Whatever Happened to Kmart?
The logo I remember as a child
My memories of Kmart
As a young child, each year around Christmas time Kmart sent out the big Christmas Catalog. With the age of the internet, catalogs have also went by the wayside for the most part. Which I happen to agree with, such a waste of paper. But I still have so many fond memories of leafing through the catalog and circling everything I wanted for Christmas. I also remember my mothers eyes lighting up with the announcements of the blue light specials. This was her chance to get some of the things I had circled. Of course I never received everything I desired as my mother also wanted to teach me to appreciate the things I had. I was spoiled to some degree, I realize now, but my mother attempted to keep that in check as I do now with my children. However in reminiscing about my Kmart shopping experiences, I decided to learn more about what actually happened to Kmart.
Kmart Corporation operates retail stores that sell merchandise under the labels of Jaclyn Smith and Joe Boxer labels. Kmart also sells Sears brand products, such as Kenmore, Craftsman and DieHard. The company was founded in 1899 and is based in Troy Michigan. Kmart Corporation operates as a subsidiary of Sears Holdings Corporation.
Kmart is currently the number three discount retailer in the US, behind Wal-Mart and Target. The company caters to mostly low and mid-income families and runs about 1300 stores in 49 states, Puerto Rico, Guam and the US Virgin Islands. Kmart also operates the kmart.com website which includes merchandise from Sears. In recent history, poor sales have forced Sears Holding Corp to close over 100 stores.
The core competencies include the brand. Kmart is a well-known and very trusted national brand. Kmart maintains its private label and designer clothing that is well endorsed, with a large number of well-located, low-cost stores. Another core competency is there management structure. New management was put into the top positions to support their turn-around strategy. Staffing confidence was created by the achievements of staff and management. At the same time, the closures of various stores allowed the opportunity to retain and move high performing staff to where they are needed, while eliminating the non-performing staff.
Another important core competency to look at is the company’s planning department. The company encompasses in-house expertise for the planning of store locations and layouts. Those stores that are located away from competitors are focused on, while the others are in being closed to free up resources. Additionally, the planning department works to ensure that all strategies are executed, while using past data and knowledge of changes in buying patterns. Overall the planning department is well established and cross-functional to provide various perspectives.
Evolution of Kmart
Kmart is often viewed negatively when compared to the more successful rivals of Target and Wal-Mart. For many years Kmart focused on advertising its brand with lower prices on selected items using coupons and sales. Kmart spent significantly more on advertising then the competitors. In addition, they promoted their special brand relationships with Sesame Street and Martha Stewart, among others to differentiate their products.
This strategy was successful in bringing customers into the stores. Kmart definitely had the competitive advantage on promotional advertising. However at the same time the competitors were raising the bar on customer service. Kmart customers began to expect the same service they were receiving at the other discount stores. Customer complaints started to increase regarding poor service, unbalanced store inventories, sloppy merchandising and uncaring employees. More and more customers began avoiding the bargain opportunities because they were constantly disappointed with the level of service they received. Customers were able to go to a competitor knowing they would still save money and at the same time feel welcome. At Kmart you were able to see more of the exclusive brands; however the ambience was more of a low-budget warehouse. Brands such as Sears Kenmore appliances often require a higher level of sales assistance that Kmart simply lacked. Ultimately Kmart lets it’s weaknesses in customer service undermine their advantage in promotional selling.
As a direct result of poor customer service, profits suffered greatly. Management then decided to change their strategy to more closely match that of Wal-Mart by offering lower prices across the board and thus reduced their dependence on promotional advertising. The dramatic change in direction was not in their best interest. When Kmart abruptly stopped advertising they further lost their branding value they had built up over the years. The loyal Kmart customers preferred promotional shopping over consistent value, hence the reason they shopped there in the first place. Once the promotional sales stopped they began to look elsewhere for promotional opportunities.
Kmart was not able to follow Wal-Mart’s strategy as they were able to offer the lowest prices due to buying power and maintaining the lowest operating costs in the industry. In addition when making such a dramatic change in strategy it should be done gradually. Such changes should be well thought out, while ensuring that the customer’s needs remain in focus.
How most Kmarts look today
Core competencies are not simply ordinary skills that can be acquired by any business very easily. They are very specific skills that are built over a long period of time. The main strength lies in the fact that such competencies are unique to that particular organization, thus giving them an unbeatable advantage.
Brand supported by promotional selling was critical to Kmart’s success as a core competency. Kmart needs to focus and continue to improve this area. Their customer service is greatly lacking and must also be a focal point to ensure success with other core competencies. However, they must not let their weaknesses undermine their strengths. In enhancing the brand they must respect what the customer already expects them to be. Making dramatic changes to that, greatly affects customer loyalty. It is so important to gradually make changes without confusing or offending the customers.
In years to come as business organizations become very complex, Kmart will have no choice but to build such competencies in order to succeed in a very competitive environment. My children will never know the joy of leafing through the catalog for things they want. I develop my Christmas list based on things they see of TV, along with the internet. Not to mention things their friends have that they "just must have too". But I will continue to shop at Kmart as the opportunity arrives, as I do feel a sense of loyalty to them.