The fact that Kohl's (NYSE: KSS) has historically opened stores outside of malls works to its benefit, but only to a point. The upside of its shopping center locations? Less competition from other department stores. The downside, however, is that shoppers need to want to head to Kohl's -- they can't simply lob a visit on to an already planned mall outing. As such, some Kohl's locations have struggled to get customers in the door.
But a few years back, Kohl's entered into a strategic partnership with Amazon (NASDAQ: AMZN). And that arrangement has really helped foot traffic pick up.
A strategic move
In 2017, Kohl's began accepting Amazon returns at 10 of its store locations. By 2019, those Amazon return kiosks were rolled out on a national level.
The goal of teaming up with Amazon was to drive more customers to Kohl's. And so far, it's worked.
In fact, Kohl's says it added at least 2 million new customers last year alone thanks to its Amazon partnership. The company now hopes it can convert those customers into repeat shoppers.
Will other retailers follow suit?
Amazon customers like the convenience of getting items delivered to their door. It's when those items need to be returned, however, that things get trickier. Some customers loathe the idea of having to leave the house just to facilitate a return, but leaving to embark on a shopping outing is a different story, and so the Kohl's arrangement works well. The hope on the part of Kohl's is that consumers who visit for the express purpose of returning Amazon packages will stay and shop, or at least consider coming back.
It's a tactic that other off-mall retailers may want to consider as well. Giving consumers an extra reason to walk in the door is never a bad thing, and the upside of maintaining shopping center locations is that consumers can park closeby, making it easier to deal with returns. Department stores with mall locations can't offer the same convenience, because, let's face it -- nobody wants to lug a bulky Amazon box that needs to go back through a crowded mall.
Of course, the arrangement with Amazon isn't the only strategic partnership Kohl's has managed to put together. Late last year, Kohl's announced that it will be opening at least 850 Sephora mini shops within its stores, 200 of which are expected to be open by the upcoming fall season. These store-in-store makeup shops are another great way to draw in customers and boost sales.
For Kohl's to thrive in the coming years, it needs people to walk through the door. Working with Amazon is a step in the right direction, and if the retailer continues to expand its partnerships, it could have a very profitable number of years ahead of it. That would, in turn, be a good thing for real estate investors. In an age when so many department stores are shuttering, relying on Kohl's as an anchor tenant is a very good thing for shopping centers.