As so many major retailers are opting to close hundreds of bricks-and-mortar locations to invest more in digital, Kohl’s is opting for a different strategy in shrinking its physical presence after it saw a decrease in omnichannel sales in markets it has shutdown.

During its recent earnings call, Kohl’s announced plans to shrink its square footage instead of just closing down a wide range of bricks-and-mortar locations, focusing more on 35,000-square-foot locations. The retailer revealed that within the 18 markets it closed down last year, online sales were even affected with a 10 percent decrease in digital revenue.

“Our overall perspective though and the importance of our store portfolio remains the same,” said Kevin Mansell, CEO of Kohl’s. “We believe stores are very important and critical component of our future success, and we’re committed to leverage them to their full extent.

‘There’s great power in stores in an omnichannel world” he said.

Shrinking strategy
Kohl’s explained in its earnings call that the retailer only retained a third of its revenue in closed down markets. In lieu of this, Kohl’s will be focusing more on its 55,000 and 35,000 square-foot stores, which will be more targeted to their local markets.

A traditional Kohl’s location averages a size of 90,000 square feet, which can be a burden on costs. The retailer opened 8 stores in the 35,000-square-foot format last year.

About 30 percent of digital sales came from mobile devices throughout the quarter. However, executives admitted that like most retailers, it struggles with conversion rates on mobile devices.

Mobile devices account for 50 percent of the retailer’s online traffic.

“Smart retailers are getting lean and mean and embracing the transformation toward a multichannel approach that seamlessly links online and offline sales,” said Wilson Kerr, president of Unbound Commerce. “Having a smaller physical footprint can speed this effort by reducing costs and trimming inventory on-hand requirements for items that can be ordered online and shipped.

“Kohl’s shift to digital makes sense, especially if their stores can serve as showroom/customer service hubs staffed by teams with sales associate apps that drive online sales supported by fast shipping,” he said. “Amazon, ironically, is opening its own retail stores nationwide, to connect with customers.

“Traditional retailers have an advantage, if they can shift their in-store inventory focus to “high touch” items that cause so much pain for Amazon, regarding returns.”

Kohl’s will be investing further in its retail application, mobile pay and mobile loyalty program.

The strategies in the mobile sector will focus on providing consumers with what its out-the-door pricing is, including discounts. The clearer the pricing and discounting is to the consumer, the better the experience.

Mobile and digital will be major tools in making Kohl’s smaller stores work. The retailer hopes to create a truly omnichannel shopping experience.

Macy’s bricks-and-mortar
Macy’s online sales are growing at a brisk pace with the past two holiday shopping seasons and in-store sales contracting even more than expected, the retailer is continuing to scale back its bricks-and-mortar business and reinvesting the savings to continue accelerate its omnichannel strategy it announced last year.

Consumers are shifting shopping behaviors online – increasingly driven by mobile – at a pace that some traditional retailers are finding hard to keep up with. While Macy’s has been aggressively pursuing a mobile strategy for some years now, it is taking a different approach to Kohl’s and will continue to reconstruct, including closing 40 stores, points to just how significant the evolution in shopping is (see more).

“We also know, however, that the average sales per store have fallen as online sales have risen,” Mr. Mansell said in regards to Kohl’s. “And so an ongoing rigorous process for store performance review is critical to long-term success.

“We continue to review performance by store,” he said. “It’s against the menu of options considered to improve that performance when less than desired.

“Certainly, our first focus continues to be to drive traffic in a positive direction in all stores, and included among actions after that are the following.”