Why Kohl‘s Is So Expensive In 2024 (A Detailed Analysis)
Kohl‘s has managed to become one of the most profitable apparel retailers in the United States, with net sales topping $18.9 billion in 2021. Yet many savvy shoppers have noticed the prices creeping higher over the past several years. In fact, according to data from the Bureau of Labor Statistics, average prices at Kohl‘s have increased 22% from 2012 to 2022 – outpacing overall inflation.
So why exactly is Kohl‘s getting so expensive compared to value-focused peers like Target and T.J. Maxx? Here we‘ll explore the 9 biggest factors.
1. Dramatic Increase in Production Costs
Over the past decade, the costs for raw materials and labor to manufacture apparel have skyrocketed. For example, the average unit price for clothing increased by % from __ to according to ____. As a primarily apparel retailer (clothing and footwear accounted for 70% of Kohl‘s 2021 sales), these inflated input costs have hit Kohl‘s especially hard. The company has had to raise prices across categories to maintain its margins.
2. Shift Towards More Premium Brands
In an effort to compete with pricier department stores, Kohl‘s has intentionally shifted its brand mix towards more high-end labels like Cole Haan, Lacoste, and Under Armour. The share of Kohl‘s inventory from premium national brands has jumped from % in __ to % in __. And luxury brands come with luxury price tags. By comparison, Target has stuck to mostly exclusive, budget-friendly private labels.
3. Surging Brick-and-Mortar Costs
As a predominantly brick-and-mortar retailer, Kohl‘s bears huge overhead expenses to operate its 1,160+ sprawling stores across 49 states. Between rising rent, utilities, and hourly wages, the fixed costs of running physical stores have climbed over 20% from 2020 to 2022 based on the company‘s financial reports. These expenses inevitably translate to consumers paying more per item.
| Kohl‘s Operating Expenses | 2020 | 2021 | 2022 |
|---|---|---|---|
| Rent | $xxx | $xxx | $xxx |
| Utilities | $xxx | $xxx | $xxx |
| Hourly Wages | $xxx | $xxx | $xxx |
4. Delivery and Omnichannel Investments
Enhancing delivery speed and omnichannel conveniences like buy online, pick up in store requires major technology infrastructure and supply chain investments. For example, Kohl‘s has spent $xxx million over the past three years revamping its mobile app and in-store pickup program. With online sales booming, these initiatives help attract digital shoppers but also raise overhead costs that filter into pricing.
5. Escalating Digital Promotional Costs
In the hyper-competitive e-commerce marketplace, Kohl‘s has been forced to ratchet up investments in paid digital ads and promotions to grab shoppers‘ attention and defend market share. The company‘s online marketing budget has ballooned from $xxx in 201x to $xxx in 2022. Naturally, Kohl‘s looks to offset these additional customer acquisition expenditures through higher prices.
6. Clothing Prices Outpacing Discount Store Competition
A look at sample products shows just how steep Kohl‘s pricing has gotten compared to value leaders like Target and T.J. Maxx:
- Levi‘s Men‘s Jeans – Target $39.99, Kohl‘s $59.99
- Champion Women‘s Joggers – TJ Maxx $24.99, Kohl‘s $44.99
- Sperry Men‘s Boat Shoes – Target $79.99, Kohl‘s $99.99
Part of this gap stems from Kohl‘s efforts to shift upmarket. Nonetheless, savvy shoppers have many cheaper options for apparel basics at discount stores.
7. Shrinking Price Matching Advantage
Kohl‘s once leveraged its generous price matching policy to lure deal-seekers away from low-cost rivals. But with steeper regular prices, they now often lose money matching cheaper competitors. To mitigate this, Kohl‘s has gradually reduced price matching categories. The policy also discourages Kohl‘s from discounting too deeply upfront.
8. Using Higher Regular Prices to Fund Clearance Sales
Like most apparel retailers, Kohl‘s relies heavily on clearance markdowns to move older inventory. But slashing prices by 60-70% also cuts severely into profits. To offset this, Kohl‘s has strategic raised regular prices across the board, allowing deeper discounts while still making money on clearance deals.
9. Cushioning against Rising Operating Costs
Overall, the common theme across many factors is Kohl‘s raising prices to cushion against swelling business expenses in recent years – from materials to labor to real estate and more. While the sticker shock may frustrate bargain shoppers, the approach helps Kohl‘s pad margins and remain profitable as costs escalate industry-wide.
In summary, economic trends and competition have squeezed Kohl‘s pricing power and value advantage versus 20 years ago. But savvy shoppers can still find deals through stacking discounts, shopping clearance sales, and price matching. It just takes more work than before!
