Change is inevitable — except from a vending machine.— Robert C Gallagher
Just like you and me, businesses have goals too. Usually, those goals are to maximize profits. No matter how long a business has been around, it has had to change at some point.
No company can last forever. Eventually, a company will go bankrupt or become obsolete. But to fend off that reality as long as possible, executives are always trying to change their business. They need to stay current with trends to be able to make profits.
If a company was successful and stayed the same for years, eventually competitors would copy them and offer a lower price or unique product to usurp them. If the company was not successful and stayed the same, well that company wouldn’t last very long.
Change is inevitable in life and in business. Companies are always changing their strategy. They do so to try and preserve the longevity of the business for as long as possible.
COVID-19 Induced Change
All great changes are preceded by chaos.— Deepak Chopra
COVID-19 has disrupted all industries. It doesn’t take an MBA from Harvard to see that. While there are glaringly obvious industries impacted, such as e-commerce or local restaurants and bars, there are many other industries impacted that people wouldn’t initially think of.
The death of department stores started long before COVID-19. But it has picked up more speed as lockdowns were enforced. It’s hard to sell to customers if no one is allowed in.
Beauty products are an industry currently changing. These products have historically been sold in malls and large department stores. As these department stores have lost their appeal, there is an opportunity for other companies to get in on the sales of these products.
Kohl’s and Target, big names on their own, are two of the companies trying to take advantage of the beauty market.
Kohl’s
In Kohl’s most recent quarterly earnings call they reported a 13.3% decline in net sales, yet their shares still rose after the call. Most times, a decline in net sales that big would send investors running away. But on this call, Kohl’s talked about their change in strategy, and it was music to investors’ ears.
The CEO, Michelle Gass, explained the company’s plans to expand into two industries with great potential, activewear and personal care. Going into 2021, Kohl’s wants to offer products in areas that they believe will serve them better. They see the trend in the beauty industry and want to take advantage of the opportunity provided to them by aiming to triple its sales in beauty.
Beauty “is a small business for us today, but we’ve made steady progress over the last five years,” Gass said, “We see a lot of upside.”
Not to be outdone by rival Target, Kohl’s made an agreement with Sephora to open over 800 beauty shops in Kohl’s stores. This was done in direct response to Target’s deal with Ulta and for Kohl’s to secure their place in the beauty industry.
In addition to expanding in certain industries, Kohl’s is also changing its strategy elsewhere. On the earnings call, they also announced they will reduce the amount of “dressier merchandise” they offer in stores.
This is in line with the strategy that experts are seeing occur in Kohl’s and other retailers. Retailers of all variety are cutting back on the choices they offer customers. This is a new strategy for retailers. After years of expanding product offerings, consumers have hit their breaking point. Retailers are now reducing options to limit customer fatigue when shopping and having to deal with the paradox of choice. It has been found that when customers are shown fewer options, their purchase rate increases.
Target
Back in mid-November, Target and Ulta Beauty announced a deal to add skincare shops in select Target stores. These shops will give Ulta retail space at 100 locations.
This is great for both companies. Combined, the two companies have 100 million loyalty program members. Target is able to offer the best beauty and skincare supplies and Ulta gets access to customers in prime retail space they did not have before. Both companies’ stocks were up after the announcement.
Target’s most recent quarterly earnings, also from mid-November, showed great growth for areas impacted by the pandemic. Comparable digital sales grew by 155%, curbside pickup service grew more than 500%, and home delivery service was up almost 280%. These are numbers that never would have been reached if the pandemic did not occur. Target has taken advantage of the opportunity that has presented itself.
Target had noticed the change in the beauty industry. The leaders at Target were able to make this deal with Ulta that helps both companies and allows Target to position themselves strategically for success in the future.
A Lesson for All
People will try to tell you that all the great opportunities have been snapped up. In reality, the world changes every second, blowing new opportunities in all directions, including yours.— Ken Hakuta
You don’t have to be a Fortune 500 company to change your strategy. Whether it applies to your personal life or your own small business, change is inevitable.
Situations like this pandemic or other events can be a much-needed shock. Evaluate all that you do, and think if it is still the best for you given the changes in your life.