Kristen Haskin

Kristy Cano
Joe Green
Jordan Ostas
Keenyn Joplin
Margarett Donaldson
33
 Kohl’s Innovation Idea/New Trend
Competition
Executive Summary

Kohl’s mission is to be the leading family-focused, value-oriented, specialty

department store offering quality exclusive and national brand merchandise to the

customer in an environment that is convenient, friendly and exciting. It is easy for Kohl’s

to maintain their image of being a family-focused, value oriented store with their many

assets, which includes everything from their apparel retrieval system to their great

customer service.

Kohl’s has already achieved many loyal customers and with the new addition of

Kohl’s book section they will hopefully retain these customers while also reaching out to

a broader customer base. The book market is continuing to increase and develop which

is one reason why Kohl’s has a great chance of being successful if they opened a book

section. On average, publishers and publishing companies have increased between

8,000 and 11,000 per year (Bowker, 2009). These books would range in price from $15

to $35 to accommodate all customers’ price ranges. There will be an assortment of

books; everything from bestselling novels, to kids books, to private label books that

directly tie into the in home brand Kohl’s already offers. There will be six different private

label books. These books include Vera Wang, Abbey Dawn, Lauren Conrad styling

books, Rachel Ray and Bobby Flay cook books, and a Martha Stewart home decorating

book.
33
 Target, Amazon, Wal-Mart, and Barnes and Noble are currently the benchmark

firms in the book industry. These companies have set the standards and are currently

leading the industry. Although Amazon, Barnes and Noble, and Wal-Mart are the

benchmark firms in the industry we will not be directly competing against them because

we won’t be carrying as many titles as these companies. These firms are natural

competitors in the industry, but there is no way that the limited assortment we will carry

will be a threat to the big chain bookstores. We do not and will not be trying to directly

compete due to the fact that we will have a small assortment of titles and no online

presence. Our focus will be to give our customers books that are exclusive to Kohl’s and

a focused selection that is catered to the specific taste of our core customer. Kohl’s

main competitors as a department store are JC Penney, Sears and Target.

A book section in Kohl’s could drive store sales while providing a convenient

shopping experience. It is estimated that the 64 feet of shelf space will yield a sales total

of $10,000 every time the space is turned over. This turnover will be easily achieved

with Kohl’s convenient shopping atmosphere. Consumers are more and more looking

for the most convenience offered, by having books offered within the store walls; this

will eliminate the additional time spent by shoppers going to a bookstore or other stores

that offer the selection.

The bookstore business has a sales mark of $15 billion each year. The 50 largest

companies comprise 75 percent of the sales (Hoovers,2009) which means there is little

margin for error. It is important that Kohl’s differentiates itself from other book stores.

One way that they will differentiate themselves is by offering the private label books.
33
 Business Background

a) Kohl’s

b) Kohl’s is located in forty nine of the fifty states excluding Hawaii. They are

conveniently located in suburban areas which feature easy access and ample

parking (Kohl’s, 2009).

c) Kohl’s mission is to be the leading family-focused, value-oriented,

specialty department store offering quality exclusive and national brand

merchandise to the customer in an environment that is convenient, friendly

and exciting (Kohl’s, 2009).

d) Kohl’s vision of the company is to renovate the remaining stores that have

not already been remodeled to give them a more modern feel. They already

have plans to open twenty five more stores in 2010, but their expansion is

slowly winding down (Kohl’s 2009). Kohl’s is also continuing to expand their

online offerings to include both items which can be purchased in their stores

and items which are not generally available in their stores, such as furniture

and certain electronics.

e) Kohl’s has many strategic assets that set it apart from its competitors.

Some tangible assets that Kohl’s has are its easy to use apparel retrieval

system and its many locations throughout the United States; locations that
33
 are conveniently located in suburban areas that feature easy access and

ample parking (Kohl’s, 2009). One system asset that we feel really helps

Kohl’s continue to improve as a company is they offer great benefits to its

employees including medical, dental, vision, life, and long term disability

coverage. Kohl’s also has cultural assets. They are a results oriented

company that empowers their employees with their “Yes We Can” attitude.

One knowledge asset that Kohl’s has that helps their associates achieve

those results is the inside knowledge that the associates must be aware of.

An example of this is the dock unloading system. It can be a very complicated

process, but with the guides on the wall and the well trained staff it is kept

organized and efficient. Kohl’s also has many relational assets. The main

asset would be its loyal customers. A combination of all of Kohl’s assets is

what helps these customers remain loyal. A few of Kohl’s private labels are

the Food Network, Abbey Dawn, and Jumping Bean. All of these labels help

Kohl’s to maintain its family oriented reputation. Along with private labels,

Kohl’s has great customer service. With their slogan of “Every customer,

Every time, Every store” they will always cater to their customer needs. They

are known for accepting anything brought back to the store regardless of

whether the customer has receipts or how old the item is. These all play a

role in making Kohl’s unique to its competitors. It was reported that there are

two main things that keeps Kohl’s ahead of its competitors. The first one

being partnerships with their private labels and the second being the logistics
33
 of inventory management (Blistein, 2009). This means making sure shelves

are well stocked and everything is put in its correct place.

f) Kohl’s has a clean, inviting atmosphere that is currently being renovated to

give Kohl’s a more modern feel. The exterior of most Kohl’s store has two

entrances; most are handicap accessible, and one large white sign. Most

stores are either stand alone stores or anchor stores in shopping plazas. As

you enter Kohl’s store there is a laid back feel with no loud music or clingy

sales associates. The checkout counters are located at the entrance of the

store. Most of the employees are knowledgeable about the product and

enthusiastic when asked for help. Kohl’s has a broad very large product

assortment with numerous private brands and national brands. Many of the

brands have celebrity influences including Avril Lavigne, Britteny Spears,

Daisy Fuentes and Vera Wang. Kohl’s, like many other retail stores, has a

very standardized store format. You can walk into any Kohl’s and it will be

very similar to the last Kohl’s you were in. This makes it easy for customers to

find what they are looking for in the store which is very convenient for the

busy consumer. Kohl’s stores use fluorescent lighting on the selling floor and

occasional spotlighting on strike points. Kohl’s had a grid type layout with very

wide aisles that made it easy to navigate through the store.

g) One market opportunity that Kohl’s or its competitors could take

advantage of is the recent weight loss craze in the United States. In 1962,

research statistics showed that the percentage of obesity in America’s

population was at 13%, by 1980 it had risen to 15%, by 1994 to it was 23%,
33
 and by the year 2000 the obesity progression in America had reached an

unprecedented 31% (American Sports Data, 2006). Since 2006 many weight

loss programs and diet foods have been showing up on department store

shelves. Alli, PowerBar, Atkins, and Nutrisystem are just a few. It has become

a popular trend in the United States and something that could be very

beneficial if stores like Kohl’s started selling these products. Nearly two thirds

of United States adults are still overweight today (American Sports Data,

2006) which means there are still many weight loss customers out there.

The second opportunity that Kohl’s could take advantage of is a book

section. There are few stand alone department stores that also have a

book section in them. According to a North American Book Market survey,

the combined total for media sales (mainly books) of the Barnes and

Noble and Border chains, plus Amazon North America and BN.com was

$13.7 billion dollars (Rosenthal, 2009). From 2007 to 2008 revenues

increased 4.4 percent to $37.26 billion. In 2009 revenues are expected to

grow 1.8 percent (Nichols, 2008). This shows great potential for Kohl’s if

add a book section to their stores that targets all ages from children to

elderly.

Kohl’s Department Store

2005 2006 2007
2008

Sales: $13,444,397 $15,596,910 $16,473,734 $16,389,000

33
 Profit Margin: 6.3% 7.1% 6.6%
5.4%

Asset Turnover: 1.70 1.70 1.82

1.55

R.O.A.: 11 12.1 12
8.4

Financial Leverage: 1.60 1.54 1.61 1.73

R.O.E.: 17.6 18.6 19.3 15

Days Net Sales: 53.0 52.4 57.1

63.6

• The profit margin shows that Kohl’s best year in profit

was 2006 with 7.1%, although they stayed pretty
consistent over the 4 years.
• Kohl’s lost money on their assets in 2008; this could be
due to problems with management, inventory, and the
economy.
• According to the ROE numbers we see that Kohl’s
common stock has not performed as well in 2008 as it
has it previous years when the company was growing the
business at a faster rate.
• Kohl’s earned 5.4 cents in profit for every $1 of net sales
in 2008, the lowest of all the years.

B. Trend/Idea Identification
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 Kohl’s department store is a household name throughout the United States for its

low priced, family oriented merchandise and exclusive private label brands. In addition

to Kohl’s exclusive brands we came up with a unique new product line to be featured

exclusively at Kohl’s stores, that being Kohl’s books. These books will be creative and

unique; we will offer 3 distinct genres: Children’s books, mature and bestselling novels,

and private label books. Our private label books will focus primarily on the 6 featured

brands; those brands include Vera Wang, Bobby Flay, Rachel Ray, Abby Dawn, Lauren

Conrad and Martha Stewart. An example of our Vera Wang label book would be a book

primarily focused on Simply Vera products; this book would provide product

descriptions, images and stylish ideas or opinions on how these products should or

could be used from fashion expert’s standpoints, ranging from how to mix and match

clothing assortment to home goods products her line offers. Each book will have several

editions a year; these editions would vary

by season, for instance new fashion

experts will provide advice for each new

line that comes out in every season of the

year. For the spring; how to incorporate

fresh light colors in both wardrobe to your

living space.

Abby Dawn,

another private

label book we

would sell at
33
 Kohl’s which would provide teens with the latest fashion tips, and popular trends that

would enhance our teen customers image and reputation. Along with that, the book

would promote the products sold in the store by showing different ways to wear an outfit

by mixing it with different things they can find in their closet; taking a simple Abby Dawn

shirt from casual to dressy.

Our Martha Steward labeled books would provide our customers with unique and

popular home décor collections, from color patterns to simply showing how to decorate

and re-arrange your furniture so that it meets your personal standards.

Kohl’s books would be a great opportunity for the company to pursue simply

because there is a market for books and it’s continuing to increase and develop. How

do we know? It’s simple, from the statistics given by the Association of American

Publishers (AAP). They released in a recent report that annual sales for book

publishers in the United States reached $25 million by 2007 year end, which was a

3.2% increase from 2006 (Jordan, 2007). As we all know Kohl’s is a family oriented

department store where middle age women are the dominant shoppers, by providing

books to these women will give them the power and freedom to make creative decisions

for their households. A recent survey by the Associated Press showed that a typical
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 woman reads on average of 9 books a year, compared to men who read only 5,

therefore our books would be more targeted toward women (Weiner, 2007). On top of

that, statistics also show that 57% of book buyers are women, with the generation X

consumers being the most predominant book buyers than any other demographic

purchasing 30% of the book market. With the number of publishers and publishing

companies increasing on average by 8,000 publishers to 11,000 publishers a year while

net sales reached $40.32 billion in 2008 gives proof that there is a demand for books in

the market, Kohl’s would like to penetrate that market hoping to gain revenues and build

customer awareness on their new products (Bowker, 2009).

These books would have a broad assortment, and would be moderately priced to

accommodate all of our consumers. The prices would range anywhere from our low

price of $15 to our high price of $35 depending on the genre of the book. Our children’s

books would be priced relatively lower, while our private label brand books and our

bestselling novels would be priced higher due to the higher demand for these items.

Kohl’s would have limited number of SKUs within the store; this book section

implementation would not be a complete department, but a single aisle containing

books on both sides of a shelving unit. A total of 400 books per store would be in

inventory at a time on the shelf, with each genre and type of book contributing to a

portion of those 400 books. Like we stated earlier, there would only be 3 distinct genres

children’s books, mature bestselling novels, and private label designer books. Our

children’s books will have 15 titles; our mature bestselling novels will have 10 titles with

10 copies of each title per genre to ensure our customers the maximum selection

possible every month. As for our private label designer books there would be 15 titles
33
 with 10 copies of each title, and this would be the same throughout the year as the book

editions change with the seasons.

This new book implementation idea fits directly into Kohl’s current strategy of being

“the one stop” destination for shoppers, having all and the right products for consumers

at the right store at the right time.

A. Industry Analysis

B. Target, Amazon, Barnes and Noble, Walmart would be the retailers

considered to be the benchmark firms.

C. A new trend in the book industry is the rise of E-books and the digital book

market for customers, up 7 percent since 2007 (Rich, 2009). Barnes & Noble

launched an e-book store this July where more than 700,000 e-books can be

reached on any device with internet access (First Research, 2009). Another

trend among top book retail companies is offering discounts through customer

loyalty programs, which builds customer and brand equity and also helps boost

declining sales. Barnes and Noble Members receive 40% off of hardcover

bestsellers, 20% off all adult hardcover books, and receive email savings offers

and money saving coupons, all for $25 a year (barnesandnoble.com). Borders

and Amazon have seen a recent trend toward finance books (Nichols, 2008).

People are purchasing books such as The Snowball (the biography of billionaire

Warren Buffett and number one on the New York Times bestseller list) and The

End of America by Naomi Wolf (Nichols, 2008). Other trends in the book
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 industry show that sales are down for bookstores in enclosed shopping malls

due to decreased mall traffic. As Kohl’s stands alone as its own anchor store,

this would not affect book sales (First Research, 2009). Barnes and Nobles has

teamed up with Starbucks to offer a café for shoppers to further enjoy their in

store experience.

3. With a rising trend in the e-book sector, this can pose a very large potential

risk or challenge for Kohl’s to enter the book market since they will mainly focus

on offering traditional hardcover and paperback books to their customers who

may or may not already be e-book readers/users. The emerging technology is

considered to be much more convenient and being able to download new books

at anytime is hard to compete against; especially for Kohl’s proposed book

section which will be miniscule compared to established internet book retailers.

The ongoing price war against large retailers for books will also pose a challenge

for Kohl’s, where we plan on pricing our books low but not too low where we will

lose profits.

4.) The growth for the book industry is looking to be leveled out, but revenues are

showing signs of growth. From 2007 to 2008 revenues increased 4.4 percent to

$37.26 billion. In 2009 revenues are expected to grow 1.8 percent. According to

Book Industry Trends 2012 book revenues are estimated at $43.46 billion. From

this information we can assume that growth will be moderate of the next several

years (Nichols, 2008).

COMPETITOR ANALYSIS
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 A. In today’s economy, retail stores are practicing many strategies to stay up

to par with their competition. Existing competitors for Kohl’s currently in the

industry of books are Target, J.C. Penny, Barnes & Noble and Sears Holding.

Target Corporation sells apparel and food. Target is an inventive and high-

ranking retail store. Their mission statement focuses on four core roles: great

guest service, clean stores, in stock merchandise, and speedy checkout.

(Deshpande, 2009). These guidelines make up the culture of the fast, fun and

friendly stores. Target also focuses on new ideas and exclusive products.

Target is the fifth largest retailer by sales revenue. Top designers have signed

agreements with Target to sell their items at affordable prices under an agreed

upon name. For example, Victoria’s Secret produces the Gillian O’Malley

lingerie line. Giving Target a great advantage over competitors.(Zimmerman,

Lu-Lien Tan, and Merrick, 2007)

J.C. Penney Corporation is one of the top retailers in the U.S. The company

offers a great deal of merchandise from family apparel, jewelry, shoes,

accessories and home furnishings products. They are also famous for their

huge catalogue of products which gives them a lead over their competitors.

Barnes & Noble is one of the leading book retailers in the Unites States. Barnes

& Noble gives the customer the opportunity of choosing from best selling

magazines, DVDS, games, and music. Barnes and Noble also has an advantage

over its rivals being that they contain a Starbucks Coffee café which is very

convenient when a customer can grab a coffee and a nice book to read. The
33
 corporation operates 774 stores around the Unites States, and has 40,000

employees (Barnes and Noble). Barnes & Noble mission is “to operate the best

specialty retail business in America, regardless of the product we sell” (Barnes

and Noble)

Sears Holding Corporation is one of the oldest yet successful retailers that have

a competitive edge over most retailers, being that they sell great quailty

hardware, and appliances. Sears vision “is committed to improving the lives of

our customers by providing quality services, products and solutions that earn

their trust and build lifetime relationships”. And their mission aims to build

customer relationships, make more money, and improve every day. (Lampert,

2005) Sears also brings in revenue by their drivers training school, and auto

repair center. Another great advantage Sears has is Lands End (Sears’s

exclusive clothing line) is an outstanding fit with Sears; its common brand

heritage representing outstanding quality and value, strength in casual, classic

merchandise connects with Sears’s apparel strategy. Lands End is also popular

for its guaranteed policy, which allows returns or exchanges at any time for any

reason.

B. Stated on Hoover’s financial statement, the total revenue for Target in 2009 is

64,948, J.C. Penny’s is 18,486, Barnes & Noble is 5,121.8, Sears is 46,770, and

Kohl’s is 16,389( Hoovers Financials). As a group we found the market share for

each competitor by adding each amount of revenue which gave us a total of

151,714.80. We then divide each competitor’s revenue by the amount of

33
 151,714.80, giving us the market share percentage. By following this formula we

calculated the total 2009 market share percentage for Target Corporation which is .

43%. With Target having the highest revenue out of all four competitors listed; it

acknowledges its successful business position for being the reason why their

company is booming with high sales. Sears Holding Corporation 2009 total market

share is .31%. With Sears being the second highest in market share; the company

gives recognition to its approximately 1368 Kmart stores, 856 Full-line stores, 73

Sears Essentials/Grand stores, and 1233 specialty stores in the United States, as

well as 122 full-line stores, 171 dealer stores, 5 appliances and mattresses stores,

30 corbel stores, 11 outlet stores. (Reuters)

J.C. Penny has a low market share in 2009 at 12%. Executives believe J.C. Penny

was well impacted by the combination of a later start to the Back-to-School selling

period and the shift of several state tax-free shopping periods into this year’s fiscal

August term. ( J.C.Penny) .

Barnes & Noble has a 3% for 2009 market share, analysts believe their market

share is really low because of college store sales fell a drastic amount, and also

noticing less traffic in the store due to the recession. (Skariachan, 2009)

Kohl’s market share was calculated as 11% in 2009. Kohl’s market share is down

due to consumers going to other discount retailers, therefore Kohl’s needs to adjust

their marketing strategies, and also create more promotional advertisements. Kohl’s

can utilize this approach by making more advertisements in the newspapers, on the

radio, and television, and using social media such as Facebook, and Twitter.
33
 C. Target is positioning itself as one of the largest discount retailer in the United States.

Target’s puts a lot of emphasis on making sure the product has great worth, while

making sure it is affordable. Target is currently partnering up with Amazon, to supply

quality book service to customers, while having great deals on books. (McCarthy, 2006)

The book types that Target offers are best sellers, kids, teens, and club pick. Kohl’s will

have to compete with Targets prices, being that Target is known to offer low prices.

Kohl’s will have to offer updated books which would be a competitive advantage. By

updating the book trend, Kohl’s will have the latest issues from authors. J.C. Penny has

positioned itself as an integrated retailer, which sells national, private and exclusive

brands. By maintaining its jewelry, apparel, toys, home decor and shoes, J.C. Penny

remains ranked as one of the leading retailers. (J.C. Penny) J.C. Penny sells 2 cook

books; as a result Kohl’s would not have any competition in the book area competing

with J.C. Penny. On the other hand Kohl’s should be prepared for any changes that may

occur within J.C. Penny, they may unexpectedly join the book wars. Barnes and Nobles

has positioned itself as the world’s largest bookseller retailer. The bookseller mogul has

a new invention that is projected to generate soaring sales called the nook, which will be

a huge advantage over competitors. Kohl’s will constantly have to do their research

when competing against Barnes and Nobles, and emphasize more on their private label

brand books. Sears is one of the oldest retailers in the U.S., but is still maintaining its

stability. This company has positioned itself to focus on their hard line products,

because they are known for their hardware and appliances being excellent quality.

Sears sells Sears top pick books, popular children books, New York Times best sellers,

cooking books, men, women, news, and parenting and family magazines (Sears). Next
33
 to Barnes and Nobles; Sears would be the next biggest rival. Kohl’s can continue their

sales growth by carrying on their discount trend within books. Kohl’s is opening up more

stores than its competitors; making Kohl’s a well known retailer around the world.

Observing from a class trip; Kohl’s Lansing store has remodeled and updated its store

to make it look more innovative instead of modern. Of course this particular store would

increase its revenue because it attracts more customers and is a nice environment to

shop in. If the books section is adopted it would still have the same strategic positioning

of being family oriented; however Kohl’s will be catering to the needs of the family who

loves to read!

D. Justification, SWOT analysis and Final Projections

a) Developing a product extension to books and adding a leisure reading

section will benefit Kohl’s existing market and drive stores sales up as

well. According to a recent report produced by the National Endowment of

the Arts titled “Reading On the Rise: A New Chapter in American

Literacy,” after two decades of descending trends in reading among

adults, in the past 6 years there has been a definitive increase in adult

readership. The report cites that there has been a 7% rate of change in

literary reading among all adults. Among the age groups that ranged from

18 years old to 75+, only one group showed a negative change rate from

2002-2008; which was the age range of 45-54 that demonstrated a -1.3

percentage point change between the span of 6 years, which is a low

number considered statistically insignificant (Reading On the Rise, 2009

p.3-4). So over all, there is a positive rise in reading trend among adults,
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 especially the age groups that are conducive to the Kohl’s consumer

market. The report also concludes that there is also a rising percent

change in literary readership among Hispanics and African American

groups, exhibiting a 20% and 15% change in the past year respectively

(Reading on the Rise, 2009 p 5). With the development of a book section

in the Kohl’s department store, the company can take advantage of this

mounting trend by opening a new product offering in which their market

can soak up with little hesitation. This new addition will not only create an

additional incentive for consumers to enter the store and prolong their

browsing time, but it will also offer a convenience to the existing market.

Since today’s shoppers are more and more looking for the most

convenience offered, by having books offered within the store walls; this

will eliminate the additional time spent by shoppers going to a bookstore

or other stores that offer the selection. As a family oriented retailer, Kohl’s

will capture the attention of its target market by offering books that will

interest the whole family from children’s educational books; to bestselling

novels to excite the mature generations, and lastly self help books that

many of the customers can relate and benefit from whether their looking

for cooking, decorating, or fashion guidance.

i. This new addition won’t need a whole lot of area. The plan is to use

aisle shelving as the primary merchandiser for the books. We

propose an area of 40 square feet would be enough to fit the aisle

shelving unit we will be adding in each store. With these shelving

33
 units extending to about 8 ft and the height of about 5 ft., the total

shelf space we propose would be around 64 ft of shelf space, give

or take 5 ft of shelf space in the aisle ending which would be used

more as a showcase. Area would be ideally placed in the party

supply/décor and greeting card section of the store. We propose a

20% reduction of the party supply/decors and around 30% of the

greeting cards to accommodate the bookshelves we intend to

replace it with. The greeting card section may seem to lose the

most shelf space, but we are only recommending cutting the aisle

which they are currently placed in, in half, and the used the rest of it

for the books. The reduction from taken from the party supply/décor

area can be then utilized to as additional room for greeting cards

can be placed at.

ii. As for fixtures we were planning to use gondola aisle shelving units.

There is also the option of using slat wall shelving for the books.

The cost for a whole aisle unit is yet to be determined but we

estimate it will be around $1,500-$2,000 for a complete unit per

store. The fixture should match the maple wood that is found all

over the Kohl’s store to match

with everything else. A few extra

spotlighting should be installed

the end of the aisles to focus on

any special book promotions

33
 being offered. These fixtures will be standard in all the Kohl’s store

with a few variations depending on the store layout.

b.) SWOT Analysis

Strengths

• Providing customers with a much wider selection of books to choose from the

small amount they already offer, which are just a few cook books and the non-

profit children’s books with the Kohl’s Cares for Kids program.

• We pose an advantage against competitors like JC Penny, Sears, Macy’s, etc.

who currently do not offer a book section in their stores. Most have books sold in

their store, but not a wide assortment and a designated store section for the

products.

• The company already has well established private labels to build off from and w

can extend a lot of them to relatable book products that can help with the brand

awareness.

• The convenience we will provide for our current customers with the new section.
33
 • The company has experience in book development and selling in relation to

Kohl’s Cares for Kids program.

• The product idea is conducive to family-oriented image which Kohl’s is known for.

Weaknesses

• Kohl’s book section won’t be comparable to the large assortment offered by

Target and Wal-Mart in their stores.

• There are space concerns, even thought the proposed section is not demanding

a lot of space, department configurations will still have to shift and some products

may lose prime selling spots.

• The selection cannot be standardized completely because of varying

demographics of stores all over the country.

• The initial costs might be set higher than what typical book stores pay due to

smaller orders compared to large book retailers.

Opportunities

• Growing favor or familiarity for private label brands

• With the recession ongoing, people are resorting to cheaper ways to entertain

themselves and books are among the top contenders. Since staying in is a

cheaper option now.

• Many of the chain department stores don’t offer a wide selection of books
33
 • Some studies show growing trend in reading among adults.

Threats

• The demand for the product may not be as strong as expected or begin to

decline.

• The continuing bad economy may affect consumers purchasing priorities

especially in the leisure product sector.

• Tough competition with book discounters like Amazon.

• Wal-Mart’s $9 books and Amazon’s $10 books...on going price war can lead to

lower prices that will be impossible to compete against.

c.Market Potential

“The bookstore business has an annual average sales mark of 15 billion dollars in revenue each

year”(Hoovers 2009). The market for books is changing at a rapid rate. Despite the popularity of

electronic entertainment people are still buying books at a rapid rate. “The chains have been

killing off the independents at the rate of three a week for years,” said Dan Poynter, longtime

author, publisher and founder of Santa Barbara, Calif.-based Para Publishing Inc. “Now, the

online stores are killing off the chains.” (Tomseth 2008) “The independent bookstore historically

has the highest rate of failure of any private business. The 50 largest companies account for

75% of the sales” (Hoovers 2009) which means there is a very small margin for error. Therefore

we must be very precise and accurate when developing our bookstore department expansion.

There is a market for specialty books, do-it-yourself books, and the rapidly expanding electronic

book market.
33
 Demand Forecast

One key feature that is in demand in the world of books is convenience and selections. The

online bookstore, such as Amazon, has taken the book selling world by storm. We cannot

compete with the online vendors across all genres but we can compete in the areas that our

core customer is interested in. The convenience we offer is that self-help books such as style

and fashion, cooking and home décor . The availability to purchase the book and immediately

put it to use when making a purchase at Kohl’s is something no online retailer can offer. We will

have to compete in the specialty book market and really focus in on our core customer. The big

box and online retailers cannot be beaten on selection so our assortment must be picked

carefully and intelligently.

Estimated Sales per Square Foot

(i)There is not an opportunity to compete directly with the Barnes and Noble or Borders

superstore bookstores. Those stores have an average of 20,000 square feet of selling space for

books. With the average Kohl’s coming in at 68,000-74,000 square feet of selling space

(Mammarella 2006) we clearly cannot offer a third of our store to one department. The average

mall chain book store and independents come in at an average 4000-5000 square feet (Hoovers

2009) which is much closer to the space we will likely dedicate to books. The competition

averages $280-300 per sq ft in the same amount of space. We need to, at a minimum, be hitting

approximately $78.13 per square foot in order to adequately compete with the competition. The

sales per square foot is taken from the $5000 in monthly sales divided by the 64ft of shelf space

in our stores.

(ii) The new book section will not displace that much of the current merchandise assortment.

The shelves that will be installed will take up a small amount of square footage. Since books are

able to be stacked side by side on the shelves we will be able to put a fairly large assortment of
33
 inventory into a small space. The 40 titles and 400 total books we are planning on carrying will

easily fit into the shelves that we are intending on adding. We are planning on adding

approximately 64ft of retail shelf space. Based on the shelving units at triodisplay.com we would

select a shelving unit that is approximately 4 ft long 5ft high and 2ft wide (50” x 54” x 24”). Each

unit has four shelves. Each unit runs at a cost of approximately $950 therefore we are budgeting

between $1500 and $2000 for the cost of shelving units per store. This configuration would only

take up a small area in each store If we can manage to compete at the level we are anticipating

our revenue should be high enough to offset any losses from displaced merchandise in the

greeting card aisle. The average book will cost $25. The books will range from low price point of

$15 to a high of & $35. If we can sell at the price of $78.13 per square foot level we will be able

to bring in approximately $5,000 each month and $10,000 every time we completely turn over

the shelf space. ($78.13/mo x 64ft) These new shelving units would be placed in the home

goods area near the greeting cards and party décor and supply section. By removing some of

the shelves that currently house greeting cards, wrapping paper and ribbon we can create an

adequate area for our new bookshelves. The cards will be consolidated together with just the

most profitable ones remaining.. The revenue lost from moving some of the cards and a small

amount of the party supply and décor section would easily be covered by the profit of the

incoming books.

(iii) The fact that Kohl’s is a promotion oriented store is something that excites us. We see this

as a big opportunity the expand some of the current brands. There is a big opportunity to sell

Food Network books. A promotion idea could be that any purchase of $50 or more of any Food

Network cookware and receive 50% off a Food Network cookbook. There is also potential to

package the books together with the pots and pans and as buy it all package. Of course we

understand that the book market has a high markdown rate as books stay on the shelf longer

and longer. The goal is to keep low inventory and a high rate of turnover so that when the book
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 sales start to slow there is less inventory that we have to cut in price. We want to move these

books quickly and efficiently so they are not sitting on the shelf losing money. We do have to be

prepared to accept some cost cutting. We will not be cutting prices as deeply as some

companies that are currently cutting prices as much as 60% in this current price war.

(iv) We are looking at this expansion of our product line as a very productive unit that can boost

our in store sales and add to the current success that Kohl’s is experiencing. The sales goal that

we have in mind is to be able to turn in below the $250 in sales per square foot of shelf space

that a bookstore pulls in but still a number that will make a suitable profit for the company. We

are striving for each book section in a Kohls store to have an average sales volume of $5000 a

month and $60,000 per year. This would equate to a sales increase of $60,240,000 for the

company. (1004 stores x $60,000 per store) After the inventory cost is taken out each store

would gain $3000 monthly in profit and $36,000 in profit per year. If those goals can be met by

all 1004 stores, the new income would lead to an additional 36 million dollars in profit to Kohls.

These sales goals would need each store to have certain levels of sales. It would require the

64ft feet of shelf space that is dedicated to books to yield a sales total of $10,000 each time that

the space is turned over. ($10,000@ 0.5 turnover rate = $5,000/mo) If our sales were the

$10,000 each time the shelf space was turned over and we managed to sell that space at a rate

of 0.5 times a month we would have total sales of $5,000 a month. The inventory would cost

approximately 40% of the list price. This would equate to a cost of $4000 each time the shelves

need to be restocked. (0.4 x avg price $25 x 400 books) This would mean a monthly expense of

$2000 if we maintain the anticipated 0.5 turnover rate. If our net sales per month equaled $5000

(net sales) and our inventory (assets) cost is $2000 then our asset turnover would be 2.5.

(5000/2000) Next we would calculate the profit margin (PM) by taking our net income of 3000

and dividing by our net sales of 5000. This gives us 0.6, our PM. Then we multiply that 2.5 ATO
33
 rate by our profit margin of approximately 0.6 to find our Return on Assets. The calculation

shows we can expect a 1.5 ROA for the new department.

D.

Target corporation carries a lower amount of books compared to a traditional bookstore with

only about 2,500 titles in each of its 1,700 stores. Target also offers a selection include diet

books, children’s picture books, young-adult novels and series romances. (Motoko 2009) I

believe that our competitors such as Wal-Mart and Target would largely ignore any venture we

make into book sales. Since we are probably going to focus on a small niche in the book selling

world our competitors will probably not enter into price wars with us. If we can extend our

exclusive private labels into the book market we will have even more of a sustainable

competitive advantage. For example if the Food Network can make exclusive books for our

store then the competition can simply not compete in that small area of books. One of our

competitors, Wal-Mart is currently busy battling Amazon and Target in an online price war on

books. “A tit-for-tat price war between Wal-Mart and Amazon accelerated late on Friday

afternoon when Wal-Mart shaved another cent off its already rock-bottom prices for hardcover

editions of some of the coming holiday season’s biggest potential best sellers, offering them

online for $8.99 apiece…” “The price cutting began on Thursday when Wal-Mart announced that

it would take pre-orders for 10 yet-to-be-published hardcovers for $10 apiece on its Web site,

Walmart.com. Later that day Amazon quietly began cutting the prices of those same titles to the

very same $10, prompting Wal-Mart to lower its price to $9, a markdown of 59 to 74 percent off

the list price of the books. Amazon had matched the $9 price by Friday morning, and Wal-Mart

had lowered its price again, to $8.99, by late afternoon.” (Motoko 2009) Since they are so

consumed with this online price battle over best sellers we are assured that they would be

unconcerned with our venture giving us the necessary space and time to develop our book

section.
33
 (F.) Recommendations for Kohl’s strategy

(a) Recommendations per store

Sales per sq.ft Avg Mo SALES mo/yr ($) ROA

($) Inventory Rate

78 0.5 5000/60,000 1.5

B) To ensure proper merchandising of the products,

we would need to build shelving prototypes to see

how the books will be laid out and displayed in the

store. The fixture prototypes would be vital to see exactly the space required and visual

layout.

For the private label books, prototypes of the books themselves will be helpful.

Developing book covers that show their exclusivity to Kohl’s needs to be monitored to
33
 make sure it ties in with the in home brand we are extending it from, also the designs

will relate to the type of promotion signs we will be placing all over the store.

[ see sample images of products on the next page]

33
 C)

Budget: about $1500-$2000 for shelving unit; promotion budget; book development

budget; distribution; inventory budget etc.

Product development and research: strike a deal with private label

partners and terms of the products being produced under their line,
which includes Vera Wang, Martha Stewart, Bobby Flay, Abbey Dawn,
Dec-May
Lauren Conrad, and Rachel Ray. Books will generally take existing
2010
designs, ideas, and recipes that each person uses and put them in
books and add special Kohl’s only extras.
Find and talk to reliable book publishers, vendors, and manufacturers
Plan shipping/distribution: types of books in diff regions
store placement planning: reduction plan for party supply/décor and
Jun-Nov greeting card sections to accommodate 20 sq feet of floor space needed
2010 for shelving unit for the books. Shelving units need to be designed that
are matching to the current store fixtures that will securely hold and
display 300? book titles at a time.

Dec-May Store fixture construction/ associate training in book arrangement and

2011 procurement

Jun-Aug
Promotions begin and build product awareness
2011

Product launchtest in early fall months to fine gauge sales for hyper
Sep 2011 selling season which is holiday shopping months of November and
December.
33
 D) Hiring additional personnel to undertake the new department is not necessary in

store. Further personnel training will be needed to better educate associates about the

products, selection offered and organization and placement protocols. An executive

might be needed to train or hired who has knowledge in developing or publishing books.

E) Timeline: Launch new addition by September 2011 [21 months].

F) Floor space needed for this addition would be around 40 sq ft and total shelf space

expected around 200 sq ft. for display purposes.

G) Four months prior to initial product launch, we will begin rolling out promotions about

the upcoming product selection. Our promotional ads will include a whole page section

in the paper ads sent out by Kohl’s highlighting the new selection and include a coupon

as well. We will send out with the email alerts information about the product line and

inform those consumers. Departments that have labels that will extend to books will

have special signs promoting the new product extension.

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 [Sample advertisement we can use for promotion. This would be for email sent to

subscribed members]

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