Kohl's Retrenches as Ross Expands: A Tale of two retail strategies to playout in Elk Grove and California

Earlier this year, Menomonee, Wis.-based Kohl's Department Stores announced the closure of several stores. While the two Elk Grove stores will remain open, the department store chain has already closed its Arden Mall area store.

The closures reveal that the retail landscape in California is undergoing a seismic shift. The contrasting fortunes of Kohl's Department Stores compared to discounters like Dublin, Calif.-based Ross Dress for Less paint a compelling picture of the evolving consumer market.

While Kohl's has recently announced the closure of several California locations, Ross is actively expanding its footprint, signaling divergent strategies in a competitive environment.

This tale of two retailers raises questions about the future prospects of traditional department stores versus off-price retailers in capturing the hearts and wallets of California shoppers. This question also has serious implications for California municipalities like Elk Grove that rely on sales taxes.

Kohl's, a long-standing player in the aging and increasingly irrelevant department store sector, has been grappling with adapting to changing consumer preferences and the rise of online shopping. The California closures reveal their strategy to optimize their physical store presence, focusing on more profitable locations and a stronger omnichannel approach.

However, the visible retreat from certain markets like Sacramento raises concerns about their ability to maintain market share in the face of nimble competitors.

Conversely, Ross Dress for Less is on an aggressive growth trajectory. The off-price retailer, known for its treasure-hunt shopping experience and discounted brand-name apparel and home goods, has been steadily opening new stores, including several in California.

This expansion reflects the enduring appeal of value-driven shopping, particularly in a state with a diverse economic landscape. Ross's success lies in its ability to offer compelling discounts by purchasing excess inventory from manufacturers and other retailers, attracting budget-conscious consumers and those seeking well-known brands at lower prices. Their no-frills store environment and focus on opportunistic buying resonate with a significant segment of the California market.

Several factors contribute to this divergence. The rise of e-commerce has pressured traditional department stores like Kohl's to offer a compelling in-store experience that goes beyond simply browsing merchandise.

Consumers expect seamless integration between online and physical channels, personalized offers, and engaging store layouts. While Kohl's has invested in these areas, the closures suggest their efforts are failing.

Meanwhile, off-price retailers like Ross, TJ Maxx, and Burlington have proven relatively resilient to the e-commerce threat. Their constantly changing inventory and the thrill of finding a bargain create a sense of urgency and a reason to visit physical stores.

Moreover, their focus on value aligns well with consumers who are increasingly price-sensitive in the current economic climate.

The contrasting strategies also highlight different target demographics, with Kohl's catering to a broad range of middle and upper-income consumers, offering a mix of private-label and national brands. Ross, on the other hand, primarily appeals to value-seeking lower-income shoppers.

Elk Grove considers itself a caviar and Dom Perignon champagne type of community. In reality, it is more akin to a hot dog and beer city.

The future of Kohl's in California appears to hinge on the success of its strategic adjustments. Its ability to create engaging in-store experiences, effectively leverage its digital platforms, and curate a compelling merchandise mix will be crucial.

For Ross, the path forward seems more straightforward and easier. Their expansion strategy, coupled with their strong value proposition, positions them well to capture a significant share of the California retail market. However, they must remain agile in their sourcing strategies and maintain the treasure-hunt experience that keeps customers returning.

While Kohl's navigates a period of consolidation in hopes of survival, Ross's aggressive growth signals the enduring power of value in the eyes of California consumers, especially those in low-brow cities like Elk Grove. The coming years will reveal whether Kohl's can successfully reinvent its aging department store and go the way of former retailing behemoths like Sears, or if the off-price sector, exemplified by Ross, rules over municipal sales tax revenues.

If history is any guide for Elk Grove, especially regarding all-important retail sales tax revenues, now is the time to realize that this is a hot dog and beer city, not a caviar and Dom Perignon champagne city.

Stay Classy, Elk Grove!