In recent years, Kmart has established itself as the third leading discount retailer in the United States, following behind Wal-Mart and Target. Kmart’s low prices and array of product have appealed mainly to low-middle class families. Kmart has fallen from the glory days when it was the leading and only discount retail store on the block. After the opening of discount giant Wal-Mart in 1962, and second largest discount retail store Target in the same year, Kmart slowly began to enter the back of consumers’ minds. Kmart is mainly known for the Blue Light Special, which was first introduced in 1965, and then was retired approximately 30 years later for failing to appeal to consumers. Blue Light Specials were revived again in 2009 only to be offered on Saturdays for an hour long sale on certain merchandise. During the 1980s, the company’s fortunes began to shift. Many of Kmart’s stores were considered to be outdated and too numerous to manage. On January 22, 2002, Kmart filed for Chapter 11 bankruptcy under the leadership of chairman Chuck Conaway and president Mark Schwartz. Later, Conaway accepted full responsibility for the financial disaster and blamed the companies loses on himself.
After terminating Conaway and Schwartz, Kmart closed hundreds of stores in the United States and laid off thousands workers as part of refurbishing the company. After rebranding and renovating again, the new layout was advertised as having wider aisles, cleaner stores, and an improved selection. However, Kmart could not afford a complete rollout in all stores after bankruptcy. In 1994, Kmart closed 110 stores. Unlike its competitors Wal-Mart and Target, it had failed to invest in computer technology to manage its stores because they had no money to improve store quality. The main reason for closing the stores was due to the corporation failing to create a strong brand image. The rebranding and introduction of the first Big Kmart (Big K) occurred in 1997. Most Kmart stores were remodeled to the new logo introduction, but not all stores were remolded. On November 17, 2004, Kmart announced its merge with Sears. As a part of the unification, the Kmart Holdings Corporation changed its name to Sears Holdings Corporation. The new corporation announced that it would continue to operate stores under both the Sears and Kmart brand names. In November 2009, Kmart reported its first sales increase of 0.5 percent since 2005. Overview of History
Kmart is a mass merchandising company that has been around since the opening of its first store in 1962. Founder, Sebastian Kresage had the idea of starting a store back in 1899 with everything for five and ten cents for low costs to shoppers. That concept grew into what is now known as Kmart.
Kmart currently has 1,307 stores, including supercenters and discount stores, in 49 states in the U.S., Guam, Puerto Rico, and the U.S. Virgin Islands. The retail store carries a wide variety of products comprised of apparel, electronics, outdoor living, toys, and grocery. Kmart has also been known to converge with designers, such as Jaclyn Smith, Martha Stewart, and Kathy Ireland. Kmart’s services arrange from 981 in-store pharmacies, 20 auto centers, a lay-away program, and online to in-store pickups.
Throughout the store’s history, Kmart had an uphill battle to keep up with the modernization of retail. During the 1980s, stores were considered to be outdated and in bad condition. In 1990, Kmart released a new logo and business plan to try to enlarge and revamp stores with a five-year, $3.5 billion remodel. A year later, Kmart twenty-four hour supercenters emerged. Soon thereafter, Kmart opened Big Kmarts for cleaner, brighter, and easier ways to shop. Kmart had yet to invest in up-to-date computer technology, leaving 110 stores to close in 1994. On May 6, 2003, Kmart filed for Chapter 11 bankruptcy. After the debacle, Kmart was forced to close 300 more stores, which put more than 34,000 people out of work.
Under new leadership, Kmart went to restructure the company. In 2004, Kmart merged with Sears, Roebuck and Company and went on to be a part of the Sears Holdings Corporation. Since then, Kmart has continued to try to revitalize stores one by one. Kmart has also started to sell Sears brand products in stores, such as Kenmore and Craftman.
As of 2009, Kmart has had a sales increase of .5 percent since 2005 even after their major efforts of restructure. In 2010, profits were down $15.6 billion for Kmart. The discount retail store is in need of a turnaround plan. Product Lines
Kmart sells brand-named items and even some private labeled names including Joe Boxer and previously, Martha Stewart. Brand name clothing lines such as Jaclyn Smith, Sofia by Sofia Vergara, Pink K, and Route 66 are all top selling women’s collections. Brand-named men’s clothing such as Wrangler, Structure, Hanes, and Dickies are also sold at an affordable price. Kmart is providing its customers with quality items at a low price.
Kmart also provides top brands in electronics, such as, Sony, Samsung, and Panasonic. Microsoft Xbox, Sony PlayStation, and all Nintendo gaming products are also available in the vast amount of electronic selection Kmart has to offer. Toshiba, HP, and Dell personal computers and lap tops are available at any Kmart retail store. These are a few of the top selling brand names available at any Kmart location, and are also available on their easy-to-navigate website. Kmart.com offers multiple ways to purchase these items online. PayPal, eBillme, and Kmart/Sears credit cards are all acceptable methods of payments. Kmart.com also allows you to put items on layaway online and select your location of pick-up once your final purchase has been made.
Leading retailer Kmart was forced to file for Chapter 11 bankruptcy in January of 2002 after being unable to meet its payment obligations to suppliers due to severe financial issues-losses amounted to $2.45 billion in 2001. Kmart initially flourished by offering goods at a discounted price of 20 percent but the store failed to maintain good relationships with its customers and suppliers which ultimately led to its downfall. Kmart had many issues. The company never tried to identify its customer segment because they always felt that anyone and everyone shopped at Kmart. They also cut 50 percent of ad spending in order to cut costs, causing them to continuously loose customers. The company also did not have a good relationship with suppliers. Kmart’s inventory turnover rate was 3.6 times per year whereas Wal-Mart’s was 7.3 per year and Target was 6.3. Shortly after filing for bankruptcy, Kmart closed 284 and laid off 22,000 employees as part of a reorganization plan. In 2003, the number of stores closed rose from 284 to 600 stores closed and approximately 25 percent of senior level positions were eliminated. The stock traded at $13 in August of 2001. It had reached an all-time low of 11 cents in February of 2003. In less than two years, a total loss of $6.7 billion in market capitalizations had been made and the stock was delisted from the New York Stock Exchange (imcrindia.org). Major Marketing Flaws:
Kmart has many marketing flaws that have ultimately led to their downfall as a retail giant. Kmart’s brand image has been lost due to competitors and not knowing their customers wants and needs. With poor management at the top of the list, there are many reasons why Kmart did not hold up to its competitors.
Kmart was founded in 1899 and originally known as S S Kresge Company (“Sears holdings corporate,” 2011). Its name did not change to Kmart until 1962, which was the same year Wal-Mart was established. When Wal-Mart was founded, Kmart ignored this huge competitor. Kmart kept expanding and adding on new, private labels while Wal-Mart was building onto their brand image and working on their goal to become the best retail provider. Kmart failed to recognize competitors, especially its biggest competitor; Wal-Mart. Kmart didn’t successfully strategize according to its locations. Kmart had a lot of stores, but the location was not ideal with them mostly being in strip malls. Competitors, like Wal-Mart, stood out to people with their locations (Howell, 2003). According to Forbes’ website, another one of Kmart’s major marketing flaws is that the company did not adapt to change. While its target market’s needs and wants were changing, Kmart seemed to stand still.
Instead the company focused on expansion of stores, when it needed to focus on creating better customer service tactics and better management of its brand. Because Kmart was unable to sufficiently meet the needs and wants of its market, the competition was providing quality goods and services. Another of Kmart’s marketing flaws is that the brand managers did not create a specific need for Kmart. An article from the Wall Street Journal (2011) proposed the question, “Would we miss Kmart?” The article goes on to say that everything one can buy at Kmart can be purchased elsewhere. If Kmart ceased to exist, its consumers could easily find alternate stores to shop in. However, if Wal-Mart or Target closed its doors forever, the impact would be much greater because its brand managers have created a specific need for such companies. Kmart could not be all things to all people, therefore, it lacked in setting its brand apart.
Kmart delayed in its efforts to change. While the company did focus on the amount of private labels, Kmart needed a bigger change. Stores were never remodeled and were often seen as dirty. Shelves never seemed to be filled which left customers leaving empty handed. The stores weren’t very customer friendly and did not take any initiative to seek out new customers. Prices were no competition with other retailers. Wal-Mart’s low prices and fair quality beat Kmart’s prices by a long shot. When Kmart did try to compete against Wal-Mart, advertising was cut by nearly fifty percent to make up for the cost of price drops (Katz, 2003).
According to Fortune magazine’s article, “Why Companies Fail” (2002), in the 1990s a new Kmart management team decided to revamp Kmart’s supply chain by investing heavily into its stores, but not into its store appearances. New CEO, Chuck Conaway, decided that he wanted Kmart to beat Wal-Mart at being number one. This unleashed a disastrous price war that in the end proved to be another mistake added to this list. This taught Kmart that’s you cannot play a game you can’t win. Kmart’s major flaws have contributed to the fact that it doesn’t know its customers wants and needs and that has hurt them in the retail market.
Kmart has many marketing flaws which attributed to the decision to file bankruptcy in January of 2003. Kmart can still be turned around if the company stops making the same mistakes and makes an effort to renovate store appearances and restore customer faith in its brand name. Kmart need to recognize competition and stay up with the times of customer service and low prices. Kmart was once a very recognized brand, but has fallen short of its wants and competitive advantage.
Strengths and Opportunities
* Kmart has a strong foundation
* Kmart has employees that can be trained to satisfy their new image * Due to the closing of multiple stores in the past, they have a manageable amount of stores to work with and revive * Kmart has many exclusive brands that appeals to its target consumers * Improve product line to appeal to middle class
* Kmart provides a layaway service over the competition who only offers layaway during the holiday season
* Kmart’s website is user-friendly and easy to navigate
Weaknesses and Threats
* Kmart as a company never adapted to change
* The stores were not updated, along with store technology
* Low marketing budget
* They do not know their consumer’s wants and needs
* Kmart’s low prices are overpowered by Wal-Mart’s
* Kmart did not adjust to the market
* Kmart has bad publicity
* Kmart has poor customer service
* Their employees were often non-existent and inconsistent
* Kmart has filed for bankruptcy before
* Lost touch with its mission statement
Kmart’s prior target market was low-income white Americans from the ages of 40 to 65 with an established home and a growing family. Upon renovation, Kmart would like to shift its target audience focus. This target market should be segmented demographically, first time homeowners who are diverse middle class Americans between the ages of 22 to 35 with a household income between $20,000 and $60,000. This target market is beginning a new chapter in their life focused on a brighter, family focused future. With this turnaround plan, our group hopes to reposition Kmart in the minds of consumers. The segmented market, young adults, makes up the focus of this campaign; the campaign’s initiatives will be targeted to reach this age group because of their majority in decision power of the new household. The target audience for the turnaround plan will be segmented in order to deliver the desired message to a potential public that will be targeted to an “ethno-centric” community. The goal of segmentation is to differentiate audiences who have diverse needs that need to be met. Even though the same message is sent across multiple audiences, being able to understand their desires will benefit both the turnaround plan and the company. Kmart’s new target audience will be a combination of multi-cultural consumers.
We will begin to target Hispanic and Urban African American households. In understanding and targeting urban minorities Kmart needs to tailor its company to each community’s ethnic mixture and give a merchandise selection that suits their customer’s tastes. By focusing its efforts on a specific audience, Kmart can create a niche for itself as a retail giant, and serve a different community that is neglected by its discount retail competition. Kmart is exceptionally popular among the multicultural populations of African Americans and Hispanic customers. The Hispanic population is beginning to increase at a faster rate than the rest of the nation. Urban African-American community’s represent $560 billion in buying power. Kmart strongest locations are its urban communities where multicultural consumers represent 40 percent of Kmart’s shoppers.
Kmart has two major competitors: Wal-Mart and Target. These two competitors have sent Kmart into a downward spiral for different reasons. Both competitors offer similar products as Kmart at a lower price making Kmart seem unnecessary. The competition has adapted well to change whereas Kmart seemed to lag behind. Wal-Mart always has everything a consumer could possibly need, which provides a one-stop shop that Kmart does not provide. Both competitors are constantly selling the newest trends whether it is technology, clothes, shoes, or even grocery items. Consumers like convenience and both competitors provide convenience to their consumers with their low prices and one stop shop. Wal-Mart was the first to over-take Kmart with convenience and low prices. Target followed shortly behind by slowly turning its stores into supercenters as well. Wal-Mart
Wal-Mart is the number one retailer and grocery chain in the world with 9600 stores in 28 countries. The 2010 fiscal year ended in sales of $405 billion and the company employs 2.1 million associates worldwide. Wal-Mart’s operations have gained the company major success and recognition since the company’s opening in 1962. Wal-Mart has risen to being a leader and threat in the retail market.
Wal-Mart has many competitive advantages compared to other retail giants. Wal-Mart’s resources and capabilities are outstanding, making the company admired by many. The distribution capabilities that Wal-Mart has are unlike any other mass retailer. Wal-Mart has its own distribution centers in expedient locations, making them ship faster and easier.
The company is also respected for its partner relationship with suppliers. Suppliers depend on Wal-Mart for a majority of sales, exchanging high purchase volumes for a low cost. Because of Wal-Mart’s size and buying power, the company can buy products at the lowest prices and passing the savings onto the customers. This improves the supply chain and lowers distribution costs.
Wal-Mart is a front-runner in the retail market because of its advanced data mining. The company can see what purchases are being made and when to restock as soon as an item is checked out. This calls for more accurate forecasting in relation to demand and lowers costs through reduced inventory and shrinkage.
Wal-Mart stays at the top of the retail arena because of the vast money and resources that it holds. Other companies can’t compete with Wal-Mart’s low prices and distribution rates. Those key factors are what make Wal-Mart stand out amongst competitors.
Target is the second largest discounter retail store behind Wal-Mart. Target is ranked 33 on the Fortune 500 and offers many incentives to its consumers. Target brings an urban feel to shopping, providing a modern shopping experience by having coffee shops, a small food café, computerized wedding and baby registry, and up-to-date computer systems to better run the store. Target, along with Kmart and Wal-Mart, has exclusive brands such as Michael Graves, Isaac Mizrahi, Mossimo Giannulli, Liz Lange, Converse, Archer Farms, Market Pantry and many others. Unlike its competitors, Target does not play music in the store, sell tobacco products or fire arms. They also only sell toy guns that do not replicate real guns; the toy guns have to be colorful and oddly shaped to be able to be on the shelves of Target. This does not seem to affect Target at all. For the quarter ending in October 30, 2011, target reported $555 million in net earnings (investors.target.com).
Target has 1,494 locations in 47 states across the United States. Shoppers have a median age of 46 with an average household income of $55,000. 80 percent of Target customers are female, and 43 percent have completed college (pressroom.target.com). 97 percent of consumers recognize Target’s bulls eye logo. Each merchandise store employs 150-250 team members. Target also gives 5 percent of its income to support education, social services, and volunteerism and has done this since 1946.
Target has an array of products ranging from electronic to grocery. They also have a credit card called the Target REDcard, which provides customers the opportunity to buy now and pay later. Customers save 10 percent when signing up for the card. Target now offers a one-stop shop by expanding the grocery section to include produce making shopping even more convenient for consumers.
* Kmart will focus on building the brand and build relationships with its customers by improving its customer service. Employees will be spread throughout the store in order to provide quality service. The employees will be very well informed about the items within their department. * Kmart will revive the appearance of the store. Each store will have their own employees to stock shelves so that the shelves do not go empty. They will also have a nightly cleaning crew and someone there throughout the day to clean bathrooms and sweep floors. Walls will be painted and floors will be replaced if needed. Reinventing the company through technology and innovation will also be a critical objective. * Kmart will lower prices as much as they can in order to compete with other companies. They will also market their exclusive brands in hopes of increasing their sales on the exclusive brands by 8 percent over 2010 sales. They will also market the layaway in hopes of bringing in more people to do their holiday shopping at Kmart. Marketing Strategies:
Strategy 1: Employee Training and Reward Programs
Superior customer service is a crucial part of being a successful company, and maintaining a positive status in the minds of consumers. In order for Kmart to increase sales and regain market share, it is important for the company to train its employees to provide outstanding service to every customer. We will implement training sessions and educational seminars for new employees to participate in upon beginning a new position with the Kmart Corporation. Existing employees will also be required to attend these training activities in order to further their education regarding customer service. The training sessions will include exercises to increase awareness of customer service standards and expectations. Employees will be expected to utilize the tools and ideas they have learned through the training activities.
It is also important to reward participation and outstanding effort. We will create quarterly meetings to serve the purpose of maintaining employee motivation throughout the year. Employee appreciation and acknowledgement is vital to a company that wishes to employ staff members who provide quality service on a daily basis. These quarterly meetings may include snacks, motivational speakers, prizes for sales incentives or other contests, awards, etc. Employee appreciation and acknowledgment meetings with help build positive attitudes among employees; this will in turn create excellent customer services leaders within Kmart’s stores. A similar strategy is currently working very well for employees at Panda Express restaurants. The Chinese chain restaurant CEO, Andrew Cherng believes that various motivational programs help create caring people and a fresh work environment, which in turn helps create a successful business (Berman, 2011). His “Panda Way” sessions occur once every few weeks and range in focal topics. Cherng believes that much of the success of Panda Express is because of the mindset of its employees and caring workplace.
This strategy would require Kmart to invest in addition labor in order to hire new employees. In addition to new staff, a professional training team would need to be hired to educate current and new management on how to facilitate the training sessions and activities. Such investments in labor would require a large investment of money as well. Strategy 2: Store Revitalization
The appearance and ambiance of a retail store is a giant factor that affects how a consumer feels about a company’s brand. Kmart wants consumers to feel at ease while shopping in its store; not confused or frustrated by lack of organization. It is time for Kmart to compete with the fresh new looks of its competitors, Wal-Mart and Target.
By closing Kmart locations in areas which are no longer popular or creating income, it is possible to revitalize the locations that do have higher traffic flow and that are contributing income to the corporation. There are numerous segments to this revitalization: remodeling of stores, café expansion, introduction of fresh market, and implementation of department consultants.
Remodeling of many Kmart locations is necessary to create the image that the company must maintain in order to compete with other retail stores. This would include repainting, installation of new floors and aisle architecture, replacement of outdated technology, etc. These changes would make existing Kmart stores more pleasant to shop in, as well as more enjoyable to be an employee in. This segment of the revitalization would require investment of money for supplies to remodel, and would also require additional labor for the remodeling processes.
Expanding Kmart’s current café will offer customers a relaxing, trendy place to take a break while shopping. Currently the café is partnered with Little Caesar’s pizza, which we will continue to facilitate. We will also continue to offer kid-friendly snacks such as popcorn and hotdogs, while also adopting healthier options such as salads and sandwiches. Offering a coffee bar is also an addition we want to add for Kmart’s adult shoppers. The new Kmart Café will also be a Wi-Fi hotspot for those shoppers wishing to connect to the web while taking a break. Offering Wi-Fi is a great opportunity for Kmart to expand its target audience as well. Panera is a good example of Wi-Fi operation. The Wi-Fi the restaurant offers is free, however during peak hours of the day consumers are limited to 30 minutes of Wi-Fi use. An expiration time may not be the best way for Kmart to offer Wi-Fi, but it is something to consider.
In past years Kmart expanded some locations to Big K stores or Kmart Supercenters. These locations housed full grocery departments, some including a fresh produce section, bakery, and deli. We want to expand every location to include these departments. Because Target and Wal-Mart both house such departments, it is important for Kmart to offer competition to increase its share of the retail market. The renovated Kmart locations will also include an Olan Mills photo studio, along with a pharmacy and garden center. Many locations may have one or more of the above, but we will focus advertising on showcasing such amenities. We want customers to have all their shopping needs met under Kmart’s roof. This segment would require addition labor, and\or rearrangement of current employees to fill future positions. Monetary investments are also required to facilitate such expansions at every location.
Lastly, we will introduce department sales consultants to the stores. In order to receive the most optimal shopping experience, consumers should be paid the attention they desire. Department sales consultants will be ready to answer questions about merchandise, offer advice, and demonstrate the use of products to ensure quality and satisfaction. One department that will have a sales consultant is Kmart’s Beauty Department. The Beauty Department sales consultant will help consumers make choices on products such as make-up and personal care. A company that already takes advantage of department sales consultants is Macy’s. Although Macy’s is a large, high-end department store, the concept can be related to Kmart. This segment would also require addition labor, and\or rearrangement of current employees to fill future positions. Monetary investments are required to educate each consultant on the department and products he or she will be selling. Strategy 3: Increase Social Media Use
Kmart currently participates in the use of social media with a Facebook page and a Twitter account. After viewing these pages numerous times I can see that the company updates daily, and many times hourly. The updates promote sales that are taking place in-stores and online, and also showcases select merchandise or in-store events nationwide. We want to continue and increase such use because the incorporation of social media can be incredibly effective in gaining new customers while increasing retention rates with previous and current customers.
Currently Kmart’s Facebook page has just fewer than 800,000 people who “like” the company. With the incorporation of increase social media usage we will increase this number by 20 percent by June 2012. The information written about the company in the side bar of the page states, “We’re a lovable, frugal, genuine brand who wants to get to know YOU – Thanks for liking us!” We want Kmart to be known as a lovable, genuine, cost-effective brand, but not necessarily fugal. Kmart’s Twitter page has only 1,769 followers. We want to increase this number by 5,000 by June 2012.
In the 1990s Kmart’s Blue Light Specials were very popular among consumers. Although the company still uses a Blue Light caricature in its advertising, Kmart no longer facilitates the in-store specials. We will reinvent the Blue Light Special by introducing it online rather than in stores. For example, Kmart will have a daily Blue Light Special online by posting a status on Facebook or Twitter, or by sending out an email to customers who provide their email address upon checkout. The online Blue Light Special could include a coupon to print off and bring to the store, a coupon code to save money when online shopping, a code to obtain free shipping, etc.
However, each of these specials will include a short expiration date in order to keep the deal exclusive just as the original Blue Light Specials were. Also, using Facebook check-in will allow Kmart costumers to receive 10 percent off of any purchase. The customer would have to first “like” Kmart’s page on Facebook, then check-in at Kmart, letting friends and family know that is where he or she is. Upon checking out at the register, the customer can show the cashier proof of the check-in via his or her smartphone to receive the 10 percent discount. This strategy will keep consumers interactive with Kmart by giving them incentive to actively watch the company’s Facebook and Twitter pages, or to keep their email address up-to-date in Kmart’s system.
Many other companies use similar online sales incentives. For example, Chili’s Grill & Bar restaurant uses social media as a way to connect to consumers and offer deals on appetizers and 2 for $20 meals. This strategy would require additional labor to execute social media changes for the company and\or each location.
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