Dive Brief:
- Kohl's reduced its inventory 7% in the first quarter of 2018, making it the ninth consecutive quarter of inventory reductions, the company said in an earnings call.
- The retailer's "ongoing focus on inventory management" was a large driver of a 0.5% increase in gross margins, Kohl's CEO Michelle Gass said in the call.
- Kohl's said it continues to invest in technology, such as data analytics and cloud migration, to improve its inventory forecasting and growth in omnichannel.
Dive Insight:
Kohl's strives for operational excellence, and it's on the path forward with its 7% inventory reduction.
Managing inventory is a classic Goldilocks problem — have excess and see higher operating expenses and lower margins, but have too little and deal with unsatisfied customers waiting for out of stock items to come in.
For a retailer like Kohl's that sells in store and online, managing inventory requires forecasting and analyzing sales in both channels.
"Our omni-channel fulfillment strategy is helping us improve the speed, quality and cost within our fulfillment network," Gass said. Kohl's will start building it's sixth e-commerce fulfillment facility this year.
For some online orders, Kohl's has leveraged its stores as fulfillment centers, using existing inventory to fulfill purchases more quickly, especially for Buy Online Pickup In Store (BOPIS) orders. In the first quarter of 2018, stores fulfilled 30% of digital units.
BOPIS has the added benefit of lowering overall shipping costs at the store, Gass said — a headwind many companies are grappling with amid the trucking capacity crunch.
Kohl's is expanding on BOPIS with a new initiative this summer known as "BOSS" — buy online, shipped to store. "This is another great way that we see we can bring traffic into our stores," Gass said.
