Tapping the trove of high-margin accessories

Kohl’s wants its shoppers to shop more across the store. The retailer is encouraging shoppers to buy in its accessories, jewelry and cosmetics departments in addition to its home and apparel departments where customers typically buy the bulk of their Kohl’s merchandise.

“A majority of our shoppers really only buy in one of our six lines of business throughout the store—approximately 60% of our customers do that,” said Wes McDonald, Kohl’s cfo, at a Piper Jaffray Consumer Conference in June. “We have a big opportunity if we can get them to buy a handbag or a piece of jewelry to go with that sportswear outfit.

According to Kohl’s research, the company still has a very small market share of customers who buy what the retailer calls “Kohl’s-like merchandise.” On average, customers spend about 10% of their spending, or $300 dollars per year, at Kohl’s. Average transactions ring in at about $50, and Kohl’s customers frequent their local store about five or six times per year.

A major opportunity for cross-shopping at Kohl’s is the cosmetics department. Less is more for the company in the beauty arena: since 2004, Kohl’s has partnered with Estée Lauder’s Beauty Bank division for exclusive product. This product is divided into a few different beauty lines, which include American Beauty, FLIRT!, goodskin and grassroots, among others.

As one of the only non-promotional departments of the store, and one that’s situated in the front of Kohl’s latest store prototype, cosmetics are one of Kohl’s answers to driving up the average ticket price for each customer transaction. The area has been growing comparable-store sales, according to analyst reports, and it will continue to do so.

“Management is focused on driving product trials…and expects Beauty Bank to continue to grow. Recent introductions at Kohl’s (Tri-Aktiline and a fifth fixture for fragrances) demonstrate that customers respond to newness in the area,” said Deborah Weinswig, a senior retail analyst for Citigroup, in a report.

The handbag and jewelry departments are other areas where Kohl’s hopes to attract more customers. According to McDonald, only 33% of Kohl’s sales are in women’s apparel, but in only a small fraction of those sales do customers also buy a matching handbag.

In the store, Kohl’s has tried to change this by adding additional Chaps handbag fixtures adjacent to its Chaps women’s apparel in all of its remodeled stores. Kohl’s is also incorporating additional integrated strike points across the store that encompass apparel, footwear and accessories in one presentation in order to encourage customers to complete the look.

The company is also beginning to promote what it has to offer across individual brands, rather than for individual items. For example, when Simply Vera launches in stores this fall, it will launch in accessories, handbags and cosmetics, as well as sportswear and intimates. In the past when Kohl’s has launched its exclusive brands, it typically waits until later to launch accessories, jewelry and makeup product. However, since Simply Vera is launching as a brand rather than as individual items, it will encourage cross-shopping, analysts say.

“Management believes that customers tend to shop only one classification currently as a result of the company’s historically item-focused (versus branding-focused) promotions and because of its convenience proposition,” Weinswig said in a report. “The introduction of Simply Vera, which will launch across multiple categories, will further solidify [a cross-shopping] strategy.”

Apart from initiatives inside the store, Kohl’s is also promoting cross-shopping through direct mail efforts and event marketing campaigns. A new tagline, “Explore the Store” will be launching this quarter, McDonald said. Kohl’s has already experienced some success with its previous direct mail efforts promoting cross-store shopping.

“Last year, we had great success with our jewelry mailers,” McDonald said. “This year we expanded it…with a shoes and handbag sale we ran earlier this spring.”

Kohl’s has also had success with its shopping events, which have been branded “Super Saturdays,” “Power Hours” and special two-day shopping events.

“We have a lot of opportunity to gain share of wallet here if we can be successful in this cross-shopping initiative,” McDonald said.