Kohl’s is struggling. Can software help turn around its business?

The company's pivoting away from its department-store model toward active and casual clothing in an attempt to renew growth; Chief Technology and Supply Chain Officer Paul Gaffney thinks tech will help it grow.

Kohl's parking lot

Kohl’s has been slower to adapt than other retailers.

Photo: Kohl's

It’s been a tough few years for Kohl’s.

Amid pressure from ecommerce competitors like Amazon, department stores have struggled to shift business online and cater to customers with changing preferences, and Kohl’s has been slower to adapt than other retailers. The company has lost 17% of its market share since 2011, according to UBS, and announced several changes at its investor day on March 7, including a pivot away from its core department-store model toward one centered around “active and casual” clothing.

Investors aren’t happy. Private equity firm Sycamore Partners and department-store chain Hudson’s Bay have put in separate bids to take over the company, indicating that they see further value for Kohl’s under private ownership than on the market.

But Kohl’s Chief Technology and Supply Chain Officer Paul Gaffney thinks technology could play an important role in the company’s plan to boost its ecommerce business, streamline its self-service pickup and integrate with other brands. By cutting down the time it takes to get customers the items they want with tech-enabled pickup and return stations and by suggesting cross-brand clothing pairings based on other shoppers’ buying data, the company hopes that convenience and upselling will help it avoid the bankruptcy fate that competitors Sears and JCPenney have met.

That means that in the background, there must be changes to streamline the company’s web designs, as well as modifications to its supply chain management software to maintain a lean inventory amid a stocking pivot. Those initiatives will be critical for getting customers to actually buy online (nearly 70% of people abandon their online shopping carts, according to the Baymard Institute) and keeping costs down.

In a recent interview with Protocol, Gaffney spoke about the company’s push to improve customer experiences and how COVID-19 has impacted its ways of thinking about technology investments.

This interview has been edited and condensed for clarity.

At the company’s recent investor day, Kohl’s spoke about increasing personalization, driving self-service in stores and growing the ecommerce business. How is the IT organization driving some of those initiatives?

No. 1, which we didn't talk about at investor day but we've talked about in the past, is reorganizing the technology organization to be focused on end-customer populations. We have teams that are focused on things that our end customers do, like search, product exploration and recommendations.

Paul Gaffney Kohl's Chief Technology and Supply Chain Officer Paul GaffneyPhoto: Kohl's

Step two is a great customer experience. That primarily shows up in simple things, like making sure our website and our app are fast. No one really does the press release, “So we made our app faster,” but in fact, that's something that's really important — sometimes that's more important than new features. For example, we took our online checkout from four pages down to one. We are also enhancing payment methods. We're doing more to make sure that the experience when you show up is fast, easy and increasingly personalized.

Third is a great experience in the stores, and that's a combination of better tools for our associates to help fulfill orders and help customers find things and then a better experience for the customer themselves. It turns out that no customer wants to have to interact with people to pick up an order, and yet most people built their order pickup experience to depend on store associates or spent an awful lot of money on these super complicated and expensive lockers.

Instead, we built something that probably feels more like the Panera pick-up experience than a typical “buy online, pick up in store” experience. We've deployed it to over a third of our stores right now, and we'll have that in all stores by the end of the summer. We're applying that same thinking to returns. It's a super simple process: Scan your item, put it in a bag, drop it in the box. Right now, most folks don't start that transaction until they're in the store, but we're going to find a way this year to get customers to start that transaction when they're not in the store.

The fourth building block is better use of data, moving from what I think has been pretty much commonplace in retail, relying on data that the firm has about itself and its customers, and instead recognizing that the universe knows a lot about our customers, probably more than we do. How do we tap into that? And how do we deliver relevant changes, whether that's in our physical assortment in our stores, or in the way we interact with customers digitally?

Kohl's has also talked about the company's pivot away from being a department store toward being an active and casual retailer, as well as increasing the number of Sephoras in stores. Those changes feel more like retail strategy changes that don't necessarily have too much to do with the technology. How is your organization helping with some of those broader pivots that aren't necessarily purely technology-focused, but have some tech element?

Some of the tech is not easy to see, but it's incredibly important. Underneath, we are trying to make all of these merchandising pivots while improving our inventory productivity. Usually, that's a very difficult thing to do, and technology has an incredibly important role in making sure that as we are entering new categories and exiting old categories, we’re doing it with increasingly leaner inventory investment.

It turns out that no customer wants to have to interact with people to pick up an order, and yet most people built their order pickup experience to depend on store associates or spent an awful lot of money on these super complicated and expensive lockers.

With Sephora, there's actually a pretty tight technology integration between Kohl's and Sephora. When you go into a Sephora shop at Kohl's, you can actually sign up for the Sephora Beauty Insider program as if you are in a Sephora. We’ve announced cross-company pickup where you can place an order on Sephora’s website and then choose a Kohl’s as a pickup location. We're also integrating on the back end, jointly managing a pool of inventory. None of those things can happen at this scale without a significant amount of technology work.

I believe we'll start to see more of those kinds of tighter cross-company partnerships. Ten [or] 20 years ago when there were more apparel salespeople, you came in to buy one garment, but you left with a whole outfit because the salesperson made you feel really good about a whole collection of pieces. I think technology is going to have to unlock that. It doesn't actually seem to be gaining traction, even though people keep trying it, but I am hopeful and optimistic that we're going to find another way to be a radically more effective technology-driven sales organization.

Some of these changes were obviously accelerated by COVID-19, like the importance of self-service pickup and returns. Are these shorter trends that will fade as COVID-19 fades, or are these changes lasting?

I don't know that there's a definitive answer on that, because there are a couple of different consumer behavior patterns. One pattern is: “I am not even thinking about going into the store for whatever reason, whether because I don’t have time or I don’t feel comfortable.” Pre-pandemic, that was virtually nonexistent other than at fast-food drive-throughs, but now that’s become commonplace, and I think there’s a segment of customers who will stay in that mode.

You shouldn't rely on third parties to be able to build software.

There are a couple of other patterns on pickup, though. Others will say, “I plan to go into the store. I have a handful of items that I know for certain that I want, but I have other things I'm looking for that I'm not certain about.” It's this hybrid trip of [self-pickup] and buying more, and we want to encourage more of that, but right now that's entirely the customer's choice. We want to try to create more reasons for the pickup customer to spend more time in the store, enhancing the purchase that they were certain of on their pickup. I do think there was a third group of people who were picking up only because of pandemic concerns, but I don't have the data in front of me about the trends on that third bucket.

It sounds like your team is working on a lot. What headwinds have you run into while working on these projects, and what partners have you engaged to try to help you solve them?

There are a lot of folks in big companies who want to build things for their own personal view of the problem. This is the classic “design for the team at headquarters, and then see if the customer likes it.” The pandemic was a great example of that: We had a long roadmap of features that we were pretty sure we needed for curbside pickup, but when the pandemic came in, it gave me a great opportunity to set aside our list, because the customer needed it right now. People have now come around to that pivot — from trying to design everything in advance to getting something smaller in front of customers quickly and then reacting and iteratively responding to it — but it's still uncomfortable for some people who would really like to know the whole rollout plan.

There's a similar headwind on data. Our intuition is often challenged by the data. You might believe something, but I have to show you that there's actually not only something different, there's also X, Y and Z. Getting people to come to grips with the fact that machines can find things that don't match your intuition is also a headwind because that's just challenging for people. Humans don't like when the world doesn't match their intuition.

In terms of partners, one of the first things that I did two and a half years ago was make sure that the Kohl's technology team was on a path to being capable on our own to drive big changes. This is a playbook that I ran at Home Depot, at Dick’s and now here at Kohl's. You shouldn't rely on third parties to be able to build software. That said, we do leverage skills, abilities and talents from a handful of key partners.

Most of our cloud computing is on Google, and most of our big data work is on Google's data platform. We also have benefited from a longstanding relationship with Dell and with VMware and, in particular, VMware spinoff Pivotal. VMware’s Tanzu Labs, which provides super effective help to organizations who are trying to become better at building software themselves (we’ve also hired a lot of alumni from that org). On the data and machine-learning side, we're currently doing a good amount of partnership with Deloitte on the third-party data and data-science side.


Why foundation models in AI need to be released responsibly

Foundation models like GPT-3 and DALL-E are changing AI forever. We urgently need to develop community norms that guarantee research access and help guide the future of AI responsibly.

Releasing new foundation models doesn’t have to be an all or nothing proposition.

Illustration: sorbetto/DigitalVision Vectors

Percy Liang is director of the Center for Research on Foundation Models, a faculty affiliate at the Stanford Institute for Human-Centered AI and an associate professor of Computer Science at Stanford University.

Humans are not very good at forecasting the future, especially when it comes to technology.

Keep Reading Show less
Percy Liang
Percy Liang is Director of the Center for Research on Foundation Models, a Faculty Affiliate at the Stanford Institute for Human-Centered AI, and an Associate Professor of Computer Science at Stanford University.

Every day, millions of us press the “order” button on our favorite coffee store's mobile application: Our chosen brew will be on the counter when we arrive. It’s a personalized, seamless experience that we have all come to expect. What we don’t know is what’s happening behind the scenes. The mobile application is sourcing data from a database that stores information about each customer and what their favorite coffee drinks are. It is also leveraging event-streaming data in real time to ensure the ingredients for your personal coffee are in supply at your local store.

Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

Keep Reading Show less
Jennifer Goforth Gregory
Jennifer Goforth Gregory has worked in the B2B technology industry for over 20 years. As a freelance writer she writes for top technology brands, including IBM, HPE, Adobe, AT&T, Verizon, Epson, Oracle, Intel and Square. She specializes in a wide range of technology, such as AI, IoT, cloud, cybersecurity, and CX. Jennifer also wrote a bestselling book The Freelance Content Marketing Writer to help other writers launch a high earning freelance business.

The West’s drought could bring about a data center reckoning

When it comes to water use, data centers are the tech industry’s secret water hogs — and they could soon come under increased scrutiny.

Lake Mead, North America's largest artificial reservoir, has dropped to about 1,052 feet above sea level, the lowest it's been since being filled in 1937.

Photo: Mario Tama/Getty Images

The West is parched, and getting more so by the day. Lake Mead — the country’s largest reservoir — is nearing “dead pool” levels, meaning it may soon be too low to flow downstream. The entirety of the Four Corners plus California is mired in megadrought.

Amid this desiccation, hundreds of the country’s data centers use vast amounts of water to hum along. Dozens cluster around major metro centers, including those with mandatory or voluntary water restrictions in place to curtail residential and agricultural use.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).


Indeed is hiring 4,000 workers despite industry layoffs

Indeed’s new CPO, Priscilla Koranteng, spoke to Protocol about her first 100 days in the role and the changing nature of HR.

"[Y]ou are serving the people. And everything that's happening around us in the world is … impacting their professional lives."

Image: Protocol

Priscilla Koranteng's plans are ambitious. Koranteng, who was appointed chief people officer of Indeed in June, has already enhanced the company’s abortion travel policies and reinforced its goal to hire 4,000 people in 2022.

She’s joined the HR tech company in a time when many other tech companies are enacting layoffs and cutbacks, but said she sees this precarious time as an opportunity for growth companies to really get ahead. Koranteng, who comes from an HR and diversity VP role at Kellogg, is working on embedding her hybrid set of expertise in her new role at Indeed.

Keep Reading Show less
Amber Burton

Amber Burton (@amberbburton) is a reporter at Protocol. Previously, she covered personal finance and diversity in business at The Wall Street Journal. She earned an M.S. in Strategic Communications from Columbia University and B.A. in English and Journalism from Wake Forest University. She lives in North Carolina.


New Jersey could become an ocean energy hub

A first-in-the-nation bill would support wave and tidal energy as a way to meet the Garden State's climate goals.

Technological challenges mean wave and tidal power remain generally more expensive than their other renewable counterparts. But government support could help spur more innovation that brings down cost.

Photo: Jeremy Bishop via Unsplash

Move over, solar and wind. There’s a new kid on the renewable energy block: waves and tides.

Harnessing the ocean’s power is still in its early stages, but the industry is poised for a big legislative boost, with the potential for real investment down the line.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Latest Stories