Kohl’s adapts the customer experience to the evolving consumer

This article was published in the August 2016 issue of STORES Magazine.

Talk to Ratnakar Lavu, Kohl’s chief technology officer, and you’ll hear the word “progress” a lot.

Kohl’s made a pronouncement that 2016 would be a big year for digital. So how’s it going?

“We’re making some great progress with our focus on customer analytics, data and insights, which are informed by both physical Kohl’s stores and our digital Kohls.com business,” Lavu says.

But it is not just insight for the sake of knowledge. Those insights are informing decisions in merchandising, allocation and localization, all with a goal of “driving the best customer experience possible,” he says. “We look at our business holistically because everything works together. We’re making good progress toward our vision around data-driven insights to leverage them across the company.”

Customer experience — more than just a buzzword to Lavu — has led the way. It means offering mobile payment options, as well as integrating offers like Kohl’s Cash, promotions, gift cards and its loyalty program, Yes2You Rewards, all into one mobile wallet within the Kohl’s app. And it means using data to support the company’s localization goals of 90 percent unique assortments by the end of 2016.

“We are undergoing a big transition to becoming a data-driven organization,” Lavu says, “with a focus on leveraging digital and physical data combined to maximize our strategic decisions within the company.”

There’s an app for that

In some ways, Kohl’s has overcome one of the biggest challenges in identifying its customers: Getting them to log in while at a computer or on a mobile device. Kohl’s app has had 12 million downloads to date, and that’s helping to create a seamless shopping experience for the majority of Kohl’s customers who combine in-store and online shopping or those who shop between their desktop computer and mobile devices.

“We’re getting great traction on Kohl’s mobile app. People can access our mobile wallet and get all of their offers, including Kohl’s Cash, Yes2You Rewards, coupons and gift cards in one place.”

Ratnakar Lavu

“We’re getting great traction on Kohl’s mobile app. People sign in because we’ve made it easy for them to shop with us. They can access our mobile wallet and get all of their offers, including Kohl’s Cash, Yes2You Rewards, coupons and gift cards in one place,” Lavu says.

“Kohl’s offers these incredible savings opportunities and bringing all these things together in one mobile wallet adds a lot of value for the customer. We’re putting a lot of effort in making that app work extremely well.”

The app also entices consumers to use mobile while in a physical store. That’s where they can search for in-stock items or scan an item’s bar code to determine the final costs when all of the discounts stored in the wallet are applied.

It’s also helping to yield data that has proven beneficial to the retailer’s overall goals.

“We are doing a lot of attribution work to understand the behaviors as the customer moves from one channel to another, whether it is the digital channels or in the physical store environment,” he says.

“We are thinking about how data can give us insights into the entire customer journey. For example, how does the customer transition from one channel to another? Are they researching on digital and going into the physical stores or vice versa?  On which channels are they transacting? We now have a much richer set of data because of this attribution.”

Lavu says it is clear that the integration of Apple Pay with the Kohl’s Charge card and Yes2You Rewards loyalty program is popular. “A shopper doesn’t have to have a separate Yes2You Rewards loyalty card anymore when it’s seamlessly integrated, so checkout is even easier and they get the value they expect from Kohl’s with enhanced mobile payment options,” he says. “We are looking at some interesting things in mobile payments this fall that will further reduce friction.”

While he couldn’t disclose what those would be, Lavu did note that the “customer evolution is happening at a very fast pace and we’re trying to keep up with that. We’re constantly innovating to make sure that we’re creating a seamless experience.”

That means increased investments into making mobile “easier and simple.”

Regardless, loyalty has been a win for Kohl’s. In the 2016 Bond Brand Loyalty Report, Kohl’s Yes2You Rewards was ranked as customers’ favorite loyalty program in the department store category. The report also found that the average consumer has joined 13.4 loyalty programs, but actively uses 6.7.

Small wonder: Lavu says mobile is “heavily used” within the 1,167 physical store locations.

Empowering associates

Becoming a digitally focused company — and one with reduced customer friction — means far more than improving the mobile experience, of course. It means helping customers get the products they want when — and how — they want. And it means understanding what the data is telling them.

“In the digital environment, we can understand what products customers are looking at, what they’re searching for and what they want to buy online and pick up in store,” Lavu says. “We can use this data to inform our localization efforts to then say, ‘OK, not only are we going to look at historical sales per store, but we’re also going to take the digital data, merge that and make better decisions with what’s available and where.”

Ship-from-store was 15 percent of online demand and buy online, pick up in store was 3 percent during the first quarter.

Ship-from-store was 15 percent of online demand and buy online, pick up in store was 3 percent during the first quarter.

While he says it’s too early to determine how successful that strategy is, “we’ve made some great progress. We still have a lot more work to do.”

Kohl’s has ramped up its ship-from-store and buy online, pick up in store programs, which are enabled across its network. Ship-from-store was 15 percent of online demand and buy online, pick up in store was 3 percent during the first quarter, president and CEO Kevin Mansell told analysts in a quarterly earnings call in May.

“We will continue to test marketing with that option throughout the year to make it top of mind [with] our customers for holiday,” he said.

That is creating a need for the digital focus to come into the physical stores in a deeper way, Lavu says. “When we think about a digitally focused Kohl’s, the stores actually serve two purposes. One is traditional shopping, which we know is very important and is not going away. The second is leveraging the store to fulfill digitally initiated orders in the form of ship-from-store or buy online, pick up in store. In order to do that really well, we’re building up new tools and capabilities for our store associates. We work with partners like Oracle and others to bring this to life.”

That means associates are armed with a handheld device that notifies them once an order has come in. They can easily use the handheld device to fulfill the order and notify the customer. “That entire experience can now happen very, very quickly,” Lavu says.