CSCMP's Supply Chain Quarterly
March 20, 2018
Forward Thinking

Kohl's fights back—with its stores

Direct-from-store fulfillment, improved collaboration, and improving the use of data are among key drivers moving retailer forward.

Retailer Kohl's Corp. aims to stay relevant with the assets that have gotten it to this point: Its 1,100 stores.

"Kohl's has chosen to fight back with our stores," Sona Chawla, chief operating officer of the Menomonee, Wis.-based retailer, said Monday at the keynote session of the RILA 2018 Retail Supply Chain Conference in Phoenix. "We have a strong belief that physical stores matter."

Chawla outlined how Kohl's intends to maintain its store traffic while seeing online sales continuing to climb. A key to the strategy is operational efficiency in the company's supply chain. "Efficiency will be the differentiator that you will see in the retail industry," she said.

New automation in its e-commerce DC operations now allows Kohl's to be two to three times more efficient than the previous facilities, Chawla said. Kohl's is leveraging its stores for direct-to-customer distribution as they now operate as mini-fulfillment centers to handle online orders.

Kohl's stores currently perform 32 percent of its online fulfillment, according to Chawla. On "Cyber Monday," the stores collectively did three times the fulfillment volume of its traditional e-commerce channels, she said.

A key factor for the strategy is that stores shorten the distance to customers, Chawla said. Delivery from stores is 25 percent faster than filling an e-commerce order from a distribution center, she said.

Kohl's has increased its store traffic by encouraging in-store pickups, where customers order online but come into the stores to pick up their merchandise. Chawla says that 90 percent of online customers also shop in Kohl's stores. Incentives, such as the Kohl's Cash discount loyalty programs, also help to keep customers coming back.

Another strategy has been to break down silos between its operational teams, Chawla said. Managers now work together to make adjustments and tradeoffs, rather than just ensuring their own areas are optimized at the expense of others, she said.

David Maloney is chief editor at DC Velocity, a sister publication of CSCMP's Supply Chain Quarterly.

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