With the vast majority of its stores located outside of malls, Kohl's real estate strategy has always diverged from its mall-based competitors. Now, as chains like J.C. Penney and Macy's close hundreds of stores, the retailer is once again taking a different approach.
Instead of turning to closures as a means to boost sales productivity, CEO Kevin Mansell is looking for opportunities to trade in Kohl's big-box locations for smaller shops. His rationale? While retailers need less square footage in a world of digital commerce, consumers still crave a physical place where they can interact with the brand — and keep it on their radar.
"If you get away from all the numbers and the stories and you just think about this intellectually, at the end of the day if you're not top of mind, and you're not relevant, and you're not convenient, people are going to shop you less," Mansell told CNBC at the Shoptalk conference in Las Vegas. "It's not that complicated really."
Kohl's got a taste of that phenomenon after closing 19 stores last year. Not only did those closures eat into the company's physical revenue, they also weighed on its digital results. While Kohl's overall online sales rose 12 percent last year, they were flat in the markets where it shuttered a store, Mansell said.
The retailer's shift toward smaller stores is already underway, accounting for nearly 200 of its 1,000-plus locations. In Boston, for example, Kohl's recently took a few shops that measured between 85,000 and 100,000 square feet, and shrunk them down closer to 70,000 square feet.
In one of those instances, the landlord used the excess space to bring in another tenant. That allowed Kohl's to get its remodel paid for, and resulted in a more productive location, Mansell said.