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Yesterday’s announcement that Kohl’s has agreed to lease space next to 10 of its stores to Planet Fitness doesn’t require a lot of mental gymnastics to understand.
“We see the Planet Fitness partnership as a real win-win, and in fact the teams are working to take advantage of the co-location in these first 10 stores to figure how we can co-market to these customers,” said Michelle Gass, Kohl’s CEO, on the retailer’s fourth quarter earnings call yesterday.
“I think like everything, we have to build a few,” said Ms. Gass. “We will learn and we will take it from there, but all our indications [are] this is going to be a great fit for us and for our customers.”
The Planet Fitness deal news came on the same day that Kohl’s reported its fourth quarter results. The retailer saw its share price rise 7.31 percent in trading yesterday after it announced that increased foot traffic to its stores helped it achieve a one percent increase in same-store sales, exceeding the 0.3 percent gain expected by Wall Street, as per CNBC. Adjusted earnings per share came in at $2.24, beating the consensus of $2.18.
DISCUSSION QUESTIONS: Do you see the Planet Fitness deal as a winning partnership for Kohl’s? How likely are other big box retailers to follow a similar strategy of right-sizing stores and looking for complementary businesses to fill the space?
16 Comments on “Will Kohl’s deal with Planet Fitness make its rivals sweat?”
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Given Kohl’s locations, which tend to be outside of malls, I see this as a smart way to use excess space. However, it’s not a game-changer nor does it reduce the need for Kohl’s to create a compelling retail destination that converts traffic into purchases. I see it as something of a side-show to the main event.
I think the idea is solid, partnering with high draw entities and betting on the bleed. But this seems like an odd pairing. I’d shoot for Panera or a like-brand partner on the food side if I were Kohl’s. We just completed a study that showed that food (not food courts, but “modern”/healthier food) is a big draw to get consumers back out to bricks. Coffee, lunch, then shopping works together IMO, always has. One hour work out, then swing over to check out some new clothes? Not so much.
The key word here is “right-sizing.” Smaller footprints make sense because of online pressures.
But a partnership with Planet Fitness is a stretch. It reminds me of retail banking. As branches become less important and more openly rejected by customers, banks have decided to make their lobbies into cafes. Because, we all know how much we want to go into a bank to buy our morning coffee.
I guess Kohl’s thinks the sweaty people who work out at Planet Fitness will quickly (on the same visit) run into Kohl’s to buy… shoes?
I disagree. I think it’s brilliant as long as they make fitness merchandise the focus.
Look all over Instagram and you’ll see the fitness trend is everywhere and the fashion is essential. Who doesn’t enjoy a treat after a workout and you know they best time to buy new yoga pants? When your current pair is all sweaty and gross. 🙂
Go to the gym and pick up a few things at Kohl’s … Are they complementary businesses? Cross-promoting athletic items could bring people from the gym into Kohl’s. No doubt it will increase foot traffic. Converting that foot traffic to repeat buyers is the key. The investors like the idea. Let’s see if the consumers like it, too.
On the surface, leasing space to Planet Fitness in “right-sized” stores is similar to deals with Aldi and others. What makes this different is the cross-merchandising opportunity given Kohl’s huge strength in fitness gear. Maybe even a chance for licensed product development?
Kohl’s partnership deal with Planet Fitness is yet another shopping and lifestyle transformation in the post-department store era. The reimagined malls and department stores’ main objectives are to draw more traffic to their sites. The trends have shown that work- and lifestyle-like services are replacing unused mall spaces. From shared office spaces to gyms and restaurants mixed-use retail is the next phase of this retail evolution.
With that said, while having a Planet Fitness next to a Kohl’s department store may draw some traffic and push sales of complementary products, by no means will this make their rivals sweat.
This is exactly what it needs to be — a high profile test with, in my opinion, a high probability of success. It’s aggressively evolutionary. And along with WW, it’s a 1+1+1 = 4 or 5 opportunity.
Landlords across the world are willing to write the right deals for traffic drivers. Malls in Asia and Africa have gyms, day care centers, libraries and schools as tenants. This partnership has limitations. Gyms tend to get the peak business at the start and end of the day – is Kohl’s open at 7 a.m., or at 7 p.m.? Much of the routine traffic is in and out. What’s important is that Kohl’s target customer is active, healthy and affluent enough to have a gym membership. The key is, how do Kohl’s and the gym cross merchandise their adjacency?
So true about in-and-out but I think the evening crowd is more likely to stick around. At that point in the day, they’re in me-time mode.
This will help Kohl’s reduce its store square footage which is a good thing since the current footprint is too large for most of its locations. I don’t see this translating to any great increase in sales if any, rather I see the benefits in the form of cost savings from reduced heating, cooling, electric, labor, inventory and revenue from leasing out the excess area.
Kohl’s has been testing a lot of different co-location partnerships (Amazon, Aldi and Weight Watchers) and now they are testing Planet Fitness. Time will tell if this is a successful partnership. Geographic proximity will likely drive some incremental foot traffic to Kohl’s but to make a noticeable impact, they will need to do cross-promotions with special discounts to Planet Fitness members. Kudos to Kohl’s for experimenting with new ideas. The more you try, the better chance you will find the winning recipe.
Kohl’s was looking for a credit-worthy tenant to pay market rates for (its) surplus space, and I’m assuming that’s what they got; anything beyond that will be a bonus. And while I’m not opposed to this arrangement, I’m not a big fan of it either. Having your store filled with people who just finished a workout — or even the possibility of it — doesn’t excite me.
While the consumer demographics for both entities might be a match — bargain hunters and explorer Millennials — this deal feels more like a real estate solution with limited merchandising legs.
Besides fitness clothing and equipment, how else will the tie-in work? And in apparel, does the fitness gear wearer want to wear a Planet Fitness branded outfit? Will the Kohl’s customer stroll the gym and get motivated to join in the gym? Will they see see Planet Fitness as an incentive to visit Kohl’s more often?
So, yes, it’s a good excess real estate solution, but I doubt the relationship will mutually increase traffic to either entity.
Very interesting partnership. Unlikely brand partnerships and health and wellness are both very on trend! Plus, Kohl’s and Planet Fitness customers are value shoppers, and who doesn’t love a reward after a hard workout?
Curious how they will merchandise it and what categories they choose to sell there. Would be great to see mostly fitness clothing and equipment shops inside these locations. Other essentials clothing items would work there, too.
How likely are Kohl’s and Planet Fitness to prove a good fit for each other’s business?
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