Will smaller, more localized stores work for Kohl’s?

Kohl’s, at its Investor Day earlier this month, said it plans over the next four years to open 100 small-format stores, at about 35,000 square feet versus the company average of 80,000.

The rollout follows a test conducted by the chain in recent years.

“The smaller-format store gives us greater real estate flexibility and the opportunity to go into markets and neighborhoods that couldn’t support a full size Kohl’s,” said Michelle Gass, CEO, during the presentation.

Ms. Gass said localized assortments, informed by data science, help support a curated experience in the smaller spaces.

“We’ve created a new test store in the Seattle area,” she said. “In that region, the store reflects local customer preferences, such as a greater emphasis on outdoor apparel. In the South, that same size store would carry more warm weather product, such as year-round swim sandals and lighter weight apparel.”

Paul Gaffney, chief technology and supply chain officer, said Kohl’s has historically built assortments based on climate and brand performance.

“Hyper-localization” taps data science to also consider local lifestyle differences, localized demographics and the effect of local competition and economic differences, including the types of jobs locals are working during the day. Mr. Gaffney said, “Those things impact customer preferences in some ways that are more compelling than climate and volume.”

Ms. Gass said the stores will still resemble “Kohl’s in terms of the core DNA of the brand, but they’re all going to look and feel differently because they are going to be developed based on what the local market competitive and consumer dynamics are in that given market.”

Major chains in recent years have pushed toward smaller store formats with Target particularly finding success in urban markets.

Macy’s has opened five smaller Market by Macy’s and Bloomie’s off-mall locations in spaces as small as 20,000 square feet to encouraging responses.

Jeff Gennette, Macy’s CEO, said on a February fourth-quarter earnings call, “We found that these stores are more productive to run and staff and stock with inventory. This new format is also bringing in new customers who are engaging with our curated under-40 brands and products.”

• Kohl’s Provides Key Updates on Strategic Growth Initiatives and Financial Plan at Investor Day – Kohl’s
• Kohl’s Investor Day 2022 – Kohl’s
• Kohl’s announces plans to open 100 small-format stores, grow Sephora business to $2 billion – Milwaukee Business Times
• Macy’s, Inc. (M) CEO Jeff Gennette on Q4 2021 Results – Earnings Call Transcript – Seeking Alpha
• Target thinks small to succeed big time – RetailWire