Source: Kohl’s
Is Kohl’s putting too many of its eggs in Sephora’s basket?
The Sephora at Kohl’s store-within-a-store concept is working really well for both retailers one year after its debut. The numbers seem to support that. So, why hasn’t all the good news surrounding this partnership done more for Kohl’s results — or is that simply too much to ask?
Kohl’s last week said that it is rolling out Sephora at Kohl’s shops in all remaining stores that do not already have one. Current plans call to have 850 of the shops operational by next year before moving the concept into the rest of Kohl’s stores.
The retailer said that the remaining 300 or so stores (Kohl’s has more than 1,100 nationwide) will get Sephora shops designed with a footprint smaller than the typical 2,500-square-foot configuration currently in its stores.
“We are incredibly proud of how our companies have come together so seamlessly to create a truly unprecedented and unique in-store experience,” Michelle Gass, Kohl’s CEO, said in a statement. “We couldn’t be happier with how our partnership with Sephora continues to perform and achieve the goals we set out to accomplish. Our success to date proves that this partnership is working, and this expansion is the next, exciting chapter in our history together.”
Sephora at Kohl’s has been a success story with the first 200 shops that opened in 2021 maintaining high single-digit percentage sales gains. The nearly 400 shops opened this year have produced mid-single gains. The concept is expected to produce $2 billion in annual sales by 2025.
Customers who shop Sephora at Kohl’s tend to be new to the chain, younger and more diverse than its typical customers. Kohl’s says that it has acquired more than one million new customers since launching the in-store beauty concept and that these customers visit more frequently than Kohl’s-only shoppers. Roughly half of the beauty customers attracted to Kohl’s also buy from at least one other category in the store.
Ms. Gass, speaking last week on Kohl’s second quarter earnings call, said Sephora at Kohl’s is “a key cornerstone” in her company’s strategy to become “the leading destination for the active and casual lifestyle.”
Kohl’s CEO said the two companies are looking for other opportunities to work together.
“We’re currently testing cross-company BOPIS, where purchases made on Sephora’s website, sephora.com, can be picked up at Kohl’s stores, creating an incredibly seamless and convenient experience for our customers,” she said.
Discussion Questions
DISCUSSION QUESTIONS: Is Kohl’s betting too heavily on its relationship with Sephora to lift results? What are the other cornerstones that Kohl’s is building its business in addition to Sephora?
Poll
Loading …BrainTrust
Tara Kirkpatrick
Mobile Trends Analyst, Apptopia
Camille P. Schuster, PhD.
President, Global Collaborations, Inc.
The addition of Sephora does not fix the wider issues with Kohl’s proposition. I am not surprised that Sephora has done well at Kohl’s, because Sephora is a compelling brand that people will make purposeful visits to. As for helping Kohl’s, I am sure there is some benefit but the stores they opened Sephora in first tend to be better, more robust locations; it will be interesting to see the impact on the rest of the chain as this is rolled out. Indeed if the Sephora locations are outperforming, given Kohl’s currently dismal results, the rest of the chain must have really, really bad comparables. Also, all of these customers have supposedly been added yet Kohl’s results are among the worst in retail. Something simply doesn’t stack up. The bottom line is that Kohl’s needs to grow the Sephora partnership AND improve its own offer.
The Sephora partnership is an important one and Kohl’s is right to promote it. That said, I do agree that they need to also find, test and promote other initiatives to drive their results. Kohl’s leadership has had to deal with extraordinary distraction that comes with activist Board members, as well as supply-chain issues and generally challenging conditions still lingering from the pandemic. The lack of other key strategic initiatives suggest that there aren’t many – or any – that have been successful.
While the Sephora collaboration is a smart one, very little has been done to change the rest of the store to bring in new, long term customers. While I see that they are working more on becoming an active and casual destination, they may want to move a little quicker before the clock runs out.
Sounds like the success to date is 100 percent attributable to Sephora. Kohl’s makes the space available and Sephora executes. Good job Sephora. Kohl’s — what about the other 90 percent of the store? How about a three year strategy for raising the profile of your owned brands? How about taking Amazon to the next level? The dating has gone well, by some accounts. Get engaged!
I’ll lead with my customary “full disclosure” that I worked for Kohl’s from 1982 to 2006, and I oversaw cosmetics (and other center core businesses) during my tenure. It’s clear from the last quarterly earnings report that Kohl’s is getting a sales lift in its Sephora stores, but it’s unclear whether those new customers are cross-shopping other areas of the store.
If that’s the case, good for Kohl’s — but the JCPenney experience is cautionary. Sephora was a success story (and maybe the only one) inside JCP while it struggled with most of its other business. Kohl’s needs to make sure its merchandising and store experience — especially in related categories like women’s accessories, shoes and apparel — reflect what the Sephora shopper is looking for. Sephora shops can’t “lift all boats” by themselves.
It seems like Ms. Gass had nothing else to talk about. This is a great move for Sephora and a helpful move for Kohl’s. However, in no way is it a lifesaver for Kohl’s.
What other baskets does Kohl’s have?
Well, they take Amazon returns — all traffic, no sales.
“Putting too many of its eggs in one basket” is the perfect way to put it. Kohl’s should be working on replicating the success of the Sephora partnership in other departments of its store. If I were in BD there, I would be looking for an aligned home decor/improvement partner. Like beauty, home goods retail appears recession-proof so far, and the product encourages an in-store shopping experience.
Totally agree Tara. The results seem to indicate that the Sephora shopper doesn’t love the rest of Kohl’s offer. They need to up their game across other categories. The model is working. Great. Now it’s time to rinse and repeat — faster.
While it’s exceptionally good to draw new customers to their stores, the key question for store health is whether those new customers put many things in their baskets which aren’t from Sephora. Given that Kohl’s believes these are customers of a certain type, Kohl’s may not have the merchandise of value for them apart from the Sephora store.
It is good that Kohl’s is challenging its business model with Sephora’s store-within-a-store concept. However the main issues facing Kohl’s still remain and are clearly represented by the mid-single digit gains that Sephora offers Kohl’s after investing in these new concepts. Perhaps the real question which should be addressed should be, what other venues should Kohl’s be exploring instead of spending their resources on partnering with Sephora?
Since many of the Sephora shoppers are new to Kohl’s, one strategy would be to enhance choices in other categories that are desirable to those consumers. The trick will be to continue to offer variety to current loyal shoppers. Another strategy would be to enhance the in-store experience of other categories to attract more shoppers into the store.
The short answer is, yes. The long answer would take more space than I have here. A department is not a brand. The Sephora relationship is a step in the right direction, but just one step. If Kohl’s is going to survive it will need more than one destination category.
The Sephora alignment has certainly been a bright spot in an otherwise challenging world for Kohl’s. And they have much riding on their aggressive expansion.
Personally, I would like to see other destinations created within Kohl’s that can differentiate the experience for shoppers, meet specific needs, and create excitement (and consumer demand) for their business. Placing too much emphasis on beauty alone may be limiting in the future (many others are vying to stake claim to this space).
P.S. We have to remember the new CEO just came on board. Let’s give her a year. Clearly the product isn’t good enough yet.
This is just the beginning of Kohl’s becoming more like a traditional department store. Replicating that store within a store feel, but also incorporating their own brands into the mix would bring them the most profit over time.
I’ve little reason to think Kohl’s itself is overemphasizing it, but I wonder if the same can be said for RetailWire (what is this, the fifth … eighth … tenth article on this since it was announced?).
Ms Gass’s comments should be taken seriously, but not literally: don’t sales people claim everything is the single most important initiative they’ve ever encountered?
Kohl’s should certainly maximize their partnership with Sephora. However, it would be wise to have additional partner plans on the horizon given this model seems to be working for them. If they are attracting a younger, more diverse shopper a fresh take on an apparel partnership could be a ripe opportunity to explore. The red flag is that there may be nothing else on the horizon for Kohl’s.
The proof in the pudding is whether shoppers purchasing Sephora at Kohl’s are transacting in multiple departments. I agree with the comments below that other merchandise categories need to improve. The overall format is dated and aside for some brands like Simply Vera, there is not much inspiration.
It would be interesting if they would honor the Amazon return Kohl’s Cash on Sephora product, at least for a limited time to get more shoppers into the store.