business news in context, analysis with attitude

by Kevin Coupe

The other day I took note of a Wall Street Journal report that "an activist investor is urging department-store chain Kohl’s Corp. to consider a sale of the company or a separation of its e-commerce business."

I commented:

Seems pretty clear to me that while it might increase short-term shareholder value, spinning off the e-commerce business would not position Kohl's as having the kind of customer-centric value that a retailing business needs to go the distance.   As for selling the company … well, I'm not qualified to pass judgement on that suggestion, but my guess is that if a hedge fund is suggesting it, such a deal may be good for the fund's bottom line and not necessarily in the best interests of the retailing entity.

Save me from the craven manipulations of hedge funders and investment bankers who know absolutely nothing about retailing.  If these clowns get their way, the thing they are most likely to achieve is turning Kohl's into Sears.  

Now, CNBC has a piece in which Mickey Drexler, who has served as CEO of Gap and J. Crew and founded Old Navy and Madewell, says "he doesn’t understand how the latest Wall Street idea for retail —spinning off growing online operations — will solve more issues than it ends up creating."

“It doesn’t make sense to me," he says, adding, “I don’t know what I would do if I had a brick-and-mortar along with a separate online company.  They are so embracing of each other."

Exactly the point I was making.  (Though Drexler has more street cred than I do.)

The larger and Eye-Opening point, I think, is that consumers are less and less differentiating between formats and segments - they are thinking about what they need and want, and are responding to integrated retail brand experiences that are consistent, compelling and provide a clear value proposition.

I repeat.  Breaking up a retail company by spinning off an e-commerce business may make short-term sense for investors, but it damages the retailer's ability to compete long-term.  If you want to own the customer, you have to own the total experience.