E-Commerce May Have Hurt Department Stores, But Tech Also can help

By Lauren Zumbach
Chicago Tribune

WWR Article Summary (tl;dr) Great Q&A with the CTO of Kohl’s on how online shopping is changing customers’ expectations and how technology that’s caused problems for retailers can also help solve them.


The rise of online shopping hasn’t been kind to traditional department stores. It’s Kohl’s Chief Technology Officer Ratnakar Lavu’s job to bring the retailer up to speed with how its customers shop today.

Lavu worked in e-commerce at Macy’s and was chief technology officer at Redbox Automated Retail before joining Kohl’s in 2011.

Today, he oversees an innovation team that’s working on bringing the online and brick-and-mortar shopping experiences closer together, an initiative that involves employees at Kohl’s Menomonee Falls, Wis., headquarters and at the company’s digital center in Silicon Valley.

At the National Retail Federation’s trade show in New York, Lavu sat down with the Chicago Tribune to talk about how online shopping is changing customers’ expectations, why you’ll probably see Kohl’s get into chatbots but not virtual reality (at least not yet), and how technology that’s caused problems for retailers can also help solve them.

The following interview has been edited for length and clarity.

Q: Bringing the department store to the 21st century sounds like a tall order.

A: It is, but one great thing about Kohl’s is we’re determined to actually transform ourselves. We understand what we need to do, it’s not like it’s rocket science. We just need to continue to innovate and we have laid a great foundation to be able to do that.

Q: So what do you need to do?

A: We know that we have to elevate our experiences. With our digital businesses, we’ve done a lot of work over the last three to five years. We need to take that into the store. The other piece of this is we also need to transform how we do business. We need a lot more speed and agility in terms of what products to buy, how we buy them, how do we get them into the store and make them hyperlocal. And from a marketing standpoint, once we get the product there, how do we personalize the experience in terms of the message for the customer? That’s what the customer is expecting.

Q: Why do you think it’s important to have part of the innovation team in Silicon Valley?

A: We are very well connected as a company with the startup and innovation ecosystems that generally are driven from Silicon Valley. That enables us to see technology that we think is going to be game-changing or that we think companies like Apple and Google and others are pushing that will get customer adoption that we need to pay attention to.

Q: Can you give me an example?

A: When Apple did Apple Pay, they came to us and asked if we wanted to partner. We would never have had that conversation, if not for us being in the valley and being connected with Apple.

Then we looked at the ecosystem and said, in addition to Apple Pay, can we bring our own payments to life? We worked with a small startup in the valley to bring Kohl’s Pay to life. Those are things that would have been a little bit harder were we not in the valley.

Q: What are some areas you’re looking at in 2017?

A: Our focus has shifted a little bit, in terms of how do we bring digital into the stores. Just like how we understand a website and mobile, how do we understand the physical store _ how many people come in, what are they looking at, what is working or not working?

Q: So if I were to walk into the Kohl’s store of two to three years from now, what does that look like?

A: We can tell you when you’re doing research online that something is available in your local store, which should give you an incentive to go to the store to try it on. When you do make that trip, we want to make sure you’re guaranteed it will be there and you have a great experience.

The key is how do we make sure the customer doesn’t feel like these are two separate channels. You should be able to take what’s in the store and also say, “I want this (online) item you’ve recommended,” and check out in a seamless way. Some gets shipped to your house, and some you take with you. It’s a little bit harder work, but it can be done.

Q: What’s harder about it?

A: Traditional (point of sale systems) have been very focused on just the in-store transactions. This year we’re going to start rolling out a new POS system that will enable us to connect both store and online transactions. No one has done that well.

Q: It has been a tough year for department stores, Kohl’s included. How much do you think that’s because of technology, and how much can be solved with technology?

A: I think customers’ expectations have changed because of the online experience. Findability is easier online. You search, you get an assortment, you get a product, you compare prices. The experience we offer is we have great products and we have it at great value. It’s not a treasure hunt like a T.J. Maxx. When customers go to other retailers like that, they’re already expecting a treasure hunt. Here, they’re expecting us to have the right product at the right value and make it very easy for them to get.

That is the transformation that we need to make, and I think we’re well-positioned to do that.

Q: How much of the innovation is focused on things you can do in next six months to a year and how much is more blue-sky?

A: We don’t have the wherewithal to do blue-sky innovation and spend tons of money like some other companies do. We look at innovation and say, is it right for our customer and what we want to do, and from a value standpoint does it create a high value quickly with low costs? Virtual reality is going to take off. Do we watch it? Yes, we do. But are we investing significantly? No. We think the adoption curve is going to be much longer and we want somebody else to figure it out and then we can leverage that.

Chatbots (computer programs that use artificial intelligence to mimic conversation with a person) though, are things we’re definitely looking at. One thing chatbots will do for us is we can automate a lot of the components that today we need people to answer, like “Where is my order?” There we see tremendous amount of value. We’re actively working on it.

Q: So you do think retail’s problems are things technology can solve?

A: The speed at which technology is evolving and what it can do today versus what it was able to do 10 years ago, there are a lot of solutions there where technology can help. With that said, can technology pick all the products for the customer? That’s not going to happen. There’s a lot of art and science in a lot of this, so what we want to do is augment art with science so we make better decisions.

Q: Is it that technology can’t do it yet, or ever?

A: It can’t do it yet. With the advent of (artificial intelligence) and how fast it’s growing and what’s coming, I think eventually, but not yet.

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