From Forbes on February 24, 2016:
What’s wrong at Kohl’s? While the department store responded to a weak holiday quarter with a round of pink slips, the answer more likely lies with its shoppers. Using the consumer intelligence collected by Prosper Insights, this analysis reviews why the disappointing holiday season at Kohl’s wasn’t a surprise, as well as a broader trend eroding the store’s customer base – which has could have a devastating impact on the retailer’s future.
As a whole, Kohl’s shoppers are a challenging group – the ultimate bargain hunters. Offering sale after sale, often paired with that frenzy-inducing Kohl’s Cash, Kohl’s has cultivated a unique customer base that is very price-sensitive and timid about spending too much, even more so than their JCPenney and Macy’s perusing peers. Now, combine this existing challenge with the recent holiday season, a wicked selling environment on its own. Back in November, we reported that Kohl’s shoppers maintained a cautious outlook for holiday spending, with planned expenditures rising only 0.3% from the previous year. With this in mind, Kohl’s had two holiday objectives: persuade their customers to spend beyond their budgets or attract new customers. With comparable store sales rising a meager 0.4% in the fourth quarter, it appears that Kohl’s failed on both counts.
With the holiday season in the rearview, though, it’s time for Kohl’s to look ahead and focus on a broader problem eroding its customer base: disappearing Millennial shoppers. Prosper’s Shopper Preference Share Composite Index for Kohl’s (which includes apparel, shoes, toys, and home categories) indicates that the department store has been floundering with shoppers overall (adults 18+) for the past few years after expanding nationally in the early 2000s. (The Shopper Preference Share Composite Index is derived from Prosper’s monthly retail preference share questions, which are unaided, write-in questions posed to consumers in an online survey.) Dig a little deeper, and it’s clear to see where Kohl’s is losing ground: not among its core shoppers over the age of 35, but with those between the ages of 18 and 34. Among those 35-plus, Kohl’s is performing quite well, with the Index rising 10% both year-over-year and versus February 2013 (i.e. during ‘Fair & Square’ era JCPenney, from which Kohl’s benefited). In sharp contrast, the retailer’s declines in younger shoppers are steep, lowering about 20% from the same two time periods.
The decline in Millennials heading to Kohl’s becomes even more dramatic among the fairer gender. Among young women, the Shopper Preference Share Composite Index for Kohl’s has slipped 22% compared to a year ago and is down nearly 30% from February 2013. Our insights show us that the department store’s position among young women is particularly deteriorating in softlines (apparel and footwear). For example, the percentage of females 18-34 who indicate they shop Kohl’s ‘most often’ for shoes (again, an unaided, write-in question) dropped 47% this month compared to February 2013; instead these shoppers are gravitating toward big box stores or higher-end retailers, such as DSW and Nordstrom, and, of course, online. This month, Amazon.com eclipsed Kohl’s in footwear shopper preference among women 18-34 for the first time, finally closing a gap that had been narrowing between the two retailers for the past several years.
Why is the decline of Millennial shoppers so detrimental for Kohl’s? Besides the obvious loyalty losses, it boils down to simple financial argument: they are worth more. Female Kohl’s shoppers under the age of the 35 outspend their over-35 counterparts in the softlines categories by about 30%, a big figure for a retailer currently stuck in revenue paralysis. Certainly, now is the time for Kohl’s to get back in touch with the younger generation – no retailer wants to age itself into becoming the next Sears.