohl’s was viewed extremely favorably as a convenient shopping experience. The use of “convenience” has become more heavily used in media campaigns, as a complement to the price and quality monikers so dominant in previous marketing pieces.
The five key selling points of the convenience value-added proposition:
1.You can travel to a Kohl’s faster than the competition. When the company is well-positioned in a market, most customers are within a 15 minute drive to their favorite Kohl’s store.
2. Since the store is usually in a power strip center vs. a mall, you can get in and out more quickly. Says Montgomery: “You can drive to them in your own neighborhood, park in front of the store, go in, and find what you are looking for.”
3. You can buy with confidence knowing that Kohl’s has a ‘no problem, no hassle’ return policy. Return policies are incredibly important to shoppers….and always a challenge to retailers. Customers want to feel like nothing is really “final” when they make a purchase. If it is the wrong size, doesn’t work properly, etc. they want to be reassured that they can return it and get their money asked without going through a frustrating, time-consuming process. All retailers want to provide shoppers with the confidence they are seeking. But at the same time they want to keep down the number of returns as much as possible. Kohl’s has done a good job at this. LL Bean, for example, has in excess of 15% returns, the traditional department stores are at around 11-12%. Kohl’s has managed to keep it around 9%. We were able to do this for two reasons. First, because we had hopefully provided a shopping experience that was pleasant and convenient in which the customer ended up purchasing the right item and therefore had no reason to return it. Of course, the other reason is that at the traditional department stores they tend to be dealing with more expensive merchandise. And people are more likely to be picky about what they return when they’re spending more money. Yet another benefit of the low cost culture.
4.The store has extended hours for your shopping convenience. Perhaps more so than any other recent adjustment to the business model, the lengthening of store hours to make Kohl’s even more convenient to the customer has been met with varying degrees of enthusiasm in the company, particularly in the stores. When this was first being discussed, Store Administration did an analysis showing that you had to be careful to not simply disperse the same volume over more hours, resulting in a lot of expense pressure in the stores.
But Larry Montgomery was sold on the idea of extending hours, and was its key driver. By the 2007 holiday season, Kohl’s was opening its store at 4 a.m. the day after Thanksgiving. Larry no doubt views extended hours as a direct threat to the competition. It’s hard to say whether or not this is a wise strategy. While it has indeed helped the company gain market share over the years, it has also taken a toll on storeline management, and no doubt did not help executive turnover rates, not mention the impact on key full-time hourly sales associates who have ended up working later on the evenings they have to ‘close’. Does the company really win in the end?
As the company’s President, Kevin Mansell has always shared Larry’s focus on convenience in the last couple of years as a differentiator to the competition.. Convenience, not price, he has long maintained, is what gets the customer hooked on your business model: “Price is literally the way you get admitted into the customer mind-set, but they will not shop you based on that.”