U.S. Markets close in 2 hrs 25 mins

The department store app that outpaced Uber, Tinder and Nike

Aaron Pressman

The list of the fastest-growing mobile apps includes many familiar and unsurprising names, such as Uber, Tinder and Nike (NKE).

But topping the hipster favorites? Kohl's (KSS), the discount department store chain based in Menomonee Falls, Wis., which increased its user base by almost 800% after overhauling its mobile offering last fall. Only ride-sharing service Lyft, with an 835% increase, grew faster last year among apps with at least 1 million monthly users, according to data collected by Comscore.

While many in the technology industry sneer at old-school retailers and their sprawling brick-and-mortar store chains, the success of apps from Kohl's and others such as Walmart (WMT) and Target (TGT) proves that they can be formidable competitors. Unlike mobile payment apps from the likes of Apple (AAPL) and Google (GOOGL), the retailers' apps provide more tangible benefits to shoppers through integrated customer loyalty and rewards programs.

"They gave people a simple value proposition and -- boom -- all of a sudden people are downloading these apps," says Andrew Lipsman, vice president of marketing and insights at Comscore.

Kohl's success comes as many traditional retailers are increasing their digital efforts to capture the attention of smartphone-carrying shoppers. While physical stores were once seen as expensive and outmoded, retailers now view their outposts as valuable spaces to connect with customers, complement online commerce and speed up shipping times.

For years, the Kohl's app was a mess, peppered with 1-star ratings and generally ignored by most shoppers. But last year, Krista Berry, the company's chief digital officer, decided the time was right for an overhaul. Kohl's had plowed $1 billion into a digital effort revamping its web platform, the systems that collected customer data and its back-end order fulfillment network. Those upgrades potentially could power an app to deliver a lot more value to customers and, in turn, increase their allegiance to Kohl's.

Focus on phones











So in February 2014 Berry gathered a team of 30 people, spanning different functions across the company, for what she called "a rumble." The team shut itself in a room for a two-day debate over what a revamped Kohl's app could -- and should -- do for customers.

"We really had to step back and ask: what do we want to be in digital when we grow up," says Berry, who came to Kohl's three years ago. Before joining the company, she spent six years at Nike crafting its digital strategy and the bulk of her career at Target, including working on the first versions of the company's website.

[Get the Latest Market Data and News with the Yahoo Finance App]

As a result of the rumble, one key decision was to make Kohl's all-important customer loyalty programs primarily mobile-based. The team also wanted to make it easier for shoppers to collect rewards and apply them to purchases.

So the new app put rewards front and center. Instead of using plastic cards and paper coupons, customers can now track their rewards in the app. Relying on simple barcode readers, Kohl's credits shoppers for their purchases via the app and then sends discounts and offers back to the app. When customers use the app to browse merchandise, it can display exactly how those discounts and rewards could lower the price of any particular item. And the app makes it easy to share rewards points or shopping lists with other users.

Rolled out last November along with a newly revised rewards program called Yes2You, the app for both iPhone and Android was an immediate hit, garnering 4-star ratings and racking up over 6.5 million downloads so far.









Kohl's needed some help. After decades of rapid growth and expansion, the company's sales flattened out for the last three years. Some feared the chain might be another victim of changing American shopping habits that have pushed Sears (SHLD) and J.C. Penney (JCP) to the brink of irrelevance.

But now the chain looks like it might be on the path to recovery. Fourth-quarter sales gained 4% from the year before, the first increase in the past seven quarters. And earnings per share rose 18% to $1.84, more than analysts had expected and the biggest increase since 2011. Kohl's share price has shot up 20% in the past three months.

That's not all because of the app, of course. Under a strategy CEO Kevin Mansell calls his "Greatness Agenda," Kohl's has been upgrading its 1,200 stores, adding more popular products (including a deal with Disney for merchandise tied to the hit movie "Frozen"), as well as bolstering online and digital efforts. "We needed to evolve and we needed to evolve a lot and we needed to evolve quickly," Mansell said at a meeting with investors to introduce the strategy last October. Still, it will take more than one great quarter to declare Mansell's efforts a success.

Berry's app overhaul isn't finished, either. Later this year, customers will be able to order items for pick-up at many Kohl's stores or rapid delivery via a pilot with Google's Express local delivery service. And customers will be able to save items in a single virtual "bag" (or digital shopping cart) across all of their computers and devices. So a late-night impulse shopping session on a laptop will be saved for the customer to review in the sober light of morning on their smartphone the next day.

"As someone who has worked in retail for a long time, it is sort of a dream come true," Berry says.

A future in mobile payments?

But she won't say much about one other likely future feature: mobile payments. "We're exploring several options," she says. "That book is yet to be written."

Kohl's joined the retail industry initiative on mobile payments called MCX in 2013. One goal of MCX is to encourage shoppers to use debit cards and bank accounts as their source of funds, so that retailers won't have to pay the much higher transaction costs required when customers use credit cards.

The group plans to offer a payments app called CurrentC, but the development process has dragged on and MCX replaced its CEO this week amid the delays. Meanwhile, Apple Pay, which has partnered closely with the major credit card networks, is gaining momentum.

Some have dismissed the retailers' chances of outmaneuvering the world's biggest and most successful tech company. But the popularity of retailers' apps, thanks to the kinds of rewards and benefits that are completely lacking in Apple Pay, could help them win the war by integrating mobile payments features.

"It makes perfect sense for their long-term strategy," says Comscore's Lipsman. "But the uptake so far has been very slow. It's an open question as to just how long this takes."