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Sunday, September 26, 2021

Brick-and-Mortar Retail in the Age of Covid, and Amazon


In recent years, traditional retailers have been decimated. Amazon was the first. Then there was the pandemic.

Despite the fact that large shopping malls are dying and many storefronts are closing, the big box stores that anchor strip malls throughout the suburbs are experiencing a renaissance. Companies such as Best Buy, Dick’s Sporting Goods, and Home Depot have managed to survive, if not thrive. Add another, somewhat unexpected, entrant to the mix: Kohl’s.

The retailer, which sells clothing, home goods, sporting goods, and other items, is battling the odds. It’s not always clear where Kohl’s fits in. It is smaller than a department store but offers many of the same items. Its stores are frequently located near Walmarts, but carry more mainstream brands.

Michelle Gass, who took over as CEO of Kohl’s in 2018, has been working to establish the company’s identity. She joined the company eight years ago after working for Starbucks for more than a decade.

Aside from keeping the stores open during the pandemic, she has struck a number of partnerships with other companies.

The most unusual was a 2019 agreement with Amazon that allows customers to return Amazon products to Kohl’s stores. Ms. Gass hopes they will do some shopping while they are there.

Sephora, the beauty retailer, is also a new partner, with mini-stores opening inside Kohl’s locations. It’s similar to, well, a department store.

This interview was condensed and edited for clarity.

What about your childhood informs your work as a C.E.O. today?

I was born and raised in a small town in Maine, in a working-class family and community. I was the first person in my family to earn a four-year college degree. From a young age, this instilled a desire to do more and achieve more. I worked throughout high school and college. Bagging groceries was my first job. I worked as a waitress and even in a factory. I enjoy working hard, and I place a high value on those who do as well.

I earned a bachelor’s degree in chemical engineering. People occasionally ask me, “How did you learn engineering, especially as a woman?” And, to be honest, I was quite pragmatic, knowing that I could get a great job with it. I didn’t grow up with any engineers around me, but I did my research and had a feeling that this would open doors for me. And it truly did.

What did you learn from working with Howard Schultz at Starbucks?

There are three things. One is the significance of culture; such a strong culture evolved over time. Second, it’s not just about what you sell; it’s about the importance of that human connection, the emotional connection to the life or consumer, and the affinity for the brand. The third, and a personal favourite of mine, is the power of innovation.

Starbucks has a very clear brand proposition. How do you define where Kohl’s sits in the consumer ecosystem?

Kohl’s has long had a successful model, sort of a hybrid department store brand with mass mall convenience. But, over time, that distinction became hazy. So the challenge and opportunity is, “OK, what is the differentiated space we can occupy?” Being a relevant omni-channel retailer was a big part of it. And I truly believe we have checked that box. But how will we become more relevant in terms of product and brand? How will we make a brand stand for something?

Department stores have struggled over the last several years. So how do you make it work when the J.C. Penney’s and the Macy’s have had such a hard go of it?

We are not what you would call a traditional department store. Because we are small and convenient, we can do things like buy online, pick up in store, and curbside. But, more importantly, we see ourselves as a specialty concept in which Kohl’s serves as the curator and editor, bringing you all of the products and brands you need to live a more active and casual lifestyle.

Is it up market? Is it down market? Who are the target consumers?

America exists. We serve a diverse range of customers, encompassing all demographics. Our strategy is based on an active and casual lifestyle, as well as selling products that were popular during the pandemic. People want to appear attractive. They want to be at ease. Their work wardrobe will look very different when they come out of this than it did when they went in.

A lot of people would think that a brick-and-mortar retailer would be crazy to work with Amazon. What’s the logic behind your deal with them?

When you take a step back and consider what it’s like to return goods in the traditional way, especially with online returns, it can be very inconvenient. Searching for the box, searching for the tape, attaching the receipt, all of this. We’re addressing that issue. Amazon receives a deal that addresses the friction point, and we are able to capitalise on our appetite and welcome in traffic. It was certainly unusual at the time we announced it, but I believe it worked out very well.

How has the pandemic changed the retail business in ways that are going to endure in the months and years ahead?

When you are in a crisis, you must make decisions quickly. We clearly needed to prioritise how we would keep our employees and customers safe. When that was resolved, we took advantage of the opportunity to examine our strategy and ask, “How can we be bigger and bolder?” As a result, we were able to strike up a conversation with Sephora.

When you talk about the increases in profitability, how much of that is getting passed on to the associates and the people in the stores?

We had to make difficult decisions like that, both in terms of furlough and when we opened the doors and invited our associates back, because the labour market is extremely tight. We are working hard to ensure that we are competitive in each market. As a result, we are providing bonuses to our hourly associates. So I believe we are doing a lot to ensure that we are providing a very positive environment for our employees.

What are you having to do to attract the employees you need right now? What do they want and what are they getting, frankly, that they weren’t?

More than 75 percent of that work force is part time, and our associates like the flexibility. They like the culture.

Do people really prefer to be part time? If you offered them a full-time role, are you telling me they would really turn it down?

That is a difficult question to answer, in my opinion. The overarching theme I hear from people is that they value flexibility. And I am confident that we offer numerous opportunities.

You’ve talked about being a servant leader before. How do you balance that imperative to take care of your employees with your commitment to deliver for shareholders?

As the CEO of the company, I have a lot of stakeholders, and our investors are certainly one of them. One of my responsibilities is to ensure that we have a sustainable business that can employ a large number of people while also serving the stakeholders and the community as a whole. People who work at Kohl’s do so for a variety of reasons other than what is written on their paycheck. That is a critical component. Absolutely. However, there is pride in having a great job and being a part of a company with which you are proud to be associated.

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