Remarkable Retail

Retail Fight Club: Can Kohl's Be Turned Around?, with guest Ethan Chernovsky

Episode Summary

This week we debut a new segment: Retail Fight Club, where we debate a contentious issue that just about everyone in retail is talking about. Ethan Chernovsky, Placer.ai's VP of Marketing returns to the pod and steps into the ring with Steve for our inaugural episode to present opposing view points on the likelihood of Kohl's mounting a meaningful return to its former glory. Will their bold set of strategic initiatives be on target, or merely amount to a slightly better version of mediocre?

Episode Notes

"The first rule of Retail Fight Club is to tell everybody about Retail Fight Club."

- Michael LeBlanc

This week we debut a new segment: Retail Fight Club, where we debate a contentious issue that just about everyone in retail is talking about. Ethan Chernovsky, Placer.ai's VP of Marketing returns to the pod and steps into the ring with Steve for our inaugural episode to present opposing view points on the likelihood of Kohl's mounting a meaningful return to its former glory. Will their bold set of strategic initiatives be on target, or merely amount to a slightly better version of mediocre?

But first we give our hot-takes on the week's retail news, including the latest read on inflation and US monthly retail sales. We also weigh in on recessionary declarations from FedEx, the World Bank and RH's CEO Gary Friedman, before reviewing new sales projections for the holiday season. Then it's Yeezy come, Yeezy go as the artist formerly known as Kanye West and the Gap part ways. We also revisit the Wobbly Unicorn Corner to discuss the train wreck that is Rent the Runway, before briefly touching on an interesting merger of digitally native brands and an apparent change of heart when it comes to Walmart as an interesting distribution partner. We end on an inspiring note, discussing the big news that Patagonia's founder is giving away the company to support action on the climate crisis.

Photo by Attentie Attentie on Unsplash

CNBC Kanye West, who goes by Ye, interview. 

Fight Club | 20th Anniversary | 20th Century FOX

 

About Ethan

Ethan Chernofsky is the VP of Marketing at Placer.ai. Previously, Ethan was the VP of Marketing at Orbs. Ethan holds an MSc in International Relations from the London School of Economics and Political Science.

About Us

Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his       website.    The expanded and revised edition of his bestselling book  Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at  Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a      Forbes senior contributor and on       Twitter and       LinkedIn. You can also check out his speaker "sizzle" reel      here.


Michael LeBlanc  is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice.   He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career.  Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast,       The Voice of Retail, plus  Global E-Commerce Tech Talks  ,      The Food Professor  with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext!  You can learn more about Michael   here  or on     LinkedIn. 

Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue,  his YouTube BBQ cooking channel!

Episode Transcription

Michael LeBlanc  00:05

Welcome to Remarkable Retail podcast, Season 5, Episode 11. Presented by MarketDial. I'm Michael LeBlanc.

Steve Dennis  00:12

And I'm Steve Dennis.

Michael LeBlanc  00:13

Well, Steve, I think you're back at least for a minute or two back home in Dallas. So, let's talk about your trip and your adventures and, and your conference in Latam. What did you see? Who did you meet and what did you hear?

Steve Dennis  00:24

Well, that's probably longer than we have time to get into. But the headlines are yes, I'm back briefly before we're going to head out. We'll be together in Las Vegas for Grocery Shop in a couple of days. Actually, by the time this comes out, we'll already be there. But yeah, it was in Buenos Aires for a few days. And then I went up to Sao Paulo for the Latam Retail Show where I did the conference kickoff keynote, which was great. And - 

Michael LeBlanc  00:48

It's not a stage, it was a mammoth. It was a ma-, you look like a, you looked like a very small person on a very large stage. 

Steve Dennis  00:54

It, it was, I think, by far actually the largest stage I've ever been on. I think there were a couple 1000 people in the audience, maybe. So, yeah, -

Michael LeBlanc   00:58

Half of them on that stage, man, it was, (crossover talk), - 

Steve Dennis   01:05

Yeah, it was a, it was an intimate gathering. But and you know, I went with English instead of Portuguese. 

Michael LeBlanc  01:11

Yeah. 

Steve Dennis   01:12

Which was easy for me since I know about two words of Portuguese. But it was, it was really good. And there are several really interesting speakers. The guy who runs Amazon's Business Development, or AWS's Business Development was on right after me, the President of Walmart, Mexico, just a whole host of, of different players. You know, mostly, mostly Brazil based but, but definitely some folks from all over the world. So, it was a, it was a good opportunity, and I ate my weight in steak. So, I'll be getting out on the Katy Trail here in Dallas to try to work some of that off. 

Michael LeBlanc  01:28

Well, great news to hear you're back home safe and sound. And also, as you said, we'll be seeing each other at Grocery Shop just right around the corner. We'll be, we’ll be there on Monday through Thursday, we got lots of great interviews, a couple of bonus episodes, and we'll bring the insights home from, from Las Vegas.  Now in this episode, very special. We have a very special episode. It's our first and who knows, maybe last segment, Retail Fight Club with our very good friend and repeat visitor to the podcast Ethan Chernovsky, Vice President of Marketing at Placer. Now the two of you throw down all about Kohl's, the largest department store in America, give us give the listeners a bit of a hint about what's to come.

Steve Dennis  02:29

I mean, I think I win, quite handily, I guess, I don't want to, that's a bit of a spoiler, (crossover talk). No, but I think you know, the idea of Retail Fight Club is, I think it's just fun, you know, to have a little bit more active debate. And I know that Ethan has been a little bit more positive towards the resurrection of department stores more broadly, broadly in Kohl's in particular. So, I am very on brand and being more pessimistic and cynical about it. So, that's what we get into.

Michael LeBlanc  02:59

Well, we'll look forward to that. Because it's a pile of fun. So, I'd love to hear back from all the folks if they, if they liked that format, and if so, we'll go out and, and do that, again. Let's get into the news. Now, there's a lot happening, not unusual, as we kind of wrap up the summer and people start, you know, how were the numbers? What are they shaken out to be? And, and what's the forecast for the balance of the year, we got inflation numbers. 

Michael LeBlanc   03:08

So, let's start with inflation numbers. So, it remains high. But the good news is gas is coming down. And in my mind, gas is one of those things that really, you know, you can make choices in the different types of food, for example, you can get a private label or, you know, you can economize a little bit on food. But you know, gas is gas, right. So, that coming down, maybe takes the edge off. But what are your insights around the inflation rate?

Steve Dennis  03:43

You know, a little bit if you ba-, I mean, I think you're right, you know, if you've got to get to work, and the only way of getting there was driving or obviously a lot of transportation costs are based on, on use of fuel. So, some of those things are pretty hard to, to radically shift the demand equation, though, you know, we're seeing demand come down, and that's driving prices down a fair amount. I think it's 13 weeks straight or something here in the US anyway. But the overall inflation picture remains stubbornly high. And, you know, I think that's what continues to be cause for concern. 

Steve Dennis   03:54

We also had in the US the weekly jobless claims, which continued to be quite low. So, part of what I think is really pushing the inflation up is that, you know, people are employed, and they have money to spend. But also, the price of labor is being built into everybody's cost structure. So, that's tending to put prices up as well. So, -

Michael LeBlanc  04:36

There's a super interesting (crossover talk), - 

Steve Dennis   04:38

It’s a tough environment. 

Michael LeBlanc    04:40

It's an interesting environment; there's a super interesting article in the Wall Street Journal. I'll put a link that ti-, that said basically, there's 500,000 people missing from the US job force because of COVID. And some of that is fo-, I mean, you know what it was it 1.05 Americans died because of COVID. And then there's a bunch of people who still have it and still get pulled out of the job force. So, there's you know, we don't talk about COVID very much anymore, but it's still very present for us, amongst other things.

Steve Dennis  05:05

Sure, ya I know, there's I think we touched on this a little bit a week or two ago, too. I mean, you know, immigration is down quite a lot. So, and there's, there's a lot of (crossover talk) population. 

Michael LeBlanc   05:11

Yeah. 

Steve Dennis   05:12

So, there's, there's a lot of factors. So, I don't, I don't think the, the kind of labor supply issue of this is going to get a heck of a lot better anytime soon. So, that's kind of our new normal, as much as I hate using that expression. But what we're seeing here, too, we had every month, as we often just touch on and I'll try to touch on quickly, we got the US Census Bureau's report on monthly sales and sales continue to be quite strong on a dollar basis. Of course, as we've touched on, and I'm sure we'll keep touching on for a while here, there's a lot of inflation baked into those numbers. So, where we see core retail up something like 8%. That's about where inflation is, of course, it varies quite a lot by category. So, you know, we're seeing kind of more deflationary kind of pricing and things like electronics and appliances, a little bit of clothing, whereas food and some other things are, are up quite a bit, -

Michael LeBlanc  06:08

Yeah, and lots of orders being canceled. So, the media says, and I hear anecdotally as well, lots of POs being canceled. It's like we got lots of stuff so that tends to you know, this we're in this weird shoulder period of, of adjustment (inaudible) quasi-post-COVID. As speaking of adjustment FedEx warned and, and they, they said listen, we're heading into a global, a global recession, they're, they're shutting down plants and doing a whole bunch of things. Now, you know, FedEx has got a new, you know, if you compare FedEx today to five years ago, they got a very new competitor, a very big competitor, who's taken some share whether they, you know, whether they it was profitable share or not, it's debatable. We-, any, you put any stock in what FedEx has to say, is that a canary in a coal mine?

Steve Dennis  06:48

I think it is, overall, we had some other issues like the World Bank, I think, predicted we're going to be in recession globally, next year. So, I think there's lots of signs of continuing slowdown. The Federal Reserve is clearly going to raise interest rates quite a lot. So, I think there's plenty of lights that are flashing red. FedEx, you know, he's got self-inflicted wounds, I think, as well. So, as you say, more competitive pressures. So, I wouldn't put it all on the macroeconomic factors, but that’s, that's certainly a big contributor. And presumably, they'd have a pretty good read on, on what's going on across a lot of industries.

Michael LeBlanc  07:25

We've often spoken about Gary Friedman, the Founder of RH and you know, he's always going in a, he seems to always be making big bets in a different direction and winning. Now he was in the news saying, listen, if you don't think we're in a recession, you know, where are you at? You don't know what you're talking about. Did you, did you see his comments and, and but at the same time, right in the middle of that he's opened up a very swanky, new, he doesn't even call a hotel, it's a home, I was going to go, I think we'll go there in New York. For some $400 caviar and an $18 bottle of champagne.

Steve Dennis  07:58

You're buying whoever the sponsor is for that.

Michael LeBlanc  08:00

I think we got to hit up our sponsor for that. But tell me wha-, what are you thinking about? I mean, Gary, you know, he's, he's got a pretty good handle on things. What do you think? 

Steve Dennis  08:09

Well, he's never shy. But I think the home category is in recession. I don't, you know, (crossover talk), get into a big sort of a semantics argument. I don't, I don't think with the kind of employment picture we have, you can argue that overall, we're in a recession. But if you look at what's going on in the, in the home category, RH, which has been one of the top performers in retail for like five years, had a pretty rough quarter, and, and guided down. So, I think everybody who's going to buy a sofa and a peloton, and a big screen TV seems to (crossover talk), to have done it in the last year, (crossover talk), -

Michael LeBlanc  08:40

Yeah, yeah. Probably bought ahead, as we often say. Let's turn our minds to the future. So, some forecasts are coming out. I see everybody from Salesforce, Deloitte and Bain. Let's talk about the Deloitte numbers. What did you learn from reading their report?

Steve Dennis  08:53

Well, most of the forecasts are, are pretty optimistic. But again, you know, it's just, it's hard to make sense of these numbers, when so much of the sales increase, apparently is going to be inflation, right? So, it's hard to put these in the context of numbers that I'm familiar with, because really, we haven't had inflation above 3%, for like, what, 40 years or something. 

Michael LeBlanc   09:12

Yeah, - 

Steve Dennis   09:13

So, (crossover talk), so, they, you know, they look positive from a $1 value basis. I think if you want to try to work inflation into it, you're looking at probably flat or slightly down units. But again, you know, that will vary a lot, I think by, by category. So, I just find this very hard to interpret these numbers in aggregate and really make much sense out of them.

Michael LeBlanc  09:39

From a percentage perspective, they're saying it bit of a, would it feel like a bit of a bounce back for eCommerce sales will grow by 12.8 to 14, three point or sorry, will grow by 12.8 to 14.3%. What do you think of that idea? Do you think there's a bounce back happening with, with eCommerce or is its organic growth resuming its natural course?

Steve Dennis  10:00

I think overall, you know, my impression is we're pretty much back on the trendline. You know, we have this, this bit of an acceleration in the early part of COVID. And then things kind of settled down. So, these numbers are compared to more muted numbers. But I think, you know, I haven't looked at it in a ton of depth and certainly varies by category. But I think the broader picture continues to be, we're kind of back on that, on that long term trend line of eCommerce growing in the 12 to 15% range. So, that feels right to me in aggregate.

Michael LeBlanc  10:31

All right, so in other news, the big news and you think I think you nailed it, easy come easy go. The Gap and Yeezy, have, have broken up and he had, you know, some perspectives to share about that.

Kanye West  10:43

No, I'm saying they have one individual on the planet that could save the Gap.

Steve Dennis  10:48

Is that you? I was kind of hoping it was me, but apparently, apparently the haven't gotten any calls. But yeah, the much vaunted, hyped partnership with the artist formerly known as Kanye West has, has fallen apart. So, he's going to be moving on to open (inaudible) some of his own stores. So, -

Michael LeBlanc  11:08

Well, he had I watched, and I'll put a link in the show notes to the Article. He made a surprise appearance on CNBC. And he is actually a pretty, he's very cogent. I mean, he was very, you know, he's very serious in his, in his explanation. So, it was worth listening to. We don't know anything about behind the scenes, but whatever it was, is no more. Let's go visit the wobbly unicorn segment.

Steve Dennis  11:35

Well, I feel like this is, this might become a regular segment here for us. But I mean, the big news, pretty sad news out of Rent the Runway was, as I wrote in my newsletter, a wobbly unicorn stumbled off the runway. They had very disappointing earnings, large sales increases, but huge losses. And they are laying off about a quarter of their staff, the stock's down like 80%, 82%, something like that year-over-year. So, continuing yet, you know, yet another one of these companies that is kind of hitting the wall, in terms of being able to deliver some profits.

Steve Dennis    11:48

So, a couple other quick stories I was going to mention, which I think (inaudible) speak to broader trends. One is that Misfits and Imperfect Foods merged. It's not clear, kind of what the profit perspective is there. But I think this is going to be part of a trend, we're going to see to consolidation, not necessarily two of these DTC companies merging but I think, you know, acquisitions or whatever, because some of these companies just don't have the ability to get where they need to get to without some partnerships or other ways to get access to capital. 

Steve Dennis   12:19

And then there was a story that I found a little bit peculiar, but basically, that many of these new DTC brands are now turning to Walmart as a partner. I don't know that we've seen that on such a huge scale. But we certainly have seen some of these companies, as we've talked about with Simeon Siegel, and others on prior episodes, you know, now looking towards wholesale relationships as one of the ways to more cost effectively build distribution. So, brands that are at Target, brands that are at Nordstrom. 

Steve Dennis    12:38

Now apparently, Walmart, which was not seen as perhaps cool enough to be a good partner is being considered possibly, to be one, which I think probably says more about where these brands are in terms of their choices, as opposed to necessarily a, a strategy that Walmart is fundamentally changing.

Michael LeBlanc  13:28

Let's end up with some inspiring news. Patagonia's announcement that Yvon Chouinard, the billionaire founder is basically giving (inaudible) son's company away, he's putting it into a trust. It just made me think about our conversation with Seth Godin. What, what were your thoughts when you, when you read the news?

Steve Dennis  13:47

I think this is very exciting. I mean, there's some cynical takes on, on how he's trying to avoid taxes or something like that. But I think, you know, the idea is, here's a great brand, like a billion and a half or something a year in sales, $100 million in profit being put so that the profits can go directly to support action against climate change, as well as I guess there's some other tax benefits for him to be able to, to do some different things for him and the, the trust to be able to do some different things. So, you know, I'd love to see more leadership. You know, a lot of people talk about sustainability and, you know, carbon offsets and all these, -

Michael LeBlanc    14:21

Planting trees. Yeah, yeah, yeah. 

Steve Dennis   14:23

Which are, you know, often more greenwashing than, than substantive this. This is a pretty big move, you know, it's a, it's a drop in the ocean, so to speak, in terms of what's necessary, but I think it's an important step and hopefully, maybe it starts a trend for some, some of these billionaires to do a bit more than fly around on their private jets and shoot themselves into space.

Michael LeBlanc  14:49

Well, let's leave it there on that note, and before we get into our first edition of retail Fight Club, let's hear from our presenting sponsor. 

Michael LeBlanc   14:59

MarketDial is an easy-to-use testing platform that emboldens great decisions leading to reliable, scalable results. With MarketDial you can be confident in the outcome of your in-store pilot initiatives before rolling them out across your fleet. In a challenging retail climate of supply chain disruption, labor shortages and dynamic customer behavior, the need for reliable insights has never been greater. Validate your remarkable ideas with market tools in store testing solutions. The proof is in the testing. Learn more at MarketDial dot com. That's marketdial.com. 

Michael LeBlanc  15:31

All right, welcome to the inaugural episode of the Retail Fight Club. Now from time to time we will be inviting industry thought leaders on to debate contentious issues in retail gentlemen, welcome to Fight Club. 

Ethan Chernovsky  15:39

The first rule of Fight Club is (inaudible) you do not, okay so the first rule of this Fight Club is tell everybody because we want everybody to know. 

Michael LeBlanc   15:42

Now on this episode, we want to take on the issue of whether Kohl's which is the largest department store in the United States can mount a turnaround. Lots of news about Kohl's you don't have to look very far to find out any news. Steve's a doubter, he's the skeptic or the pessimist. But our guest holds out hope. And speaking of our guests, we're welcoming back Ethan Chernovsky, Vice President of Marketing at Placer.ai. How are you this morning, Ethan?

Ethan Chernovsky  16:23

I mean, I'm doing great if we're doing Fight Club, though, does this mean I get to pretend I look like Brad Pitt.

Michael LeBlanc  16:28

One of us does, one of us does. And you are coming to us live from Tel Aviv, right? 

Ethan Chernovsky  16:30

Absolutely. 

Michael LeBlanc    16:31

Fantastic. Fantastic. Now, before we dive into our (inaudible), not your first time on the podcast season, but for those who may have missed it or may not know enough about you or have heard of you but don't know enough as they need to. Tell us a bit about yourself and who you are and, and what you do and what Placer.ai is all about.

Ethan Chernovsky  16:54

Sure. So, I have been spending kind of my career in, in high-tech marketing, specifically working with startups. And for the last nearly four years I've been working at Placer, we’re a location data company. So, people vote with their feet, we're showing you how they vote across the US every single day. And we bring a whole range of different insights and analysis based on that data.

Michael LeBlanc  17:13

Let's set up today's Fight Club. Kohl's has been in the news quite a bit lately, more than, by the way, for those just to anchor everybody. Not everyone might be from the United States listening,1100 Us stores, 19 billion with a B in annual sales. The largest department store chain in the United States. But they're struggling to find a path, so you know, recent reports are a dour outlook, bloated inventories that kind of left at the altar a little bit, most recently trying to sell themselves to Franchise Group of all people. 

Michael LeBlanc   17:37

On the positive, they had a great partnership with Sephora. And apparently, it's generated a million new customers, a million new customers that's hard to get when you're a big depar-, already a big department store who are younger, diverse, shop more frequently. And of course, they got their Amazon partnership with (inaudible) footfall, which is not easy to come by for anyone. 

Michael LeBlanc   17:54

All right, so let's start getting into this. 

Brad Pitt    17:58

“I want you to hit me as hard as you can. Why? How much can you know about yourself when you have never been in a fight”? 

Michael LeBlanc   18:06

Let's start with Steve, (crossover talk), you don't believe, (crossover talk), they are likely, they are likely to transform, fire away.

Steve Dennis  18:22

Well, you know, I guess I come at this, and some people may think that I've got a little bit of an axe to grind. Because way back when, when I was at Sears, particularly the late 90s, early 2000s, Kohl's was one of the brands that was really stealing market share from us, but it is not about revenge. It is about just the reality of what's going on in retail and has been going on in retail really, since probably, you know, late, late 90s, early 2000s, which is that this, this middle ground where most of the moderate department stores are, whether we're talking about on the mall, like Macy's and JC Penney, or we're talking about off the mall, which is Kohl's. 

Steve Dennis    18:46

That whole sector has been losing market share for more than 20 years. Now Kohl's, as I mentioned, was doing a little bit better kind of in the early days, but really for quite some time. They've kind of tread water and if you look at the statistics, now they've got Michelle, she's not so new anymore, but Michelle Cass, Gass, who came in has launched a lot of these initiatives, most of which you've mentioned, and none of them really seem to be gaining any traction. 

Steve Dennis    18:57

But first, I'll just say the big picture. What is the argument fundamentally, that says that this vast middle ground, which has been losing share, as I said for you know, really 20 plus years is going to turn around just as a category. And within that, what really suggests that Kohl's is going to gain significant market share. I can't see anything that it's really compelling, not that they can't improve some things, and not that they haven't improved some things. But what they would have to do to really change the fundamental trajectory of retail, I think is so significant. And they haven't laid out anything that I think will move the dial.

Steve Dennis   19:45

And if you look at the facts, since they've put some of these initiatives into place, they've gone precisely nowhere. Their sales in 2019 were about 20 billion. I think you mentioned that they have lost ground in the last few years, despite having Sephora open despite having Amazon open, despite several of their competitors closing hundreds of stores. So, if these initiatives were really working, if they were gaining share from their competitors, their sales would be up a lot. And they haven't gone up at all, in fact, on an inflation adjusted basis they've gone backwards. And, you know, we could argue a little bit about what's going on, in kind, of in the short term, but certainly their earnings are going in the other direction as well. They're about half of what they were three years ago.

Michael LeBlanc  21:06

Well, Ethan, that's a flurry of blows coming from Steve. Now you are the master of understanding traffic patterns, movements. And I think you've got a different perspective, what's your argument or perspective or more optimistic scenario, with Kohl's and department store?

Ethan Chernovsky  21:22

I think, so it actually begins with a, a fundamental difference in opinion on this idea of the contraction of the middle. And I think, the perspective of the way you start from 20 years ago, I think there's, there's almost no question that, that this idea is right. But when you look at a more short-term perspective of this bifurcation of retail phenomenon that's pushed things either towards luxury or towards high value, I think we're seeing a stark change, because the opportunity exists in the middle. So, when we think about the luxury lane, we see how much competition there is. We can rattle off brand after brand that we know dominates within that space. And the same is true in value. 

Ethan Chernovsky   21:57

But it's actually the middle where there's the most interesting things happening, because it's the most underserved because of the level of complexity in serving that market. Because what defines the middle is not, you know, imagine a $20 product versus a $5 product. The middle is not about making sure everything is kind of halfway in between those two, it's about understanding where people are willing to spend more and understanding where they're looking to save. And that's why I think you're seeing moves, whether it's you know, the Walmarts of the world trying to kind of upmarket whether you look at the Big Lots or Dollar Generals looking at these upmarket concepts. It's because there's an exciting opportunity in the middle. 

Ethan Chernovsky  22:13

But when we look at Kohl's more specifically the addition there is some of the things that they've been doing. So, has Sephora changed everything for Kohl's. No, is it a very strong step in the right direction? Absolutely and especially when we think about when this took place. So, if we had seen Kohl's in, in a quote unquote, normal environment. 

Ethan Chernovsky   22:29

So, imagine that the pandemic doesn't hit, which clearly, you know, it did, and it has a huge effect, that 19 that decline in revenue compared to 19 is significant because Kohl's really struggled within the pandemic. And by the way, so did, other quote unquote middle oriented retailers do, I think that's going to bounce back as the impact of the pandemic begins to dissipate as we see a decline in some of these economic headwinds. 

Ethan Chernovsky   22:51

And then all of a sudden, that's a foreign concept has a real power. And already we see that locations with Sephora and it outperformed really significantly in terms of both foot traffic. We've heard the company talk about revenue, but then there's these other ideas that are on top of it. So, if it was just Sephora, I mean, it's a nice move, but it's probably not enough. 

Ethan Chernovsky   23:09

But then we think of Discover @ Kohl's which is a step by Kohl's to see how do we turn over ideas faster. How do we bring new concepts into locations to understand what's going to resonate with our audience and what's going to resonate with younger audiences. And that's another kind of adjacent move to what we're seeing with Sephora of Kohl's attempting to find its next wave. And this is important in and of itself, because we saw this with ma-, Macy's and others, brands that are willing to test brands that are willing to innovate and push the agenda are going to land on ideas that weren't even if there was a rou-, rocky first kind of steps into that play. 

Ethan Chernovsky   23:40

And now we also think about the fact that heading into the pandemic, so July 2019, through February 2020, Kohl's was seeing growth in visits consistently every single month. Since the pandemic that's been wiped away and they haven't returned to year-over-year or year over three-year growth. But when we take into account that kind of pandemic challenge, it gives us reason to wonder whether this post-pandemic environment will be much friendlier. I also think we have to remember that suburban footprint power that right now, are they taking full advantage? No. 

Ethan Chernovsky  24:11

But in terms of their positioning in the long term when we know that these really interesting audiences, younger audiences have been moving into the suburbs. Their positioning is really powerful when you think about their attempts to get younger, their attempts to bring urban oriented brands like Sephora, which are usually kind of city centers, malls into these suburban locations. This is a really powerful way to try and kind of take away this negative trend that they've been, that they have been facing, and is called a guaranteed success story in the next year. No, if they continue to push forward with ideas that bring in younger audiences that evolve their brand forward, I think they do have a really good chance to recover.

Michael LeBlanc  25:26

Well, Steve, Ethan's putting some judo moves on you there. He's taken the, the strength of your, you know, weakness in the middle, and he's converting it to a strength. In other words, if I get the essence there, and I'd love to hear your opinion, he basically said everybody left the middle of leaving it open for growth. What do you think, what do you make of that and, and the idea that you know, this strength in the burbs is pretty important. In addition, as people work from home, they're shopping where they live?

Steve Dennis  25:52

Well, several things. One is, and this may be a little bit of a definitional issue. The middle ground in terms of price points is still valid. The middle ground in terms of market positioning is going to continue, I'll, I'll go out on a limb is going to contract. And the reason is that not that these brands, whether we're talking about Kohl's or others, aren't getting better. But the problem is, particularly if you're in a market, which is pretty flat. Customers don't shift their preferences for a slightly better version of mediocre or incremental improvement.

Steve Dennis   26:14

And the challenge for Kohl's and Macy's is there's lots of other competition either with a strong value proposition in terms of pricing, or more convenience. Keep in mind most of the department stores, you know outside of eCommerce are competing, have lost most of their market share to brands like TJ Maxx and other value players who have 10 locations in a trade area for every Kohl's. Similarly, with Sephora, not only are there lots of locations where you can buy beauty, but they're going up against stealing the Alta customer. So, it's not that these aren't. And I certainly agree that Kohl's is trying a lot of things. And if I worked there, those are probably the sort of things I would try. 

Steve Dennis   27:32

But I think they're going to be very incremental because they're not powerful enough to steal meaningful market share. And for the Kohl's model to work economically, they're going to have to start growing at like, you know, 10 to 15% per year. You know, once we get past this, you know, we're in a recession or whatever. So, it's not that these aren't decent ideas. It's just they're not powerful enough to steal customers away from so many amazing competitors. 

Steve Dennis   27:43

And a lot of what they're doing in terms of, like, casual apparel and all these things. They're perfectly fine idea, perfectly fine ideas. But there are so many other places to get essentially the same product at a little bit lower price, or at a more convenient location, or convenient in terms of you know, access, but also convenient in terms of you're already going to Target to buy your groceries or other things. I'll pick up some of these other items as well.

Michael LeBlanc  28:07

Well, that's a bit of a Suplex movie (inaudible) and he's taken that argument, you're flipped, you're down. It's tough to argue against numbers, but you see bigger, broader numbers. So, bring us home, tell us your final, you know, where you sit on being positive about this in your last swing?

Ethan Chernovsky  28:25

So, I think when, when I think and I look back at, you know, in, in the in the, you know, era of loving judo, you know, let's steal Steve's key terminology like I love, I think a lot about what is remarkable retail, like, what is it that makes it kind of noteworthy and special? And I think when we look at brands that provide something that makes it worth the visit. And I think that we have a tendency to overemphasize convenience, and even slightly to over emphasize value. It's, it's about this combination of factors. 

Ethan Chernovsky   28:48

And what Kohl's has, is a very strong brand. And if we go and we ask every retailer on planet Earth, who is trying to kind of grow right now, there are about 20 of them that would have a better brand awareness factor than Kohl's. And so, this idea that you have this awareness in this poll, then you have this willingness to move into ideas like the Sephoras'. If you are aggressive enough to launch more of them. If you're actually capable of bringing in younger, more kind of edgier operations in this Discover @ Kohl's concept, you have a real fighting chance to create something that is a bridge that the even though I love off-price that the off-pricers can't compete with because you can start bringing in brands that are ahead of the curve. And it's not just about value. It's not just about the treasure hunt. It's because maybe you have something that others don't have. 

Ethan Chernovsky   29:13

The other piece here is if we see digitally natives look to be to temper their desire to own locations and maybe look towards wholesale a little bit more with you know, mutual friends like Simeon Segal had been suggesting for a while That's an opportunity for Kohl's to come in and snatch up this, this, this market and say, hey, you want to come speak to this new suburban audience that's a little bit younger than it used to be that has a little bit more display, you know, income to spend, because they they're spending a little bit less on rent, they have more room to fill up in this house as opposed to the apartment they have come and reach them here. 

Ethan Chernovsky   29:42

I think there's a really powerful argument, there are clearly challenges that Kohl's is going to face and they're going to need to move faster and even more aggressively than they have. But I think these steps indicate something really strong, some really strong movement in the right direction. If they can continue to build upon that they have more than a fighting chance. (Crossover talk). I get points for the fighting, right?

Michael LeBlanc  30:44

I know I was going to, (crossover talk), do that. That's twice you used that I was going to comment on that, good use of language, you get bonus points for that. Listen, this is the inaugural version of the Retail Fight Club and is in the movie. Everybody's a winner because it's a great swing. And the audience and the listeners are the big winners, listening to two great perspectives. So, thank you. Thank you, Ethan, for joining us. 

Michael LeBlanc   31:21

Tell us a little bit about what you're seeing in the market beyond the department stores. How are people moving around? We touched on a few of these things you both did, you know, are people moving into the burbs? Are the other downtown stores kind of really, you know, really struggling to get footfall because there's not people going into work? What are you seeing?

Ethan Chernovsky  31:28

So, I'll tell you, I'll talk to you about two things that we're really excited by one: is very much in the moment and a more short-term thing. And the other is, is a big long term one. So, on the short-term side, one of the interesting things we saw in about late July, was a turning point where year-over-year visits, which had been declining and increasingly declining week-over-week compared to 21. In discretionary categories, I think electronics, home improvement, clothing apparel, that was starting to trickle back towards through the middle of August, and even into late August and early September. 

Ethan Chernovsky   31:58

So, we do feel like we're currently seeing a turning point, at least in the short term for consumer demand for comfort levels with the current economic environment. And because the (inaudible) September is going to be a little friendlier, we expect that to continue through this through the month. 

Ethan Chernovsky   32:07

The big question is going to come in October when you have this really strong month in 21, in that pre-panda-, pre-holiday kind of push for sales. And there will be a strong question to ask, you know, heading into that period. But then we should be in another friendlier environment, especially when you think brick and mortar, because November and December of 21, we're already starting to feel the impact of Omicron. And so there is this opportunity in the brick and mortar environment to have a much stronger, 22 holiday season than they did a year ago. 

Ethan Chernovsky    32:27

The second thing we're looking at, and we are this, is a, this is a topic that we've been investigating for, for years now and getting increasingly excited about is the idea of the retail media network. And it's basically if you look at Albertsons, Walmart, Dollar General, many others saying, our store is more than just about sales per square foot. It is a marketing platform. It's an advertising platform. It's an advertising platform, where the consumer has a tremendous amount of intent, because they're already in the location where they're spending. And so, if I can deliver them the right experience, the right ad, the right, the right element, within that shopping experience, can I drive that excitement really close to the point of purchase. 

Ethan Chernovsky   33:01

But even more exciting is its ability to say I want to reach markets in a different way. So, I don't want to just think in terms of the CBSA or a DMA. I want to think in terms of a retail experience. So, a Dollar General, within a town that has less than 100,000 people, that's my market, or an area that's over indexed for millennials, or an area that has, you know, a certain type of population where it can reach on a certain kind of holiday or event to bring them better products. So, this idea of recognizing the advertising, marketing power of the retail locations, is something that we've been looking at a lot, which has really interesting data. You know, Walmart, Target, many others, their unique visits offline are much larger than what they're getting online. And so, that recognition is going to drive a huge push to add new revenue streams and bring more power to CPG companies in the way they reach audiences, and it's something we're really excited about.

Steve Dennis  34:29

Well, thanks so much for joining us, Ethan, on this inaugural Fight Club. You know, I'm sorry, you had such a weak case to have to argue but you know, it's our podcast, we get to decide these things, and we get to set people up. But no, seriously, you did, you did a great job, always a great perspective. And you, you have the advantage working at Placer and you actually have some data, whereas I just mostly make stuff up. So that's, that's a bit of an unfair advantage, I suppose. But thanks for joining us, and we look forward to seeing you out in the world sometime soon.

Ethan Chernovsky  35:00

Thank you so much for having me. Oh, always weird to have to fight your friends, but it is, it was a joy, nonetheless.

Michael LeBlanc  35:07

Well, thanks for being a good sport about it, both of you. If you like what you heard, please follow us on Apple, Spotify, your favorite podcast platform so you can catch up with all our great interviews, like our discussion with Seth Godin on what retailers can actually do to fight climate change. New episodes of Season 5, presented by MarketDial will show up each and every week. And be sure to tell your friends and colleagues in the retail industry, all about us.

Steve Dennis  35:29

And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.

Michael LeBlanc  35:29

And I'm Michael LeBlanc, Consumer Retail Growth Consultant, keynote speaker and producer and host of a series of retail trade podcasts including this one, plus the host of the popular YouTube cooking show Last Request Barbecue. You can learn even more about me on LinkedIn or at meleblanc.co. 

Safe travels everyone.

SUMMARY KEYWORDS

Kohl’s, retail, bit, brands, Steve, Ethan, big, pandemic, department store, people, little bit, continue, idea, Sephora, terms, fight, locations, year