Kohl’s focuses on e-commerce efficiency and in-store pickup
November 11, 2016 12:01 PM
Kohl’s Corp. is looking to draw more online shoppers into its stores by better publicizing its buy online, pickup in-store option, and improving that process when they get there, executives said on a quarterly earnings call with investors.
The retail chain did not say how web sales fared in the quarter, but did say 5% to 6% of online orders were picked up in a Kohl’s store, which is less than it wants. It did not say what its in-store pickup goal is.
That’s because driving more consumers into stores drives more sales. 28% of consumers who came to a Kohl’s store in the third quarter to pick up an online order bought another product in-store, the company says.
“Buy online, pick up in store as a percent of our total digital demand was not as high as we had hoped for,” CEO Kevin Mansell said on the call. He anticipates changes Kohl’s is putting into place will drive the percentage of online orders picked up in a Kohl’s store during the fourth quarter into the “high single digit” range. Those improvements include better publicizing the in-store pickup option on Kohls.com and better signage in Kohl’s stores. The retailer is also setting up a separate pickup area for online orders. Until now, online customers had to visit the regular customer service line to retrieve their online orders.
“I think if we make the experience phenomenal, I think it's going to be really, really good,” Mansell said.
The fourth quarter is a critical sales period for Kohl’s. Last year, Kohls.com sales grew 30% in the fourth quarter. The web also accounts for an increasingly greater proportion of the chain’s total sales. In 2015, web sales accounted for 14.7% of Kohl’s sales, up from 11.4% in 2014, according to data on Internet Retailer’s Top500Guide.com.
Kohl’s executives said the company is working to lower operational expenses related to fulfilling online orders from store inventory. Wesley McDonald, Kohl’s chief financial officer, said it is trying to reduce how many store-fulfilled web orders require that multiple shipments be sent to one customer because the order is fulfilled from different stores. All Kohl’s stores are set up to fulfill web orders.
“The key for us to continue to improve profitability is to reduce the amount of split shipments,” McDonald said. “It's especially for important for us, given our relatively low average transaction value online, which is around $75.”
That may be tough to do though, as the company said it has reduced the amount of inventory carried in its stores by 9%.
McDonald also said a fifth e-commerce fulfillment center set to open next summer will help improve profitability of online orders. “[The e-commerce fulfillment center] that we’re opening next year is going to be three times as productive as our existing [centers.]”
Kohl’s new e-commerce fulfillment center will be in Plainfield, Ind., near Indianapolis, and measure 937,000-square-feet. Kohl’s other e-commerce fulfillment centers are in Cincinnati, Baltimore, Dallas and San Bernardino, Calif.
For the third quarter ended Oct. 29, Kohl’s reported:
- $4.33 billion in sales, down 2.3% from $4.43 billion a year earlier.
- A 1.7% decline in comparable store sales.
- $146 million in net income, compared to $120 million a year earlier.
For the first nine months, Kohl’s reported:
- $12.48 billion in sales, down 2.7% from $12.82 billion.
- A 2.4% decline in comparable store sales.
- $303 million in net income, down from $377 million.
Kohl’s is No. 19 in the Internet Retailer 2016 Top 500 Guide.