Beyond Brand Martha

Mar 11, 2004

By D.
Wendal Attig

If you’re Kmart and you were counting on Martha Stewart to continue pulling your brand position up a notch in the retail space, you’re scrambling right now. What to do with all
of the merchandise on the shelf? What about the values of the company and your own Business Code of Ethics? What about protecting your store and core brands? What about followers
of the Martha Stewart Everyday product lines that appear to consume 40+% of the shelf space inside neighborhood “Big Kmarts”?

What about Martha?

She actually seems to be of secondary concern. In fact, she’ll personally be fine whether or not the appeal process is good to her.

Sure Martha Stewart Living took a hit when the diva of how-to television got the guilty verdict from the jury, but word has it the company has $170-million in cash reserves to
work with while they sort things out.

But what about Martha personally?

Martha’s personal fortune has reportedly suffered a $250-million loss due to the dive in market value of her stock. But before you take that to heart, keep in mind that she’ll
have plenty of time in the tank to think about how to spend the remaining $320-million.

So, what about Kmart?

Kmart’s own 2003 Business Code of Ethics States, “Kmart Management Corporation and Kmart Corporation (collectively “Kmart”) values honesty, integrity and adherence to the
highest ethical standards.”
Now the company finds the champion of their largest assortment of merchandise from garden hoes to bath towels and wall paint in trouble with the
law. Now what?

What about the associated integrity of the brand?

The quality of the merchandise certainly hasn’t changed just because a jury made a decision about Martha’s immediate future. The shelves in more than 1,500 stores in 49 states
are stocked with a pipeline of Martha Stewart products that continue streaming into these locations on a weekly basis where more than 158,000 employees try to make sense of it
all—if they can.

But in the face of this latest development, what about Kmart’s brand management?

No question, it is decision-time. Kmart employees are watching carefully to see what the company’s new Senior Vice President, Chief Apparel Officer, John D. Goodman (just in
from 11 years at the GAP) is going to do. You can be sure that he and CEO Julian Day are huddling on this one. Goodman, who just came to Kmart in December of 2003 is no doubt
facing his first crisis in the company even though he doesn’t work directly on the Martha Stewart Everyday lines.

If Goodman is a true leader in his field and worth his own weight in integrity, you can bet he’ll argue to dump the Martha Stewart products as quickly as possible.

Even though Martha Stewart Everyday doesn’t involve apparel, big John’s got a lot at stake and so does his boss. Here’s why:

  • If they keep Martha’s products in the line-up, they run the risk of sending a message to associates that the Kmart Business Code of Ethics is simply fluff—potentially triggering
    a serious breach of trust between those employees and key management.

  • If they keep Martha on the shelf, they have to risk a negative affect on the perception of integrity for the other named store and independent brands like: THALIA SODI, JACLYN
    SMITH, JOE BOXER, KATHY IRELAND and SESAME STREET. (The latter list of brands is mostly apparel.)

  • The independent brands no doubt have their own concerns, as well they should.

  • If the company makes a decision NOT to replace Martha’s products, they run the risk of creating customer perception that honesty is not valued by one of America’s largest

If I was coaching Kmart’s senior staff through this brand crisis, I would recommend that one of the strongest PR moves they could make in the market would be to take the high
road, expressing their regrets that the Martha Stewart Everyday line would have to be replaced, but announcing that the decision is being made to honor the integrity that Kmart
employees display everyday. (The public is in a mood to honor that commitment.)

Next, I would recommend offering all of the current MSE merchandise at clearance prices, driving traffic into the stores.

And I would recommend that they publicly promise to introduce fresh, replacement products quickly that will meet the standards of excellence and integrity that Kmart customers
have come to expect.

Unquestionably, the company will have to jump through some hoops to execute a plan like this, but the payoff could have a significant impact on customer opinion and be so much
more effective than struggling with a will she- won’t she brand affected by a customer-driven jury.

At the end of the day, if the management team at Kmart believes the company has a future, they have to work toward customer preference for the Kmart brand shopping experience–
far more important than preference for the Martha Stewart Everyday product line-up.

Kmart is a brand beyond Brand Martha. How senior management leads the brand today will determine its success in the future—with or without the help of the puce green
Martha label.

Moderator’s Comment: Should Kmart follow D. Wendal Attig’s advice concerning the Martha
Stewart Everyday brand?

We have to admit up till now being in the “who cares as long as the stuff is selling” camp.

We find D. Wendal Attig’s arguments convincing and thank him for reminding us that while doing the right thing may not be easy, it still needs to be done.
Anderson – Moderator

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