The Company operates family-oriented, specialty department stores that feature
quality, national brand merchandise priced to provide value to customers. The
Company’s stores sell moderately priced apparel, shoes, accessories and home products
targeted to middle-income customers shopping for their families and homes. Kohl’s
offers a convenient shopping experience through easily accessible locations, well
laid out stores, central checkout and good in-stock position which allows the
customer to get in and out quickly. Kohl’s stores have fewer departments than
traditional, full-line department stores but offer customers dominant assortments
of merchandise displayed in complete selections of styles, colors and sizes. Central
to the Company’s pricing strategy and overall profitability is a culture focused
on maintaining a low cost structure. Critical elements of this low cost structure
are the Company’s unique store format, lean staffing levels, sophisticated management
information systems and operating efficiencies resulting from centralized buying,
advertising and distribution.
In support of its geographic expansion, the Company has focused on providing
the solid infrastructure needed to ensure consistent execution. Kohl’s proactively
invests in distribution capacity and regional management to facilitate the growth
in new and existing markets. The Company’s central merchandising organization
and market solution teams tailor merchandise assortments to reflect regional
climates and preferences. Management information systems support the Company’s
low cost culture by enhancing productivity and providing the information needed
to make key merchandising decisions.
The Kohl’s concept has proven to be transferable to markets across the country.
The Company’s approach is to enter new markets with critical mass to establish
a presence and to leverage marketing, regional management and distribution costs.
New market entries are supported by extensive advertising and promotions designed
to introduce new customers to the Kohl’s concept of brands, value and convenience.
Additionally, the Company has been successful in acquiring, refurbishing and
operating locations previously operated by other retailers.
Merchandising
Kohl’s stores feature moderately priced, national brand merchandise, which
provide value to customers. Kohl’s merchandise is targeted to appeal to middle-income
customers shopping for their families and homes. The Company’s stores generally
carry a consistent merchandise assortment with some differences attributable
to regional preferences. The Company’s stores emphasize apparel and shoes for
women, men, and children, soft home products, such as towels, sheets and pillows
and housewares.
Convenience
Convenience is another important cornerstone of Kohl’s business model. At Kohl’s,
convenience begins before the customer enters the store, with a neighborhood
location close to home. Other aspects of convenience include easily accessible
entry, knowledgeable and friendly associates, wide aisles, a functional store
layout, shopping carts/strollers and fast, centralized checkouts. The physical
store layout coupled with the Company’s focus on strong in-stock position on
color and size are aimed at providing a convenient shopping experience for an
increasingly time starved customer. In addition, Kohl’s offers on-line shopping
on the Company’s web-site. Designed as an added service for customers who prefer
to shop from their homes, the web-site offers key items, best selling family
apparel and home merchandise. The site is designed to provide an easy-to-navigate,
on-line shopping environment that complements the Company’s in-store focus on
convenience.
Distribution
The Company receives substantially all of its merchandise at seven distribution
centers, with the balance delivered directly to the stores by vendors or their
distributors. The distribution centers ship merchandise to each store by contract
carrier several times a week.
Competition
The retail industry is highly competitive. Management considers quality, value,
merchandise mix, service and convenience to be the most significant competitive
factors in the industry. The Company’s primary competitors are traditional department
stores, upscale mass merchandisers and specialty stores. The Company’s specific
competitors vary from market to market.
