Kmart (Maybe) Makes a Comeback

Discussion
Jul 28, 2009
George Anderson

By George Anderson

An early version of an Advertising Age article online yesterday
offered a surprise for Kmart fans. According to the initial draft that went
online, Kmart saw its sales dip only two percent in the most recent quarter
while rivals Target and Wal-Mart Stores were down by a higher number. Alas,
the joy in Blue Light land was not to be enjoyed for long when a correction
was made showing Wal-Mart Stores’ performance was actually in positive territory.
Target, on the other hand, did see a bigger sales drop than Kmart.

Even though Kmart did not outdo rival Wal-Mart, there is some hope that
the chain is finally getting an idea of how to turn itself around. For one,
although year-over-year comparisons are against a pitiful base, the chain
has found ways to minimize some of the worst effects of the recession.

The chain’s layaway program offers core customers an opportunity to save
for gifts that is not available at Wal-Mart and Target locations.

The company has also sought to offer “bargains” to its shoppers without
getting into an unwinnable low price tit-for-tat with Wal-Mart. Kmart recently
reintroduced its “Blue Light” specials with unadvertised sales on select
items in stores for an hour at a time.

Mark Snyder, chief marketing officer at Kmart, is encouraged by the initial
results of the Blue Light test.

“We know it has a lot of equity, and we know that when it’s done well it’s
meaningful to the customer and has the ability to energize our associates
and store experience,” he told AdAge.com. “We got some great traction
through apparel, home electronics and a couple of other categories like sporting
goods and seasonal. [Continued testing] will tell us whether this is a great
long-term strategy for us to have in the promotional arsenal.”

Serving a less affluent demographic was the impetus behind Kmart’s decision
to resurrect layaway. It also is behind the chain’s test of the Smart Assist
program in Michigan. The program offers the unemployed a 20 percent discount
of store brands for up to six months. With unemployment at high levels across
the country, an expansion of the program could bring in large numbers of
new shoppers to Kmart stores.

“Everyone else is talking about things on sale and food and consumables,
and Kmart has all of those things,” Mr. Snyder said. “But even in a recession,
where price and value are so important, you can’t forget about the importance
of going to the marketplace with a differentiated message.”

A point of difference for Kmart has been the addition of Sears brands within
dedicated sections in its stores. The company recently converted a garden
center at a store in Alabama to offer the first full-line major appliance
department in one of the mass merchant’s stores.

One area where Kmart has yet to gain traction is in apparel. The company
now has several hundred designers working in its studios and has plans to
run a major print campaign this fall in Vogue, Glamour and Lucky.

“[We’re] building credibility around quality and trend-forward style while
we have the opportunity with a very willing audience,” Mr. Snyder told AdAge.com.

Discussion Questions: Has Kmart hit on a strategy that will enable it to
succeed in the competition for consumer dollars? Where do you see strengths
or weaknesses that it can build on or address to strengthen itself going
forward?

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19 Comments on "Kmart (Maybe) Makes a Comeback"


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David Livingston
Guest
11 years 9 months ago

Two percent of nothing is nothing. There is no turn-around. I doubt there is any other big box retailer in the country with a lower sales per square foot performance than Kmart. The two percent figure does not surprise me. I can’t see how they can get any lower. Eventually, at this rate, they will become non-existent which is probably their best strategy going forward. Wal-Mart, Target, and Kohl’s continue to rapidly expand through the recession while Kmart quietly shutters stores.

Doug Stephens
Guest
Doug Stephens
11 years 9 months ago

Kmart has gone from being a poorly-run business with a brand that didn’t stand for anything to being a better-run business with a brand that doesn’t stand for anything.

I’m not trying to be flippant. I respect their effort from a tactical point of view. Things like lay-away plans, store designs and assortment planning are all relevant tactics. But at the core of it all, your brand has to mean something to someone. You have to be the best at something.

There was a time when Kmart stood for solid value for the middle class. A good shopping experience, a good selection with good prices and good locations. The problem is that there isn’t a middle-class anymore and “good” is invisible.

For Kmart, recession isn’t the enemy…recovery is.

Robert Craycraft
Guest
Robert Craycraft
11 years 9 months ago

I disagree that the Kmart brand stands for nothing. In the small Appalachian town where I was raised, Kmart is viewed as the low-price leader, and with unemployment near 20% in the region, they are always busy. The new Walmart supercenter is increasingly seen as a middle-class destination. I believe there is a niche for Kmart as a bare-bones, no frills outlet for the lowest income demographic. Not a fun place to be, but better than none.

Kenneth Allan
Guest
Kenneth Allan
11 years 9 months ago

To me, Kmart does stand a strong chance of making a “comeback,” provided it continues to keep its stores clean and well stocked, AND interjects some fun into the equation. Walmart and Target may be well-run companies, BUT their stores are not fun. Taking some of the blandness that has infected most retail formats out, Kmart can be a strong competitor. Blue Light Specials are fun, and inject just enough quirkiness into the mix.

Further, Kmart continues to have the most urban locations of the bunch, and it needs to improve these stores now, rather than wait for a competitor to open nearby.

Mel Kleiman
Guest
11 years 9 months ago

Too little too late.

They have missed the boat; trying to be the low-cost provider in today’s world is not going to give them enough ROI to keep the boat afloat for very long. What retailer has a 20% margin to give away to what it is defining as its core customers who are on unemployment?

Brian Kelly
Guest
11 years 9 months ago

Comeback?

Like liquidators or auto repair categories, in this economy there are winners. Most retailers are now accepting the importance of the box, the brick and mortar, the shopping experience. That is most except SHC. IMHO, blue balloons to support “Blue Light Special” is not a comeback. A return to something, but who remembers a blue light special? And is that enough to differentiate vs. a refining WMT or renewing TGT?

Blue Crew or Blue Light; a thin veneer to promise change is futile and what makes us say, retail ain’t for sissies.

Don Delzell
Guest
Don Delzell
11 years 9 months ago
For far too long analysts and commentators have criticized anything done by any aspect of Sears Holdings as non-retail centric, ignoring the core business, and simply, ineffective. Now, we have Kmart implementing solid and appropriate merchandising tactics. Instead of fairly praising these efforts as significant within the context of previous management decisions, Kmart continues to be attacked on elements not yet addressed by management. In short, nothing any division of SHLD can do will be good enough. Not here. There absolutely is room under Walmart. WMT itself has created that opportunity with the never ending program to capture higher income shoppers. One could argue that the dollar store niche is filling this lowest rung, and perhaps, to some extent, that is correct. However, the assortments, consistency of offering, and breadth of merchandise in dollar stores will never match that of Kmart. Would I want to be the bottom rung on the mass merchandise ladder? No. Is there an opportunity to occupy it, given exodus of the previous occupant and inability of competing formats to adequately… Read more »
W. Frank Dell II
Guest
11 years 9 months ago

Kmart has not hit on any strategy, just a slower demise. Some retailers are up in this recession and Kmart continues to decline, just not at the same rate. But then again, they are working off an ever decreasing number. I would expect Family Dollar and Dollar General will put the finishing touches on them. Walmart has done its damage and management has helped out best it can.

Declining comp sales are the path to nowhere, recession or not. Until they have a positive comp number, nothing has changed.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 9 months ago

Of course, this recounting of Kmart’s latest tactics does not amount to a strategy. As they’ve stated, they’re testing, that’s all. Kmart’s Mark Snyder is incorrect in referring to Blue Light tests as potentially “a great long-term strategy.” It’s a tactic, Mark–merchant strategies do not reside in “promotional arsenals.” And therein lies a central marketing issue for Kmart if their CMO doesn’t understand and employ classic marketing structure. You can’t lead with tactics. Strategies flow from objectives, and tactics flow from strategies. If Kmart’s strategy is “try a bunch of stuff and see what works,” they’re in for a continuing slide.

Craig Sundstrom
Guest
11 years 9 months ago

“The new Walmart supercenter is increasingly seen as a middle-class destination. I believe there is a niche for Kmart as a bare-bones, no frills outlet for the lowest income demographic”

OUCH! A store that makes Walmart look upscale…now THERE’S a strategy no one would have envisioned.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 9 months ago

It’s just so hard to get excited about much of anything that Kmart does. This company has been irrelevant to anything going on in retail for more than 2 decades now. Clearly they have a niche, but they’ve been such an uninspiring retailer for so long that perhaps the most notable thing to say is that they’ve found a way to survive.

Kai Clarke
Guest
11 years 9 months ago

Kmart is truly at the bottom of their retail position. The true question here is whether there will be an up. Management, product position, and of course profits will all be determiners of this in their future, but the key determinant here is time. How much longer can Kmart exist before their time runs out? 2% is something, but not enough to stop (or perhaps even slow) the inevitable for Kmart. They are in trouble and they need to take drastic steps now to stop this slide.

Joel Warady
Guest
Joel Warady
11 years 9 months ago

Talk about an article with a lot of spin! Kmart is not experiencing any turn-around, nor are they gaining any traction. While not to pick on any one individual, if the best idea that the marketing team can present is resurrecting the “Blue Light special,” I think the marketing team needs to look inward and try and figure out where all of their creative ideas have gone.

Have you been in a Kmart lately? The store should only sell bed sheets and pillows, it is so tired! I don’t think we are seeing any turn-around happening with this chain.

Vincent Kelly
Guest
Vincent Kelly
11 years 9 months ago

Kmart stores have a few things going for them. They have urban stores, thereby serving the demographic who rely on public transport. They can transform themselves with a strong offering based on quality and value, along side innovative ways to shop and purchase. I believe that using their one-time all American image where you could get a bowling ball and tires for your car and do lay away for Christmas will help them capture a customer base. Big box retailers on the edge of town have no heart, they are not part of the community.

Ron Boto
Guest
Ron Boto
11 years 9 months ago

Kmart’s destiny is up to them. If I were advising Kmart I would tell them to first rethink their customer experience. From the moment someone walks into the store is he/she achieving the desired affect, or are they forming negative opinions? Kmarts today are often very clean and well organized, but good luck if you want to ask a question. And sometimes most of your time inside of the store will be spent standing in line at checkout.

Kmart needs to rethink staffing and focus more on other costs where their frontline interaction with customers is marking their time on earth. I’ve been in retail management and turnaround consulting for 30 some years and this story never changes.

David Livingston
Guest
11 years 9 months ago

Just stopped by my local Kmart to see what’s new. Nothing. The automotive department has been long shut down. The snack bar area roped off and permanently closed. The garden center pretty much cleaned out and empty, and it’s still summer. Cars littering the parking lot, giving the homeless something to steal. Whatch out where you drive, there are large potholes in the parking lot. One cash register open. Never a need to open a second. Put down the press release and visit a store. It will all become clear to you what is really going on.

John Hyman
Guest
11 years 9 months ago

Kmart’s trend year over year only reflects that last years performance was very poor relative to 2007.

Next year they might show a positive trend but is this a measure of retail health? Have you been in a Kmart recently? Looking tired; anything but exciting.

William Passodelis
Guest
11 years 9 months ago

I wish Kmart the best–I am shocked that they are still in business.

Justin Time
Guest
11 years 9 months ago

For those of us who frequently shop Kmart and SuperKmart, the in-store changes are indeed evident.

Last weekend, for instance, was a kickoff for the back-to-school sales season. They had a great turnout with the Disney Radio van parked in front of the store doing live “on-air” remote broadcasts throughout the weekend. Very kid friendly.

Shopping Kmart means not having to fight lines, finding great selection and quality fashionable merchandise at fantastic savings. That’s what Kmart is again, all about!!!

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