Cool. A retail giant teaming up with Amazon to provide in store space and a return depot for the largest disrupter to the retail industry. In return they are getting….online customers into their stores. Hmm. I have my doubts. But let’s look at this through the lens of a few VBO Principles – STI (strategy, tactics and implementation) as well as our DVAA (Define, validate &Align Assumptions).
Amazon – Two big wins here. They’re creating value through service by making it easier for their customers to return product. All products. Secondly, Amazon has no showroom at this time(exception is a few Amazon Book Stores) so it’s a win to create an instore space at each Kohl’s store.
Kohl’s – A bit more complicated, but there is opportunity.
1)Short Term – This deal brings in Amazon Smart Home products into the stores. But, caveat emptor, Amazon does have a history of using retailers to introduce and grow their lines and then moving on.
2)Short Term – Amazon returns will generate in store traffic. The question becomes how Kohl’s will capitalize on bringing online buyers into a department store? The keyword here would be meaningful. There’s a lot of ‘blue sky’ here.
3) Long Term. Is there an expectation this partnership is the first step toward acquisition?
Strategic Take-A-Way – I don’t see the Win/Win here- unless we’re looking at an acquisition. This deal looks great for Amazon. The biggest unanswered question for Kohl’s becomes creating benefits for a consumer segment whose profile does not value the department store shopping experience. No surprise that Amazon doesn’t seem concerned about their customer jumping over to a Kohl’s website.
On the other hand, if this is Kohl’s way of having Amazon ‘kick the wheels’ before buying, then I see the strategic win/win for both companies. Time will tell if this is indeed the case.
Amazon – Really very little tactical issues for Amazon to consider. A new clause to their return policy and logistically they need to figure out how to take the returns from Kohl’s stores. On the marketing side, they will develop merchandising and packaging for their products and create the tactical plans for store layout and product introduction.
Kohls – The burden falls on Kohl’s. Here are the primary tactical issues they must plan for now;
Converting the customer – Kohl’s isn’t taking Amazon returns because they want to show the world Midwest Hospitality (after all they are based in Wisconsin). Kohl’s must use this opportunitity to grow their busines
Merchandising & Sales – The Amazon Home Products. They must free the space required to accommodate Amazon’s product, merchandise the product and train their people. My guess is that both Kohl’s and Amazon see this aspect of the partnership as showroom space only. Kohl’s is not set up to sell – their people clerk and provide service.
Processing Returns. They need to develop a process for Amazon returns (simple drop off?) while impressing these Amazon customers. Execution in store will be critical to converting these online customers.
Tactical Take – A Way –The value expectations of an online customer are very different than those of Kohls’ current customer profile. How Kohl’s develops their people and establishes a customer friendly plan for these returns will be crucial.
The second tactical issue here is relationship development with these ‘transactions’– what do they do with these customers once they are in the store?
At VBO Marketing we always look at strategy and tactical planning as the means to move up the Pyramid to implementation. This means that the plans heavily consider implementation as a matter of alignment to process and planning. So…
Amazon – As I said earlier – the burden is on Kohl’s. Amazon will drive the policy and logistics to provide online customers their high level of service.
Kohl’s – Lots to do here. I think the biggest question they have is to bring in people with the right skill sets to manage the process and initiate a Kohl’s relationship with these online customers. After all, why would an Amazon customer stay and purchase in a Kohl’s store if they are dissatisfied or unimpressed with the service or process provided?
Let’s put aside the acquisition scenario for now. By working with Kohl’s, Amazon overcomes a weakness – they get a showroom for their products and a return depot. This is more a sign of transition for Kohl’s. By participating in this partnership, Kohl’s is looking to redefine itself.
Kohl’s recognizes that while in store purchases, as of last quarter, were trending positive, transactions are still down. How do you increase transactions? Get people into the store. Kohl’s has developed partnerships with Under Armour and now Amazon. It’s not rocket science to guess that Kohl’s will continue to work on developing programs with strategic partners in key growth areas.
But, Amazon brings more than a category profit center. These consumers will require service for returns before they consider product. The key here is a positive in store experience. Kohl’s is committed strategically. But, do they have the cultural flexibility to fulfill this brand promise, the logistical expertise and the people with the skill sets to execute effectively?
Kohl’s has one chance to win online customers who do not currently shop in department stores. The first impression will be critical.
We’ve laid out the issues, now, let’s look at a few recommendations as to how VBO Marketing would address the opportunities at Kohl’s
Recommendation #1 – Returns. Allow this consumer to choose the experience they want while making the process simple. Ideally, the consumer just brings a package into Kohls, scans it, drops it in a bin and gets a receipt at the kiosk. But, what if Kohls’ staff was there to help? Maybe get on the phone with Amazon if the customer has problems? Generate a UPS label? What other value can they provide this online consumer to facilitate a return? It’s soft, but the experience is extremely positive and would signal the service they would receive from Kohls in the future.
Recommendation #2 -Development of the ‘Kohl’s Customer’. It’s a great opportunity to provide special pricing for Amazon customers for that day. Offer loyalty programs with special features and benefits for Amazon customers. Soft sell coupon codes and take away pieces to generate calls. These are all opportunities for initiating the process.
Recommendation #3 – Skill Sets – Kohl’s should develop people with the skill sets to work with these customers – both at returns as well as the Amazon Smart Home floor. Online consumers will Showroom. Kohl’s needs people there with the expertise to help when necessary and drive them to a computer to ‘help’ them place an order. Additionally, these staff members should be trained to provide an enhanced experience. Remember, these online profiles shun the department store experience. Koh’ls needs to convert these customers.
Recommendation #4 – Integrated Merchandising. Planners like to think of floor and shelf space as surrounded by lines of demarcation defined for product and brands. This is a revenue center mindset and it must change. Kohl’s needs to drive promoted products and partnerships while developing signage and space valued by this consumer. Even if it’s about bringing in couches with an abundance of electrical outlets. Everything should be about the consumer, keeping them in the store and giving them the shopping experience they want. Every transaction counts.
Have other recommendations? Comment on the post. We’ll have more to say about this partnership and how others are managing Omnichannel marketing challenges.