Amazon a ‘friend’ to retail giant Kohl’s: Kohl’s CEO

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Sales at e-commerce giant Amazon (AMZN) have soared this year as the coronavirus pandemic forced many Americans into their home, prompting a surge in online shopping and a string of bankruptcies for brick-and-mortar retailers like J.C. Penney (JCPNQ) and Lord & Taylor.

Department store giant Kohl’s (KSS), which boasts nearly 1,200 stores nationwide, has struggled to keep up — but the company doesn’t blame Amazon.

In a new interview, CEO Michelle Gass called Amazon a “friend,” noting a mutually beneficial partnership between the two companies that allows Amazon customers to return their items at Kohl’s stores, and enables Kohl’s to derive additional value from its large brick-and-mortar footprint.

“I would definitely put them in the friend category,” Gass says. “When we created this relationship a few years ago and started testing, it definitely got a few questions like, wait a minute, aren't you competing with Amazon?”

“I would say there's plenty of market share to be had,” she adds. “There's billions of dollars and the kinds of products we sell.”

Kohl’s temporarily closed its stores nationwide in the early weeks of the coronavirus outbreak, causing sales to plummet 33% in the first half of the fiscal year. But the company saw an increase in digital sales, including a 58% spike in the second quarter compared to the same quarter last year even as overall sales dropped 23% year-over-year.

Meanwhile, Amazon’s sales have spiked this year, including strong third quarter earnings released last week that showed a 37% increase in sales year-over-year.

The Kohl’s partnership with Amazon, which began with a pilot program in 2017 and expanded to all stores last year, permits customers to return items bought on Amazon to any Kohl’s store. In turn, Kohl’s packages the product and sends it to an Amazon return center.

The partnership gives the department store chain an opportunity to optimize its physical locations, Gass said.

“The future of brick and mortar, it's not just about transacting and buying products,” she says. “We're using them to fulfill goods, so they’re an omni-channel fulfillment center as well.”

“So we've really challenged ourselves to think creatively about all the ways that this physical space can be used and serve our families,” she adds.

U.S. consumer spending rose 1.4% in September, the fifth straight month of gains but a more modest jump than the sharp increases earlier in the year. Kohl’s will release its third quarter earnings later this month.

Kohl's CEO Michelle Gass appears on "Influencers with Andy Serwer."
Kohl's CEO Michelle Gass appears on "Influencers with Andy Serwer."

Gass spoke to Yahoo Finance Editor-in-Chief Andy Serwer in an episode of “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.

The returns programs brings new customers who belong to an otherwise hard-to-reach demographic, Gass said.

“What we get is we get new traffic,” she says. “What we're finding is we are getting new customers and we're seeing a younger customer — those are both very strategically important to us.”

“I can't say enough with them,” she adds. “They've been a great partner to us.”

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