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The Kohl's Mystique
How a value-driven, coupon-crazed milwaukee company conquered America's shoppers - and

One New York day in May, a black Cadillac Escalade pulls up, and the ever-stunning Jennifer Lopez and her photogenic husband, Marc Anthony, exit hand in hand with a quick wave to the crowd. Donning a luscious cream pea coat over a three-quarter-length sleeve, sequin-covered gold top with high-waisted, wide-leg tan trousers, J. Lo walks swiftly alongside Anthony, who is wearing distressed denim with a crisp, white button-down and an army green midlength military jacket. It’s all about the clothes, after all. Two months later, they’ll announce their divorce (that’s showbiz), but right now, they are guests of honor for this fashion event, grabbing hugs and congrats from a crew of notables in the showroom space. On hand is Nina Garcia of Marie Claire and “Project Runway,” an editor from InStyle, and many others.

“We had every magazine here from Vogue to Elle to Glamour. Marie Claire. Everything!” Lopez gushes. She is positioned in front of a Kohl’s backdrop.

Kohl’s? The Milwaukee-based department store?

Exactly. This is the official preview for the Jennifer Lopez and Marc Anthony collections, debuting exclusively at Kohl’s this fall, and the professionally produced video, set to perky Latin music, runs rapid fire through glimpses of the collections and interviews with J. Lo, Marc and fashion editors.

“I think people are going to be really spoiled by this collection, because it offers a lot of quality for a lot of value,” Garcia says.

The merchandise looks stunning, filled with glitz and glam, perfectly mirroring the outfits of both Lopez and Anthony. There are trousers a la J. Lo, minidresses, faux-fur accents and plenty of sparkle. The look, Lopez says, incorporates old Hollywood glamour, a movie-star feel. “I wanted to bring all of those elements of my style into this first collection for Kohl’s,” she explains.

The talking points are clear, the production seamless. Even the fashion editors drop the right phrases and word choices. That’s the Kohl’s way.

But how in the world did Kohl’s, a midlevel department store headquartered in suburban Milwaukee and focused on value, land one of the biggest names in the business?

Lopez is a judge on “American Idol,” one of TV’s highest rated shows with 25 million viewers. People magazine named her the “World’s Most Beautiful Woman” in April. Her latest album, Love?, debuted in May, with single “On the Floor” reaching No. 3 on the Billboard Hot 100. She’s one of the most sought-after film actors, signing on in June to What to Expect When You’re Expecting alongside Cameron Diaz.

And now, her name is in lights (as is her soon-to-be ex-husband’s) in Kohl’s Department Stores, which boasts some 1,100 locations in 49 states. Not to mention in plentiful marketing materials online, in print and on air.

“This will be the biggest brand launch Kohl’s has ever done,” says Kevin Mansell, Kohl’s CEO, chairman and president. “And that’s saying something, because we’ve had some big launches.”

The focus on exclusive, private brands and celebrities is a not-so-recent development for Kohl’s, but as it accounts for nearly 50 percent in total sales, and the corporation grows substantially each  year, it’s clear the company has transformed itself from the old days of motor oil displays and plain-Jane discount clothing.

Kohl’s has turned into one of the most stable and successful names in retail, exporting a Milwaukee-style value orientation to the entire nation. It is notoriously tight-lipped about how it achieved this remarkable success. And that’s odd. It’s quite a story.

 

***

 

Exiting Highway 45 in Menomonee Falls is nothing extraordinary. The stretch of suburban Silver Spring Drive is lined with chains, and as the road narrows, Silver Spring Business Park appears. An ominous black rectangular structure looms above the tallest trees and buildings, and Ridgewood Drive approaches. A quick right turn on that winding road unveils the Kohl’s corporate offices, including that black seven-story, windowed tower.

 “In Menomonee Falls, there are very few buildings on the order of magnitude of Kohl’s, so it sort of stands in stark contrast with virtually everything else,” says Mark Fitzgerald, village manager of Menomonee Falls.

The parking area screams of the company’s size. The lot is broken up by brands (Food Network, Cuisinart, Fisher-Price) as markers, so guests and employees can remember where they parked. A loss-prevention SUV combs the entire complex, and shuttle buses transport guests from visitor parking to the headquarters. It’s efficient if slightly intimidating.

Inside, thousands navigate the mazelike cube farms with the help of maps posted for guidance. Offices overflow with product and circular drafts hang from walls in working states. Conference rooms are named after Internet browsers (Netscape, Mosaic, Mozilla), trees (Maple, Oak) and Wisconsin lakes (North Lake, Pine Lake, Lac La Belle). Eating areas boast similar themes. The Loft, which sits above one of the entrances, is packed at lunch hour with fashion-forward “associates,” as the company calls employees. Everywhere you go, they appear stylishly dressed, though, of course, their clothes aren’t necessarily from Kohl’s.

The company’s core VALUES (Very results-oriented; Acts with integrity; Leverages teams and partnerships; Uses an informed approach; Engaged, prepared and focused; Strives to develop self and others) are on display throughout the hallways. In big cities, you can stand on a corner and see three Starbucks stores. In the Kohl’s HQ, you can stand in one corner and see three displays of those values. Talk with any associates, and inevitably, they’ll mention them.

It has taken Kohl’s decades and several incarnations to reach this state of success. It’s a well-oiled machine where nothing less than perfection is accepted. The stress, competition and expectations can be felt just by entering the building.

The original Kohl’s was a family-owned chain of grocery stores that began in 1946 and added a line of discount clothing stores in 1962, following in the footsteps of Arlan’s, the kind of discount retailer that had motor oil pyramids at checkout. In 1978, BATUS Retail Group purchased 80 percent ownership of the company and began expanding the discount stores. In the ’80s, BATUS sold off the food stores, which eventually closed, and bought other retailers such as Gimbels, Saks Fifth Avenue and Marshall Field & Co. These higher-end retail stores left value-centric Kohl’s the odd man out, and BATUS wanted to unload it.

“Kohl’s was in bankruptcy basically,” says Mike Edmonds, the company’s first vice president of product development. “The folks at BATUS had decided to shut it down.”

In 1986, Kohl’s CEO Bill Kellogg and Chief Operating Officer John Herma led a management buyout, purchasing the stores from BATUS. “Bill and John mortgaged everything they had to buy the company,” Edmonds says. “They wanted to change it from top to bottom and wanted to be like Mervyn’s.”

Mervyn’s was a popular department store of the time that focused on soft lines (clothing, footwear, linens, etc.) and was in the process of closing its Dallas headquarters and merging all of its operations at its San Francisco office. Meanwhile, Kellogg and Herma had traveled to Dallas to scout talent from Mervyn’s for Kohl’s. They offered Edmonds a job as a division merchandising manager, and he accepted.

“A few months later, Jay Baker came on,” Edmonds recalls. Baker had been an executive with BATUS-owned Saks, and he and Kellogg had known each other for more than a decade. “Baker was the final piece in the puzzle.”

And so “the three amigos,” as Edmonds says they were coined, were born. There was Kellogg, the even-keeled Wisconsinite and Kohl’s lifer turned boss; Herma, the all-business money man; and Baker, the outspoken New Yorker with a vision.

Kellogg started as a store manager in Brookfield in 1967. He worked his way up, becoming merchandise manager, director of stores and then vice president. He was groomed for the job of president and CEO by Max Kohl himself, and assumed those titles right after the last Kohl family member left the business in 1978. “Max took a personal interest in Bill and taught him about … the competitive world of retailing,” a Spring 1992 Kohl’s newsletter reads. He brought a Wisconsin sensibility to the position and won over employees. “Kellogg was an excellent CEO,” Edmonds says. “He wasn’t a very public guy. But he had a keen sense of what’s right and what’s wrong.”

Herma started as senior vice president of human resources in 1979, according to the Spring 1992 newsletter. “Herma was very quiet, very much behind the scenes,” Edmonds says. “I’m hard-pressed to remember much of a sense of humor. Herma was interested in one thing, the bottom line of the company.”

Company President Jay Baker was the wild card, the New Yorker with the big personality. “He was a force, to say the least, a very hard guy to work for,” Edmonds says. “A Steve Jobs kind of guy. Excellent wasn’t good enough. But at the same time, he was one of the most inspiring people you could work for.” It was Baker who helped establish a fiercely competitive environment that has remained to this day. After all, the three amigos faced a formidable challenge: to save the sinking ship they had just bailed out with every last dime they owned.

“Kohl’s was an absolute disaster, so we just kind of started from the bottom up,” Edmonds says.

Over the next several years, Kellogg, Herma and Baker made revolutionary changes: altering inventory, dropping candy, sewing notions and sporting goods, and shifting focus to merchandise like linens and jewelry. They purchased 26 Main Street stores, a now-defunct department store chain, from Federated (now known as Macy’s) in 1988, moving Kohl’s into markets in Michigan and Minneapolis, and expanding in Chicago. And sales climbed, hitting $1 billion in 1992, up from just $388 million in 1988.

“It almost doubled the size of the company, and we pretty much took off from there,” Edmonds says of the Main Street purchase. Inventory continued to change, as did labeling.

“From the day Jay Baker walked in, he said, ‘We’re a department store,’ ” Edmonds recalls. “We all used to kind of laugh.” This had been a group of “old beat-down stores … attached to a bunch of grocery stores,” as Edmonds puts it. But Baker stuck to his guns. The name changed to Kohl’s Department Stores. It was a fixation for him.

“They were trying to get Levi to sell us the Dockers brand,” Edmonds says. “The president came in, and Jay kept saying, ‘We’re a department store,’ and the president of Levi kept saying, ‘You’re not a department store.’ ” They were standing on the floor of the Brookfield store, so Baker walked the president outside and pointed up. “See, Kohl’s Department Store.”

Eventually, they got Dockers, but getting good national brands continued to be an uphill battle. So Baker came up with another idea as well: private labels.

The seven division merchandise managers were brought together to discuss Baker’s thoughts. Each manager maintained several private labels within their divisions. Baker wanted cohesion, unified private labels for the company, but each manager wanted to maintain control.

Baker, however, kept pushing.

“We’re going to start our own product development division,” Edmonds remembers Baker saying. “How many of you have traveled overseas?”

Only two had for retail purchasing purposes: Edmonds and another manager. “By the luck of the draw, I was the only guy who had much experience, and frankly, it was relatively limited.” But it was good enough for Baker, and so Edmonds became the first vice president of product development. He was charged with creating a plan (on no more than two sheets of paper) and given a budget for the first year.

The philosophy: Build in-house brands that were better in quality yet at least 20 percent cheaper in price and still delivered a better gross margin to Kohl’s than the branded alternative. “That was my baby, my idea to run it that way,” Edmonds says. “Jay got behind it 100 percent.”

Others resisted, but they moved forward. A Kohl’s newsletter from October 1991 proselytizes for the private-label approach, announcing that “Kohl’s private-label program will be a major focus for Kohl’s during the 1990s.” Initial offerings would be in fashion basics, where sales were easier to predict on a seasonal basis. Even at this early stage, Kohl’s execs had come to understand not just the benefit of cutting out the middleman who sells brands like Dockers or Reebok but had also realized the need for brand recognition. If you can’t get the big guys, why not make your own?

“Jay said, ‘I want us to have something like Arizona,’ ” which was a big label for J.C. Penney at the time, Edmonds recalls. “I spent a weekend looking at atlases and maps, reading books, and I came up with Sonoma.”

It was a relaxed, weekend-esque brand that didn’t win over Baker or the merchandising managers immediately. “I wasn’t getting a whole lot of support,” Edmonds says. So Baker acted. He stood before the managers, put his arm around Edmonds and said, “This is the product VP, you’re going to support him,” Edmonds recalls. “When the president does that, that helps a lot. He really shepherded the whole program.”

Edmonds came up with 10 more private-label ideas. But no one could agree on what they liked. “We had seven different division managers with seven different choices” Edmonds recalls. “Jay was getting frustrated. I was getting frustrated.”

“I said, ‘How about Sonoma?’ ”

And Sonoma was born. Today, it’s the cornerstone of the Kohl’s private-label family.

“The launch was incredible,” Edmonds says. “We did over a million bucks at a time when that was some money.”

As the private-label division took off, Kohl’s was enjoying greater success. The next natural step was to take the company public, to generate more money for expansion. In 1992, Kohl’s became a publicly traded company and soon established plans to open around 15 new stores each year. They quickly blew this goal out of the water. The number of stores tripled to 259 by 1999, with revenue at $4.56 billion.

By 2000, another set of massive changes took place: Four new distribution centers were built, electronics were phased out, and the three amigos, Kellogg, Baker and Herma, all retired as multimillionaires.

“Those three guys individually were probably OK,” Edmonds says. “As a team, they were incredible.”

As was the foundation they built. By the end of 2000, there were 320 stores in 26 states. Kohl’s then entered Atlanta, California and expanded throughout the southwest. They updated brands, introduced Kohls.com and experimented with a new store prototype that reduced square footage to 60,000 from 90,000. But in 2003, after hitting 542 stores and reaching total revenue of $10.3 billion, Kohl’s finally hit a roadblock. Net income dropped 8.5 percent, the first drop in 10 years. Same-store sales also declined.

Issues with inventory and selection were considered the culprits for the poor performance, as was a slow start in California. “Kohl’s went into California and didn’t know the market as well,” says Erika Maschmeyer, an analyst for Robert W. Baird & Co. “Now, you’re seeing [California customers] learn about the brand and start to discover it.”

 

***

 

Sleeves rolled up, tie loose, head glistening, veins bulging, Jim Cramer yells speedily through stock recommendations on
CNBC’s “Mad Money” with a thick New York accent and his characteristic hoarse throat. You picture him leaving the studio every day with a headache.

But take the Philadelphia native out of the studio, ask him about Kohl’s, and listen to a marked switch in demeanor, to that of a happily cooing customer. Cramer recommends Kohl’s stock to viewers, sure, but this is about something far more personal: He loves shopping Kohl’s. This is where he buys shirts, pants and socks, where everyone treats him well, and where he goes unrecognized. Those rolled-up shirtsleeves on TV? Chances are they’re from Kohl’s.

“I particularly like to shop there,” Cramer says, running through the khaki sale he hit the previous weekend (two pairs for just $34, Sonoma brand) and the cotton quotient of his favorite socks. “I’m wearing socks right now from Kohl’s.”

Cramer is notoriously busy, yet he jumped at the opportunity to chat about Kohl’s, telling stories of his childhood in Philadelphia and the Wanamaker’s and (later on) Hecht’s department stores. When the outsider company Kohl’s surfaced, he deliberately resisted, but it won him over by the mid-’90s. Now, the store off Route 22, just 15 minutes from his home in New Jersey, is his Kohl’s of choice.

“I don’t know if you’ve watched the show; I’m just a practical guy,” Cramer says, referring to his TV personality. The kind of guy, he adds, who would go to Kohl’s.

The typical Kohl’s shopper is indeed practical and often coupon-crazed. Kohl’s has taken the Milwaukee bargain-hunter’s mentality (Scarborough Research has named Milwaukee the top market in the country for coupon-clipping, with 40 percent of households using them) and exported it nationally. Four times a year, hefty coupons appear in the mail for credit card holders. Use them on top of already significant savings, and it can become a competition for who saved the most at Kohl’s.

Jerry O’Brien is director of the Kohl’s Department Stores Center for Retailing Excellence, the cumbersomely named bachelor of science degree program in retailing located at UW-Madison. (Kohl’s gave $3 million to name the center in 2008.) He has seen the impact of the Kohl’s coupons first hand. “They have created kind of an excitement about the value,” he says “That’s a very common conversation piece: ‘I went to Kohl’s. I can’t believe what I got out with. And then they gave me Kohl’s dollars!’ It’s not typical for people to make that part of their lunch conversation.” But O’Brien says it’s a conversation he hears often. “How much did you save?” is the common question.

Kohl’s makes it easy to answer. Each printed receipt displays the amount saved in big, bold type. In some stores, as the cashier rings up the purchases, the amount saved displays with each item (circled in red) on a digital screen at checkout. It’s a practice the company has been ironing out since the ’90s, when checkout was digitized and receipts could display more information for the customer.

“I don’t think Kohl’s will ever not have a sale,” Maschmeyer says. “Their strategy was formulated and developed on a promotional model.”

And the model targets women, as the company notes in announcing one of its mottos: “In 2011, marketing will continue to build the universe of women who buy into the Kohl’s experience, because it’s been proven through company results that The More She Knows, The More She Kohl’s.”

A casual conversation with Kohl’s associates will yield the same verbiage. “Where she is and where she’s buying stuff, we want it to be through her lifestyle,” one associate says, instantly recognizing his pronoun use. “We talk about women all the time.”

But while the basics of the Kohl’s approach remain, the company has broadened its definition of value. Increasingly, there is a focus on more exclusive, private brands, especially in its contemporary best category. It’s not about finding cheap clothing; it’s about finding value in a particular style of clothing.

“Value has always been there,” Mansell says. “How we communicate value has evolved.”

In 2004, Kohl’s launched the Daisy Fuentes line (“the first of our major successful brand initiatives,” company materials note) in fashion apparel, sleepwear, jewelry and accessories. Soon, it expanded to petites and intimates. 2005 brought juniors brand Candie’s, with Hilary Duff, Fergie, Britney Spears and Vanessa Hudgens all taking turns as the face of promotions. In 2007, Elle (the world’s largest fashion mag) launched its own brand (aptly called Elle) in 300 stores, quickly expanding across the nation, with women’s apparel. But the big highlight of 2007 featured high-end wedding dress designer Vera Wang in the form of her Simply Vera collection. “That was pretty groundbreaking,” Maschmeyer says. This “premium fashion and lifestyle brand” spans the entire store, with ready-to-wear, accessories, jewelry, footwear, intimates and items for the home.

The original Kohl’s focus was on national brand names you could buy anywhere, but over time, it has created unique lines. “Today, a very large percentage of our brands are proprietary; they are exclusive to us,” Mansell says.

Why would big-time names like Daisy Fuentes or Vera Wang sign with Kohl’s? Kohl’s, after all, is a company that lacks the luxe of high-end retailers such as Nordstrom and the trendsetting flair of big-box discount stores like Target. But a unique deal with Kohl’s means the department store has just as much at stake as the designer or celebrity. If the launch fails, Kohl’s suffers. So Kohl’s will put every ounce of energy behind a brand. It’s everything from the way the line looks online to how it’s presented in stores and in circulars nationwide. No detail is too small to consider.

And celebrities must agree, as the influx of exclusive brands
continues.

There was the Food Network in 2007, Bobby Flay in 2008, Dana Buchman in 2009, the nationwide rollout of LC Lauren Conrad in 2010, and now J. Lo and Marc in 2011. And there’s already talk of 2012: Rock & Republic, a high-end LA denim label. “I might start shopping at Kohl’s for Rock & Republic; those are amazing jeans,” one Kohl’s fashion designer privately confesses. Maschmeyer agrees: “That’s definitely a high-end brand. That will be huge.”

Mansell, the white-haired, fatherly CEO, still clings to a bit of his hometown Missouri accent and is a far cry from a fashion-forward dresser, but he speaks smartly about the exclusive world of denim. “There is a need being shown for more denim choices,” he says. “We’re also continuing to look for new brands. Trust me, we’re very focused on continuing to deliver newness.”

It’s all about giving consumers a continued rationale to shop at Kohl’s. “Brands being exclusive are a key reason,” he says.

“Sometimes, people think about value just as low prices. We describe value as certainly low prices but also what you get – the quality, the style and the way it’s presented. It’s not just about the lowest price. I think, fundamentally, that’s what Milwaukeeans knew long ago.”

For once, it seems, Milwaukee was ahead of the curve. Not only did its coupon-cutting shoppers have a leg up on the rest of the country (a recession will do funny things to spending habits), but the city is the headquarters for the company spreading the Midwestern Gospel of Value. But as the company increases its emphasis on celebrities and trends, will it be able to maintain its headquarters in Menomonee Falls? Does it even want to?

 

***

 

Retail is ruthless. Building consumer loyalty is critical, and the competition is fierce. Rival retailers will bash you in one breath and try to copy you in the next.

Every Monday morning, reports flood into Kohl’s corporate, meetings begin, questions are raised, and plans take shape. For a designer, it’s the moment of truth – is my product selling well? “We’re able to look at it by category or by style,” one designer says of the report, “so it tells us, ‘Wow, she really likes this. We need to do more of that.’ Or, ‘She’s really not liking that. What did we do wrong?’ ” Then they adjust.

The missteps, one designer explains, probably mean the customer has been pushed too far out of her comfort zone. But the successes can be thrilling. For instance, the Sonoma team designed a sweater with ribbon detail inspired by J.Crew. After it hit stores, a designer saw a similar item at Nordstrom. “They had the exact same thing but cheaper quality, not as pretty, for like $60. Ours was selling for $40. And they delivered it a month later than us.”

The competitive style established under the three amigos has endured. You can feel the level of tension just walking through the headquarters. Employees talk of needing to work weekends to get promoted, and of long, stressful, exhausting days.

But many are waiting to get in the door. Jobs as Kohl’s designers have become coveted positions. Many of the top design programs feed students into the internship program and grads into full-time positions. “The people at Kohl’s are extremely talented,” one associate says. “They are just really impassioned about what they do, really inspiring.” And they come from all over: Ohio, Chicago, California, London.

Between metro-area stores and the Menomonee Falls headquarters, Kohl’s employs more than 7,200 people in Greater Milwaukee. Since 2000, of some $180 million given to charitable organizations nationally, about $38 million has gone to Milwaukee-area groups. The Kohl’s impact on this community is immense.

But they’ve outgrown their space and need a solution. Quickly.

“They always sort of make the standard joke that ‘We’re stacking people like cordwood,’ ” Village Manager Fitzgerald says.

It’s a problem, Mansell concedes. “We’re definitely out of space here.”

To alleviate parking issues, about 500 employees park at a satellite lot and take a shuttle to headquarters. Others work at off-site locations, such as the photo studio in Menomonee Falls.

There’s really no room left for expansion. Mansell wants a solution that will accommodate the growing company for the next 20 years. “We’re very happy in Milwaukee,” he says. “Having said that, we have to look at every option.”

Speculation abounds about where Kohl’s will go: Will they come Downtown? Mayor Tom Barrett’s office won’t comment. Will they leave the state? Gov. Scott Walker’s office is just as tight-lipped. Fitzgerald seems pretty certain they will remain in the city he serves. “I don’t believe they ever intend to leave that facility,” Fitzgerald says. Privately, some Kohl’s employees say the company is simply allowing the discussion of a move to increase its chances for government funding of some kind to help pay for a new facility.

“I think Kohl’s is always going to be in Milwaukee,” says one associate. “Ideally, it would be nice to have a satellite office in LA,” to go along with the office in New York. But home would still be here.

Kohl’s has survived more than four decades in a tumultuous industry and now faces a changing world where retail chains are challenged by online competitors. This has also hurt the stock price of retail companies. Kohl’s execs have voiced disappointment in their share price, calling it tremendously undervalued. But as always, they have been strategic: They initiated a massive stock repurchasing plan, buying back $445 million in shares during the first quarter of 2011, and they expected to buy back just as much in the second. “The market works over time,” Mansell says. “Over time, our price will start to reflect all those good things.”

Through the recession, Kohl’s continued to grow and hire more employees despite a small dip in sales from 2007 to 2008. “Kohl’s weathered the downturn very well,” O’Brien says. Maintaining their off-mall format (“It’s very efficient,” Maschmeyer says) and focusing on store remodels (100 for 2011) contributes to their stability.

They’ve placed emphasis on new initiatives – such as small-store formats, which can get them into more urban areas and reduce overhead costs, and in-store kiosks, which allow customers to order items that are out of stock or only available online without shipping costs. There is even a kiosk in the corporate headquarters.

But Kohl’s has lagged behind many other merchants when it comes to capitalizing on the massive potential of online shopping. “We were clearly behind in e-commerce,” Mansell says. “In the last five years, we’ve been behind competitors in terms of the scale of our business.” Now, it’s growing quickly. Both online and in stores.

In 2010, overall sales increased 7.1 percent to $18.4 billion, and the first quarter of 2011 brought jumps as well – $4.2 billion in sales, 3.1 percent greater than the first quarter of 2010, and 1,097 stores, 30 more than the year before.

Net profit margins are significantly better than competitors, too, coming in at several percentage points higher than Target, Macy’s and J.C. Penney. Kohl’s has become the model for other retail chains.

“Kohl’s had been kind of a Kmart that then pulled themselves up to Mervyn’s and then had aspirations of becoming a smaller-size Boston Store or Macy’s type of operation,” former VP Edmonds says. And now they’re the ones being copied, from their racetrack layout to kiosks and Kohl’s cash.

 

***

 

Between 38th and 39th on Broadway sits one Manhattan high-rise among a slew of others. Take the elevator to the 20th floor, and you’ll reach the Kohl’s New York fashion studio, a 70,000-square-foot office in the center of NYC’s Garment District. A far cry from the sprawling, well-labeled Menomonee Falls complex, this classic New York building displays no sign of Kohl’s on the exterior but offers powerful messaging in the office itself.

“The New York design office is beautiful,” exclaims a Milwaukee-based associate with a touch of jealousy. “Kohl’s in Milwaukee doesn’t really look like that.”

Indeed, this is nothing like the gray cube farms in Menomonee Falls. Opened in 2010, the sleek and luxurious Manhattan office space – with white tiled walls, white floors and white staircases – mirrors the newly designed Kohl’s Department Stores, which are themselves a far cry from the maroon color and darker, drearier layouts of the past. “We had our design and construction team develop our new office to reflect the personality of our store,” Mansell says.

“Expect great things,” the company’s positioning statement introduced in 2005, lines a wall of the 20th-floor office, while “Kohl’s” in big silver block letters is fastened to another. Off to the side of a staircase, some of the company’s top brands are displayed with marketing materials, merchandise and put-together outfits. An outdoor patio offers dramatic views of the rest of the Garment District.

But why put such effort into New York? Other corporations seem to manage just fine without a Big Apple presence. Target, for instance, does the celebrity thing while headquartered in Minneapolis.

When production on the LC Lauren Conrad collection was underway for Kohl’s, Conrad would fly into Milwaukee, venturing out to Menomonee Falls to meet with her team, including “Project Runway” vet Ra’mon-Lawrence Coleman, who has since moved to New York to work on other fashion endeavors. The process worked, but it wasn’t ideal. And when Coleman left, designing of the LC line moved to the New York office. “New York is the center of fashion in America for sure. Many of our partners live and work there,” Mansell says. “It just makes being able to do business with them much more effective.”

The Manhattan office serves as a grand gesture to celebrities and designers Kohl’s already works with and those Kohl’s wants to court. It gives the department store more legitimacy in the cutthroat world of fashion and provides a new pool of designers to potentially hire. “It gets us closer to talent,” Mansell says.

In true Kohl’s fashion, the office is already expanding to accommodate new brands and employees. By the end of the year, Mansell estimates that staff will rise from the current 100 to 150, a big jump but still modest compared to the thousands in Milwaukee.

Kohl’s job listings during the summer showed designer openings for Jennifer Lopez, Vera Wang and Rock & Republic, and product manager positions for Dana Buchman, Candie’s and Elle. The company’s trend team works out of New York, supplying reports to the entire company. “They do competitive shopping,” one associate says. “They figure out that in London, this is the hot new thing. In Paris, this is the hot new thing. They go all over the world.”

And they continue to refine how they court big brands and big celebrities. For the highly anticipated Rock & Republic brand that will launch in 2012, Kohl’s took a company with a great brand name, but in financial trouble, and generated an
exclusive deal. With Jennifer Lopez, Kohl’s found a hugely popular celebrity in the middle of a comeback who had attempted (and failed) with fashion lines in the past. There was JLO by Jennifer Lopez and Sweetface, but by 2009, her clothing lines were done in the states.

Having the marketing power and design successes of other lines (LC, Vera, Daisy) strengthened the Kohl’s sales pitch when approaching a singer-actor-TV personality who wanted to add successful fashion designer to her résumé. “We just got to be creative, and we got to really express ourselves,” Lopez said at the fashion preview. “Kohl’s has been a great partner in really helping me execute what I envisioned to be my first collection.”

Meanwhile, J. Lo’s marriage was history, as she and Anthony filed for divorce in July, just two months before the scheduled launch of their lines. Undaunted, the increasingly slick Kohl’s marketing operation adjusted immediately: Selling points were tweaked and official statements remade – the show would go on. Lopez and Anthony shifted from “the first celebrity couple to design collections for one retailer” to designers with “two separate, distinctive collections.” (With two separate, distinctive contracts, the company made clear.) The Jennifer Lopez and Marc Anthony collections have always been positioned this way, Kohl’s noted, in a neat bit of revisionist history.

The official statements came straight from the Menomonee Falls office, but those who helped J. Lo (and Marc) execute their lines are firmly planted in New York, where the most fashion-forward jobs in the company exist. These are the people creating the “new” Kohl’s. Not the Kohl’s for Milwaukee coupon-clippers or the Kohl’s for Jim Cramer. This is the Kohl’s for New York City and LA, the Kohl’s for higher-end shoppers interested in value but not the least bit phased by Jennifer Lopez’s $119.99 over-the-knee stretch boots or her $100 faux-fur jacket.

It’s a remarkable transformation, the old Kohl’s yielding to the new, and it remains to be seen how the company can continue to manage this dual identity, but one thing is clear: Thrifty old Milwaukee has never seemed more stylish.

 

Cristina Daglas is managing editor at Milwaukee Magazine. Write to her at cristina.daglas@milwaukeemag.com.





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