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Will Kohl’s and Babies“R”Us Be a Beneficial Alliance?
In a bid to revitalize its offerings and entice a younger demographic, Kohl’s announced a partnership with WHP Global, the proprietors of Babies“R”Us. The collaboration is set to introduce a diverse array of baby products, furniture, and accessories to around 200 Kohl’s stores nationwide, marking a significant expansion of Kohl’s merchandise portfolio.
The undisclosed terms of the licensing agreement between Kohl’s and WHP Global signify a strategic maneuver aimed at leveraging the latter’s expertise in brand management. WHP Global, known for its esteemed brands like Bonobos and Joe’s Jeans, brings a wealth of experience to the table, promising an infusion of freshness into Kohl’s retail landscape.
The inaugural Babies“R”Us shops are slated to debut in August, with a subsequent rollout across more locations in the fall. Ranging from 750 to 2,500 square feet, these dedicated spaces within Kohl’s stores will offer an extensive selection of renowned brands alongside Kohl’s existing baby merchandise lineup, featuring stalwarts like Graco, Carter’s, and Fisher-Price.
CEO Tom Kingsbury underscored the strategic importance of this alliance during an earnings call, emphasizing its pivotal role in reinvigorating Kohl’s appeal to a younger demographic. The move aligns with Kohl’s overarching strategy to curate a more relevant product mix, thereby enhancing its competitive edge in the retail landscape.
Furthermore, Kingsbury highlighted the pragmatic aspect of this expansion, citing the void left by the closure of prominent specialty retailers in the baby gear segment. With Babies“R”Us’ resurgence under the stewardship of WHP Global, Kohl’s aims to meet the evolving needs of modern parents while capitalizing on a burgeoning market opportunity.
“Evolving our assortment and bringing more relevant product to the millions of customers we serve is a core focus as we continue to deliver on Kohl’s broader growth strategy. We see significant opportunity in the baby gear category, and partnering with Babies“R”Us is another example of how we are finding new ways to optimize our assortment and further establish Kohl’s as the go-to brand for families.”
Tom Kingsbury, Kohl’s chief executive officer, via Business Wire
This collaboration represents yet another cornerstone in Kohl’s ongoing transformation journey. In recent years, the retail giant has been focused on repositioning itself in response to shifting consumer preferences and market dynamics. The addition of Babies“R”Us to its repertoire mirrors Kohl’s proactive approach to diversifying its offerings and fortifying its market presence.
Kohl’s recent financial report for the fourth quarter of 2023 left much to be desired, with net sales dropping slightly by 1.1% to $5.7 billion. The yearly net sales also took a hit, decreasing by 3.4% to $16.6 billion compared to the previous year. While Kohl’s performance wasn’t as dismal as other department stores, which as a category saw a decline of 4.7% in sales during the fourth quarter, it’s still concerning, considering the retail industry as a whole experienced a 3.5% growth last year.
Kingsbury tried to put a positive spin on the situation, highlighting that store comparable sales were the best since 2010, although they were down by 1% in the fourth quarter and remained flat year-over-year. However, the outlook for 2024 remains modest, with guidance indicating a potential decrease of 1% to an increase of 1% in sales. To counteract these challenges, Kohl’s is aiming to bolster its sales by $2 billion over the next few years.
Meanwhile, Kohl’s collaboration with Sephora has been successful, with sales surpassing $1.4 billion last year and showing potential to reach $2 billion by 2025. This partnership has surged, with a 90% year-over-year increase for the full year. By year-end, the collaboration spanned 910 shops across large-format and smaller locations.
Kohl’s hopes to build on this success with Sephora by introducing Babies“R”Us products in its stores. Aiming to revamp its in-store experience further, Kohl’s is also redesigning layouts, optimizing displays, and introducing new brands.
Discussion Questions
How does Kohl’s strategic partnership with WHP Global to introduce Babies“R”Us products into its stores reflect a broader trend in the retail industry toward diversification and collaboration amidst evolving consumer preferences?
What implications do these moves hold for traditional department store models, particularly in navigating shifts in consumer behavior and market dynamics?
Poll
Loading …BrainTrust
Zel Bianco
President, founder and CEO Interactive Edge
Carol Spieckerman
President, Spieckerman Retail
Kohl’s likes to engage in what I call magpie retailing – ‘stealing’ other concepts and brands rather than developing its own. First Amazon. Then Sephora. Now a Babies R Us shop-in-shop is being added to 200 stores.
There is nothing inherently wrong with this. It could be argued that it allows concepts and categories to be ramped up very quickly, and this one may help in attracting some younger family-forming shoppers to Kohl’s.
However, Kohl’s also needs to reinvent its own core proposition – especially in apparel. It’s no good just adding fancy concepts around the edges, there has to be a reason for people to engage with the rest of the store. Revitalizing the heart of the business is one area where there is still an enormous amount of work to be done and Kohl’s has not yet proven itself.
Done well, it can work quite nicely: IIRC, Selfridges – most people’s idea of a successful department store – used to call itself a “House of Brands”, and certainly no one questions the wisdom of couture boutiques in stores like Saks or Neiman Marcus. But… But done poorly – or maybe just out of desperation (when two failing brands try to help each other) – a retailer can be saddled with a dead end that ties up resources and puts recovery even further out of reach. I certainly wouldn’t put this partnership in the last group, but I don’t know exactly where in the spectrum it lies…worth a shot, perhaps. I agree Kohls needs something: a few weeks ago I visited a macy*s that is closing down, and it had more people than Kohls did.
If this is the most positive spin the CEO can spin, Kohl is in real trouble. “store comparable sales were the best since 2010, although they were down by 1% in the fourth quarter and remained flat year-over-year. ” Based on purchasing power, those revenue dollars indicate a decline of between 35% and 40% in actual product moved since 2010.
That being said, this partnership, and hopefully, others to come, are critical to Kohl’s survival if there is a turnaround in the wind. Kohl’s has proven they can’t operate a successful retail operation. Perhaps their partners will be able to. This could be a model for those department stores that are continually failing in the marketplace.
But don’t expect a significant turnaround. It seems shoppers are not clamoring for a department store, new concept, or old.
As long as the assortments aren’t repetitious between the two company offerings, and there is a knowledgable staff to support the sales of gear, this could work. Targeted marketing and a realistic sales ramp will be critical. Baby stuff is not as simple as “offer it and they will come”. Its a slow build and a very limited consumer group.
This makes sense as so many of the standard items needed for young families can be found at Kohl’s and Babies “R” Us when taken together. The cross promotional opportunities alone will be good for both. This coupled with WHP Global’s marketing strength should produce positive results.
The short answer is yes. And, honestly, I have often wondered where mature brands with valuable IP could go in brick and mortar. Perhaps Kohl’s is laying the groundwork for being that resource. I think there is something there for that model. Interesting to watch.
I am not a cheerleader for Kohl’s despite working there for 24 years — but the latest “store within a store” following Sephora makes sense to me. (And there is evidence that the Sephora deal is beginning to affect Kohl’s sales and profits in a positive way.) Children’s products — from infants’ and toddlers’ apparel to kids’ shoes — were a big legacy business for Kohl’s and those customers from years ago are now in their 30’s and forming families. Why cede this business to Target and others when an umbrella brand like Babies “R” Us can recapture some lost market share?
You have to give Kohl’s credit for uncovering every rock to keep things fresh. The key here will be quality. Babies “R” Us under WHP is a pure licensing deal. In other words, “Babies ‘R’ Us” is a brand whose name will be slapped on goods manufactured by whoever WHP designates. These may or may not be legacy BRU manufacturers which could spell downgrades or upgrades in quality and brand consistency. Hopefully, WHP did its homework to ensure this program is compelling, high-quality, consistent, and in-brand.
This move opens up opportunities for both parties, something that is aimed for with strategic partnerships but rarely hit. Younger families now have another reason to shop at Kohl’s and Babies R Us has another sales channel. I am eager to see the results!
There are no implications for traditional department stores because there’s nothing new here and Kohl’s isn’t a traditional department store. They’re simply serving young parents with a brand that will drive them to the store. Smart move.
Kohl’s collaboration with WHP Global to integrate Babies“R”Us products aligns with a growing trend of diversification and collaboration in retail. As consumer preferences evolve, retailers seek partnerships to offer a broader array of products and cater to changing demands. This move reflects a shift from traditional department store models towards curated experiences and specialized offerings.
By leveraging external expertise, Kohl’s aims to enhance its appeal to modern consumers and strengthen its market position. Such initiatives signal a strategic response to market dynamics, emphasizing the importance of adaptability and innovation in today’s retail.
The giant stores that Kohl’s has are way overstocked with clothing. Reducing the apparel assortment and increasing the amount of baby and home products could be a winner, if it’s well-priced and well merchandised. I don’t think they need the Babies R Us branding but if that’s what it takes to jump start them in the category, go for it. Over time, the value of the Babies R Us branding is going to diminish in value for them.
Finally. Kohl’s is adding a category that includes essentials, regularly recurring purchases, for a customer segment that is both younger, and less price sensitive than most. This is a good fit for a company that includes homewares and kids clothing. And Kohl’s store placement will actually be a good fit for this category, because often they are located in areas not as well served by other brands. This should be a win for them and I look forward to seeing the results.