Kohl’s was made for Walmart’s grocery customers

While many retailers want their stores to be as far away from a Walmart Supercenter as possible, Kohl’s probably wants to be in the very same shopping center. The reason, according to Pam Goodfellow, consumer insights director at Prosper Insights & Analytics, is that when consumers have finished up shopping for groceries at Walmart, they are most likely to head to Kohl’s to buy clothing for their families.

In all, these Walmart shoppers spend up to $7 billion a year on clothing and a "good proportion" of that is going to Kohl’s. Over the past decade, Ms. Goodfellow wrote on Forbes.com, the number of consumers that list Walmart as their primary destination for groceries has continued to grow, while those listing it as the main place they buy clothes has waned.

For example, the proportion of Walmart grocery shoppers who buy women’s clothes at Kohl’s has increased from 3.4 percent in February 2005 to 11.8 percent today, according to Prosper’s research. This increase mirrored Kohl’s national expansion over the same period when its store count went from 640 to 1,162, based on reporting by the Milwaukee Journal Sentinel.

kohls storefront

While retailers employing Hi-Lo pricing models have not fared very well against Walmart in grocery, it is this same strategy that has helped Kohl’s gain share of the clothing market, according to Ms. Goodfellow.

"The Kohl’s shopper, I think, is one of the most interesting shopper groups to look at because they are 100 percent invested in coupons and promotions and the Kohl’s Cash," she told the Milwaukee Journal Sentinel.

BrainTrust

Discussion Questions

Why do you think Kohl’s has been successful in selling clothes to shoppers who go to Walmart for their groceries? What lessons are in this experience for Walmart and retailers looking to compete with the company?

Poll

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Dr. Stephen Needel
Dr. Stephen Needel
9 years ago

First, I’m pretty sure shoppers aren’t going from Walmart grocery to Kohl’s. Maybe the other way around, but I’d like to get my milk and ice cream put away, not leave it sitting in my car. That said, Kohl’s has the same promise as Walmart—good products at a good price. There’s something low-end feeling (to me, at least) about buying clothes at Walmart. Kohl’s is an easy step up.

Paula Rosenblum
Paula Rosenblum
9 years ago

Well, Walmart seems very committed to groceries now. I don’t expect them to stay this way for long, as groceries are a traffic driver. But a profit driver? Not so much. The money is in GM and apparel.

The question is, can Walmart be successful selling clothes? If it can, then Kohl’s success will be short-lived. If it proves problematic, it’s a great formula for success.

The core message to me is “You can’t be all things to all people” and if you let Walmart be the strip center equivalent of a mall anchor, you can grab their existing traffic for the curated assortment you want to sell.

Steve Montgomery
Steve Montgomery
9 years ago

Both groups are price shoppers.

Walmart is a destination location and generates high traffic. With the right products and price points a retailer can convert some of that traffic into customers.

Richard J. George, Ph.D.
Richard J. George, Ph.D.
9 years ago

Kohl’s recognizes that food purchases drive store visits. I think the company also realizes that its positioning as “cheap chic” provides a significant differentiation from the Walmart clothing offerings.

Lesson learned: Physically locating near a Walmart makes strategic sense when the retailer offers complimentary versus competing products.

Dick Seesel
Dick Seesel
9 years ago

Of course Kohl’s sells clothes to Walmart grocery shoppers. Walmart is the biggest food retailer in the U.S. and cross-shopping is not a new phenomenon. I’m sure Walgreens customers shop at Kohl’s too, just as Target HBA shoppers buy their paint at Home Depot.

My point? I’m not sure the study is all that meaningful. Both Walmart and Kohl’s appeal to value-oriented shoppers but the household income demographics have been quite different for a long time.

Nikki Baird
Nikki Baird
9 years ago

Well, one, I think Kohl’s has been successful in selling clothes precisely because Walmart has been so bad at it. But I think the promotional aspect of it definitely plays a role in making apparel more attractive. I’m not a fan of Kohl’s model personally (I just don’t have time to keep track of all that stuff) but I have friends that are rabidly loyal to Kohl’s, primarily because of Kohl’s cash and the thrill of the deal—they just love the idea that they could buy something marked full price for $40 for the equivalent of $10.

I guess it just goes to show: For the kinds of things you have to buy every week, EDLP and predictably low prices is the way to go. But fashion is not a “need” it’s a “want,” even when you really need new clothes. So promotional pricing has more influence than EDLP.

But all of this presumes, of course, that the fashion sensibility at Walmart is comparable to Kohl’s, and I would have to say that they are not. Kohl’s definitely wins there.

Ben Ball
Ben Ball
9 years ago

I think the operative concept is “acceptably chic.” Walmart is now “acceptably chic” for groceries for most shoppers—but not so much for clothes. Kohl’s clears that psychological hurdle for clothes for many who buy Walmart groceries.

Jan Kniffen
Jan Kniffen
9 years ago

The most successful Stage Stores locations also share a parking lot with Walmart, and just like Kohl’s, Stage offers the apparel customer brands, quality and style that they will not find on the apparel racks at Walmart. But the customer for all three (Walmart, Stage and Kohl’s) seeks value. Hey folks, it ain’t rocket science, it is just retail.

Ed Rosenbaum
Ed Rosenbaum
9 years ago

It has become more acceptable to buy groceries at Walmart because price consciousness has reached all levels of society. Not so much for clothes purchases. Walmart is not and will not be the place for the above price conscious, but more affluent, shoppers to purchase anything but groceries.

Rick Myers
Rick Myers
9 years ago

First thing, I think it makes sense that you want to be where the customers are. Walmart stores tend to be a great traffic draw. A thought I had was that Maxwell Kohl, founder of the company, ran a chain of supermarkets called Kohl’s Food Stores in the ’40s. But it probably just has more to do with being where the people are.

Peter J. Charness
Peter J. Charness
9 years ago

Walmart is a traffic draw. I think Hibbet Sporting Goods plays the same game, locating near Walmarts. In some ways you have specialty large box stores conveniently located close to the big box traffic generator, “poaching” that Walmart customer base with a broader, more appealing assortment as a category killer. It’s really the same as a shopping mall with anchors and specialty stores.

Carol Spieckerman
Carol Spieckerman
9 years ago

Walmart is overdue for a revisit of its apparel-obsessive past (circa 2005-ish), when the world’s biggest retailer of everything dared to venture into Vogue and raise the fashion bar (though not nearly as high as reported at the time). The backlash was scathing but unfortunately, Walmart has been operating in the land of meh ever since (although active wear has recently emerged as an exception). Walmart of course does huge numbers in apparel, but it’s time to start asking just how much better it could be. Maybe the Kohl’s correlation will reignite Walmart’s competitive spirit.

Kenneth Leung
Kenneth Leung
9 years ago

Both companies target the value shoppers, with Walmart focusing on groceries and general merchandise and some clothing. Kohl’s base is driven by Kohl’s cash promotion and value buyers. Think what we have is a cross pollination. The typical Walmart shopper may go to Kohl’s for occasion outfits while Kohl’s buyers would stop by Walmart for groceries and laundry detergent—both wins.

Eliott Olson
Eliott Olson
9 years ago

It is because Walmart’s clothing line is weak.

Kai Clarke
Kai Clarke
9 years ago

Because these represent the same shopper, who has an unfilled clothes need as they leave Walmart. Walmart should be very concerned regarding the positioning of their clothing departments, and what their futures might appear to their core market, since another retailer can so easily cannibalize their marketing efforts.

Lee Esmond
Lee Esmond
9 years ago

Kohl’s has done a very nice job in recent years of creating an engaging experience for shoppers. They have created popular, formerly seen as affluent, brand sections for all demographics. The stores are merchandised nicely and create an aspirational approach. Most notably their men’s section is one of the most expansive anywhere outside of a major department store.

The implementation of Kohl’s cash not only makes the shopper feel like she “won” by saving and getting, but also gives her a reason to come back. In my book Kohl’s wins on a lot of levels—good assortment, good shopabilty and good perceived value that drives a boomerang effect with the shopper. Others could/should watch and learn.

As for Walmart, obviously they are grocery focused, but there are countless articles, studies and Walmart comments about the need and desire to grow GM. And while Walmart has done a nice job of increasing their apparel format and assortment, it still lacks shopability and aspiration. With all of that said, they continue to play a role in their core shoppers clothing needs and I don’t think Kohl’s enters the consideration set with them.

Net/net, I agree with Dick—this study doesn’t create any “ahas” for me. Next.

Craig Sundstrom
Craig Sundstrom
9 years ago

While I don’t think there’s much surprise that many WM shoppers are also Kohl’s shoppers, or mystery as to why—they’re both price driven—I’m confused by the magnitude. The Forbes article, which is by Ms. Goodfellow herself, comes right out and claims WM is “giving” $7B to Kohl’s, while George and the JS claim only a “good portion” of that number. Hmmm.

Of course there something both quaint and (disturbingly) medieval about the notion that some store “owns” a customer … why not turn the tables and point out all the grocery dollars Kohl’s is “losing” to WM?

Mark Burr
Mark Burr
9 years ago

For Kohl’s, it is likely able to do so from the perception that they are low price, low, low level experience, and maybe a known label on the product. Thus, the same as Walmart.

The lesson for retailers looking to compete with Kohl’s or Walmart is the same. When the consumer realizes that they get no worse of an experience and receive the lowest common denominator of price—they choose price. So many retailers have failed so miserably at the “experience” differentiation for their higher price, the consumer no longer cares and is willing to accept the disappointment for the price.

What can other retailers do? Find out what the two are doing and do the complete opposite. The list of “To-Do’s” are so painfully obvious that it’s to painful to write them once again.

Li McClelland
Li McClelland
9 years ago

People who are perfectly happy to enjoy the significant savings of buying their vitamins, TV, ALL detergent, paper towels, onions, and cheese at Walmart are less comfortable saying to their work cubicle neighbor, “yeah I got this blouse at Walmart.” Kohl’s for clothes and shoes, Walmart for just about everything else has a nice synergy.

William Passodelis
William Passodelis
9 years ago

This is simply a value play on both ends. The difference is—as others have said—Kohl’s does such a great job with their Kohl’s Cash and also with a nice shopping experience that is SATISFYING, validating, and reinforcing in and of itself. Sales drive future sales. I also know people strongly loyal to Kohl’s, and happy with their Kohl’s “successes.” Walmart has to find a way to improve their perception. A difficult task. They must find a way to make their GM assortment acceptable, as others have said. There is NO aspiration with Walmart and their probably will not be.

When I was a kid. if you had clothes from Sears, it was…fine, okay—no big deal. Anything from anywhere else was, at least, “a little better,” but Sears was the backdrop and the “go-to” for necessities. I think that Walmart now occupies that space in the minds of a lot of the public and given the business model of WM, that is a difficult place to expand from.