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Kohl’s plans to open 200 stores within its establishments by the end of September. The retailer will sell a wide variety of baby items, including strollers, car seats, and cribs.
WOODLAND PARK, NJ — Kohl’s is betting on the little ones to boost its sales.
The retailer will open Babies R Us stores within its establishments nationwide starting this week and plans to have 200 by the end of September. The stores will offer a variety of baby items that the company has never sold before, including shampoos, strollers, and car seats. Previously, Kohl’s only sold baby clothing.
With this initiative, the Wisconsin-based retailer aims to better meet the needs of young families, whether decorating their homes, preparing for back-to-school, or expecting a new baby. Most of Kohl’s approximately 1,170 stores are located in suburban shopping centers, just a short drive for busy parents running errands or grocery shopping.
In addition to the baby category, Kohl’s is also expanding its range of home products, gifts, and impulse items. CEO Tom Kingsbury estimated in late May that these expanded categories, including Babies R Us, represent “a sales opportunity of over $2 billion” in the coming years.
However, U.S. demographics are not in Kohl’s favor. There were 3.59 million births in the United States last year, according to provisional data from the U.S. National Center for Health Statistics. That’s the lowest number of births in more than 40 years.
During a store tour in New Jersey on Wednesday, Chief Merchandising Officer Nick Jones showcased the first Babies R Us store. Customers entering the store can see and touch many of the more expensive items, such as strollers, cribs, and high chairs, outside of their cardboard boxes. The stores feature many of the top baby brands, including Hatch, Frida, Graco, and BabyBjorn.
In recent weeks, online shoppers have also seen Babies R Us on the Kohl’s website. Its website offers twice the number of products compared to the approximately 800 to 1,000 items available in most stores, the company said. Kohl’s will also launch a baby registry this fall.
Each store will be of a different size but will be located next to the baby and children’s clothing stores already present in all stores. Jones said more products for expecting families are on the way, including baby clothing from Nike. It is also introducing maternity clothing from Motherhood, a direct-to-consumer brand, which will be exclusive to Kohl’s stores.
The retailer is launching the Babies R Us stores at a time when it needs growth drivers. Kohl’s net sales totaled $16.6 billion in its last fiscal year, which ended in early February. That is almost 14% less than five years ago.
Kohl’s predicts that current annual net sales will decrease by between 2% and 4%. In the first fiscal quarter, it reported a surprising net loss of $27 million and lowered its annual outlook in late May.
Kohl’s shares have fallen 24% this year, compared to gains of nearly 16% for the S&P 500 index over the same period.
Like other retailers, Kohl’s has had to deal with shoppers postponing discretionary purchases while spending more on daily expenses like food and housing. However, Kohl’s challenges go beyond that, according to Dana Telsey, CEO and Chief Research Officer of Telsey Advisory Group. She said it needs to refine its merchandise to capture the attention of new and existing customers.
“There has been so much competition from others,” she said. “A brand has to stand for something and have relevance.”
Inside the Kohl’s Babies R Us stores, customers can touch and feel some of the more expensive items that might be on their shopping or registry list.
Fewer Births, But More Premium Products
Kohl’s is targeting the baby category as innovative and high-end products, such as luxury strollers, drive spending.
Sales of baby products totaled $7.5 billion for the 12-month period that ended in May, a 4% increase compared to the same period in 2020, according to Circana, a market research firm that tracks the industry. It includes a wide range of items like car seats, strollers, bottles, cribs, high chairs, bassinets, and breastfeeding systems.
Stephen Hinz, an industry consultant at Circana who tracks baby product sales, said customers’ willingness to pay for high-quality baby items has driven spending.
He indicated that the U.S. Census Bureau has found that the average age of American women giving birth is 30 years.
“People are at a very different stage of life at that time,” he said. “They are older, more established in their careers, more likely to be homeowners. They have more disposable income. And that has a greater influence on the things they choose to bring into those homes.”
Hinz said the market has remained stable despite the low birth rate, as parents opt for more sophisticated items like natural wood cribs and car seats that swivel for easier entry and exit of the baby. Families will adjust their budgets to support the health and safety of a child even in tough economic times, he said.
Additionally, new parents have more retailers and brands to choose from and new ways to register for baby products. Large chains like Target and Macy’s have expanded their departments dedicated to newborns. Macy’s launched its own baby registry in late April. Universal registries like Zola and Babylist have gained popularity by allowing customers to choose items on retailers’ and brands’ websites.
In an interview with CNBC in March, Kingsbury said there is market share available in the category. He pointed to the bankruptcy and store closures of Bed Bath & Beyond, the parent company of Buy Buy Baby.
And, he said, customers shopping at Babies R Us will also buy items in other departments.
Kohl’s is making a similar move to what it did with Sephora beauty stores, which it is opening in all its stores. On earnings calls, Kohl’s leaders said the stores are attracting younger and more diverse customers.
Jones said Kohl’s will decide whether to open more Babies R Us stores in other locations after receiving feedback from the first 200 locations.
Kohl’s will place the Babies R Us stores next to its current baby items. It will also add related products, such as baby clothing from Nike and maternity clothing from Motherhood.
Is Babies R Us Still Relevant?
With the relaunch of Babies R Us, Kohl’s will test whether the brand is still relevant or has become obsolete.
The Babies R Us brands and its former parent company Toys R Us are now owned by WHP Global, a New York City-based brand management company. The company has bought and tried to rebuild other brands, including Bonobos, Rag & Bone, and Isaac Mizrahi. Toys R Us closed its stores after filing for bankruptcy in 2017.
Kohl’s and WHP Global, which announced the deal in March, did not disclose the financial terms of the agreement.
In addition to the deal with Kohl’s, WHP Global also has an agreement with Macy’s, which has opened Toys R Us stores in several of its department stores.
Kohl’s move is risky because tastes have changed since the brand’s heyday in the ’80s and ’90s, said Natalie Gordon, founder and CEO of Babylist.
She said many retailers did not meet customers’ expectations, with little opportunity to try products firsthand. She recalled her frustrations with retailers when she was preparing to have her first child about 13 years ago, which sparked the idea for Babylist.
“I felt infantilized by the brands that existed,” she said. “Things were pink and blue with little cartoon characters. And I’m a woman who is pregnant. It didn’t resonate with me at all.”
Kohl’s latest iteration of Babies R Us features the brand’s familiar font, but Kohl’s and WHP have given the brand a more contemporary look, said Christie Raymond, Kohl’s chief marketing officer.
“There is a lot of credibility,” she said. “But we needed to modernize it.”
The stores are decorated with stylish photos of children, rather than pastels or cartoon mascots like Geoffrey the Giraffe from Toys R Us.
Kohl’s will use a marketing tool that didn’t exist during the heyday of Babies R Us. It plans to partner with influencers who can spread the word about the stores on Instagram and TikTok.
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