Inflation rates are ballooning whilst salaries and wages remain unchanged and as a result, now more than ever, consumers are being extremely cautious about how and where they spend their money. During these tense economic times, the first to take a hit are non-essential stores like clothing stores or specialty retailers.
Despite its massive popularity once upon a time, department store chain Kohl’s has been struggling for many consecutive quarters now. In 2024, more than 7,300 stores were compelled to shut its doors permanently and Kohl’s themselves will be shuttering close to 30 of their own branches once April hits.
E-commerce spells trouble for department stores
Since 2020, department stores in particular have been struggling to keep afloat. The issue began with the pandemic when consumers shifted their preference to online shopping due to health concerns and things have not been able to return to a pre-COVID state since.
Department stores are dependent on loyal customers who takes time out of their schedules to meander through the store, loading their carts as they browse. Having inventory in front of you like this does tend to make shoppers feel more confident in their purchases as they can see and feel the exact quality of the product — a perk that cannot be achieved when online shopping.
However, the general sense of convenience found in online stores is still preferred by most consumers which poses a problem for these kinds of brick and mortar stores. They simply do not have the same level of digital infrastructure as e-commerce giants like Amazon and as such they are incapable of offering customers the same level of rapid service even if they do have an online store. Unlike Amazon who offers same day delivery, or at the very least 48 hour delivery, these primarily physical stores usually have a 7 day average waiting period for online orders.
How is Kohl’s coping?
Over the years, Kohl’s has managed to develop a loyal customer base thanks to its enticing rewards program and broad spectrum of inventory. Unfortunately, not even a loyal fan base is enough to deter the effects of growing inflation rates and its resulting decline in demand.
As such, the company has had to explore all of its option and enact a restructuring plan to ensure it survives new competition and the economic landscape in general. In terms of earnings and revenue for the most recent quarter, the retailer did manage to exceed the expectations of analysts. However, this is expected to decline for 2025 and it is projected that comparable sales will drop by 4%-6%.
The company decided to restructure by means of closing down 27 stores nationwide, as well as by laying off 10% of its corporate workforce. This kind of move has been a growing trend in the retail sector in recent months.
Another major change for the retailer is its decision to test out a discontinuation of its Amazon return service at some stores. Kohl’s introduced this third-party service at its stores in 2017 in a bid to attract new customers and increase foot traffic. This collaboration was aimed at boosting sales for Kohl’s but unfortunately, despite Amazon sales sky-rocketing, Kohl’s has been recording a decline in sales.
A company spokesperson confirmed that for the time being, this is only a temporary test as the company explores cost-cutting options. Kohl’s employees in Leominster, Mass.; Washington, Missouri, and Eau Claire, Wis., have also confirmed that their stores no longer offer the Amazon return service.
“To continue to learn from our customers, we are conducting a test in a handful of our stores where we will be temporarily discontinuing the third-party returns service,” the Kohl’s spokesperson explained. “Kohl’s has a test-and-learn culture that helps us to evolve our store experience and stay informed about customers’ expectations and preferences.”