Brick-and-Mortar Retail in the Age of Covid, and Amazon

Brick-and-Mortar Retail in the Age of Covid, and Amazon

Brick-and-mortar retailers have been decimated in recent years. First came Amazon. Then the pandemic.

Yet even as giant shopping malls are dying and many storefronts are shuttered, the big box stores that anchor strip malls throughout the exurbs are enjoying something of a renaissance. Companies like Best Buy, Dick’s Sporting Goods and Home Depot have managed to hang on, and even thrive. Add to that list another, somewhat unlikely, entrant: Kohl’s.

The retailer, which sells clothes, home wares, sporting goods and more, is hanging on against the odds. Just where Kohl’s fits in isn’t always clear. It’s smaller than a department store, but has many of the same offerings. Its stores are often near Walmarts, but feature more mainstream brands.

Since taking over as Kohl’s chief executive in 2018, Michelle Gass has been working to carve out a distinct identity for the company. She joined the company eight years ago after more than a decade working at Starbucks.

Among her moves — besides keeping the stores open during the pandemic — has been striking a series of partnerships with other companies.

The most unconventional was a deal with Amazon in 2019 that allows customers to return Amazon products to Kohl’s stores. While there, Ms. Gass hopes, they might do some shopping.

Another new partner is Sephora, the beauty retailer, which is setting up mini-stores inside Kohl’s locations. It’s a bit like, well, a department store.

This interview was condensed and edited for clarity.


What about your childhood informs your work as a C.E.O. today?

I was born and raised in a small town in Maine, and grew up in a very working-class family and community. I was among the first in my family to get a four-year college degree. That fostered a drive to do more, achieve more, from a really young age. I worked all the way through high school and college. My first job was bagging groceries. I waitressed and even did factory work. I like to work hard, and I really put a high value on people who also work hard.

I got my degree in chemical engineering. Sometimes people ask me, “How did you learn engineering, especially as a woman?” And candidly, I was quite pragmatic, and I knew I could get a great job with it. I didn’t grow up with any engineers around me, but I did my homework and I had a sense that this was going to open up doors. And it really did.

What did you learn from working with Howard Schultz at Starbucks?

Three things. One is the importance of culture; such a strong culture was built over time. Secondly, it’s not just what you sell, but it’s the importance of that human connection, the emotional connection around the life or consumer, the affinity for the brand. And then the third, and a big passion of mine, is the power of innovation.

Starbucks has a very clear brand proposition. How do you define where Kohl’s sits in the consumer ecosystem?

Kohl’s had a successful model for a long time, sort of this hybrid department store brand, but with mass mall convenience. But over time that got blurred. So the challenge and opportunity is, “OK, what is the space we can occupy that will be differentiated?” Part of it was becoming a relevant omni-channel retailer. And I really feel like we’ve checked that box. But from a product and brand standpoint, how are we going to be more relevant? How are we going to have a brand stand for something?

Department stores have struggled over the last several years. So how do you make it work when the J.C. Penney’s and the Macy’s have had such a hard go of it?

We are very far apart from what a traditional department store is. We are small, we’re super convenient and that allows us to do things like buy online, pick up in store and curbside. But more importantly, we see ourselves as a specialty concept, that Kohl’s is the curator and the editor to bring you all the products and brands you need to lead a more active and casual lifestyle.

Is it up market? Is it down market? Who are the target consumers?

We have America. We serve a very broad base of customers, really all demographics. Our strategy is the active and casual lifestyle, and selling the kinds of products that were amplified during the pandemic. People want to look good. They want to be comfortable. Their work wardrobe is going to look very different coming out of this eventually than what it was going in.

A lot of people would think that a brick-and-mortar retailer would be crazy to work with Amazon. What’s the logic behind your deal with them?

When you take a step back and think about what it’s like to return goods, it can be very inconvenient in the traditional way, especially with online returns. Looking for the box, looking for the tape, attaching the receipt, all of that. We’re addressing that pain point. Amazon gets a deal that can address the friction point, and we’re able to leverage our appetite and welcome in traffic. It was certainly unconventional at the time when we announced it, but I think it worked out really well.

How has the pandemic changed the retail business in ways that are going to endure in the months and years ahead?

When you’re in the crisis, you have to make decisions very quickly. We clearly needed to prioritize how we were going to keep our people and our customers safe. When that got settled, we used the opportunity to look at our strategy and say, “How do we be bigger and bolder?” And that allowed us to start having conversations with Sephora.

When you talk about the increases in profitability, how much of that is getting passed on to the associates and the people in the stores?

We had to make tough decisions like that, in terms of furlough and when we opened doors and invited our associates back, and it’s a very tight labor market. We are doing a lot to ensure that we are competitive in a market-by-market basis. So we’re providing bonuses to our hourly associates. So I feel like we’re doing a lot to ensure that we are creating a very good environment for our people.

What are you having to do to attract the employees you need right now? What do they want and what are they getting, frankly, that they weren’t?

More than 75 percent of that work force is part time, and our associates like the flexibility. They like the culture.

Do people really prefer to be part time? If you offered them a full-time role, are you telling me they would really turn it down?

I think it’s hard to answer that question. The overarching thing I hear from people a lot is they like this notion of flexibility. And I strongly believe we provide a lot of opportunities.

You’ve talked about being a servant leader before. How do you balance that imperative to take care of your employees with your commitment to deliver for shareholders?

As the C.E.O. leading the business, I have a lot of stakeholders, and certainly our investors are one of them. One of my responsibilities is to ensure that we have a sustainable business, a business that can employ a lot of people and also serve the stakeholders and the community at large. As it relates to the people we employ, people are working in Kohl’s for a lot of reasons outside of what is in their paycheck. That’s an important part. Absolutely. But there is pride in having a great job and being part of a company that you’re proud to be associated with.

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