Where Did It All Go Wrong?
Earlier in 2019, Kohl’s and industry analysts estimated that Kohl’s would see a certain amount of revenues for Q4. They based the estimate on previous shopping trends and evidence from previous quarters, starting in Q2 with the national returns rollout, that the partnership worked as planned. Yet, Kohl’s relies heavily on seasonal and member discounts and female shoppers. Offering steep discounts during the holidays brought additional people into stores, but fewer women bought apparel. Unsurprisingly, Kohl’s saw plenty of foot traffic, but not the level of expected impulse and other purchases from that traffic. Kohl’s experienced a 0.2 percent drop across November/December as compared to previous years even though it experienced a strong growth trend in Q3 with nearly double the traffic and triple the sales.
Although the full Q4 earnings won’t be released until March 2020, Kohl’s CEO Michelle Gass advised investors on January 9 to expect lower-than-estimated earnings. Some analysts believe that the actual losses are worse than 2008. Kohl’s is pleased by the increase of traffic that has resulted from the Amazon returns. Digital purchases also continue to rise because of the Kohl’s app, but the company must now re-evaluate how to bring female consumers back into stores to buy apparel or find another revenue generator.
Why Is This News Important?
A well-known name, massive discounts and even an Amazon partnership isn’t a guarantee of steady on-site, brick-and-mortar traffic and revenues in today’s volatile retail market. Kohl’s ignored warnings about shopping trends and relied too heavily on female apparel purchases. It’s been known for some time now that women are shopping more online through programs that allow them to conveniently try on clothing and shoes at home and then return items they don’t want or need. Kohl’s also didn’t offer more perks to appeal to younger shoppers. Its heavy discounts usually appeal to older consumers who are less like to impulse shop. Mid-price department stores across America are dying not only because of these factors, but also because of competitors, such as T.J. Maxx, Marshalls and Ross, who offer high-end goods at discounted prices far below their own. These buying trends have forced retailers like Kohl’s to offer steep discounts and adapt in various ways to survive. Without adapting, such as by accepting Amazon returns, Kohl’s would have lost far more. J.C. Penny, for example, experienced a 7.5 percent drop in sales over the holidays. According to Mastercard, department stores industry-wide experienced a drop of 1.8 percent.
At Host Merchant Services we hope that this type of news can help our retail merchants understand how they need to adapt their own traffic and sales strategies to survive. We also want these mistakes to help you to learn how to adapt so that you can always reach your estimated revenue goals. For more information, contact us today.