K-Mart Analysis

Attention Kmart executives: reality check on aisle five please. The former "Big Three" of the discount stores is now seemingly becoming the "Big Two," as Target and Wal-Mart have surpassed Kmart in terms of growth rate and public perception. What happened to the at one time leader of discounters? This paper will point out not only what Kmart has done wrong in recent years, but also what Target and Wal-Mart have done right in the meanwhile to become the more dominant names in the discount store business. Emphasis will be placed on bad marketing strategies, questionable management decisions, and an outdated supply-chain system. Suggestions will be made as to how Kmart could rebound from this current state of affairs in order to remain a part of the "Big Three."

One of Kmart's biggest problems of late has been it's mundane and ineffective advertising promotions. Target has seen huge success as of late with it's mixture of vibrant colors and exciting music featured in it's ads, while Wal-Mart has maintained it's "everyday low-price" campaign that continues to resonate with consumers. Kmart is trying, albeit unsuccessfully so far, to reintroduce its "Blue Light Specials" promotion that was retired in 1991 after a successful twenty-six year run. (Muller, 50) Kmart failed to include the younger generations in its target market for this campaign, as they're likely too young to be able to conjure up any sense of nostalgia that its obvious Kmart hopes to invoke. Kmart should not be afraid to try something new, something different. Another major problem regarding this promotion involved the lack of participation from various individual Kmart stores. A Kmart in Chicago had a banner proclaiming "You are now entering the BlueLight Zone," however; there was no BlueLight Special to be seen. (Zimmerman, B2) Spending $25 million on an advertising campaign for a promotion that's not even available in certain stores is a waste of money and more importantly, of the customer's patience. This problem could be fixed easily by making the programs implemented mandatory and enacting penalties against those that don't follow through.

Another of Kmart's failed promotions was it's recent "Dare to Compare" slogan which advertised that it's prices were lower than those of Target's and Wal-Mart's, and "dared" customers to compare the prices themselves. This backfired when Target decided it would "dare to compare" and realized that Kmart had misquoted Target's prices on 74% of the items involved in the promotion. (Craig, 13) Not a wise move, considering not only the monetary and legal ramifications, but also due to the fact that hearing such a story creates a bad image in the public eye. The ads were eventually pulled, but the case by Target still remains open. Executives for Kmart should have never allowed such misrepresentation of Target's prices, and should be more careful when choosing ad campaigns.

A major issue in marketing with regards to discount stores has been the showcasing and marketing of house brands. Target in the last year has begun selling Mossimo clothing, further extending its image as a stylish and chic discounter, while Kmart maintains its successful ties with Jaclyn Smith, Kathy Ireland and Martha Stewart. (Arlen, A5) While these relationships are extremely beneficial to Kmart, they could also be considered old-fashioned, and Kmart should look into partnering with some edgier companies to increase their market share. Recently Kmart reached an agreement to market Joe Boxer products exclusively, which seems to be a step in the right direction. These partnerships should also serve to differentiate Kmart from Target and Wal-Mart, which would further distance itself from the competition. This strategy has worked amazingly well for Target, as they saw their growth rate skyrocket 13.3% in 1999 when they implemented their promotion. (Anonymous, Chain Store Age) I believe Kmart could see similar results with a change in their marketing and branding techniques.

Perhaps the most discouraging news for Kmart is the public's current assessment of its stores. Chain Store Age and the Consumer Products, Retail and Distribution practice of Cap Gemini Ernst & Young asked 5,000 consumers what they want from retailers and which chains fit their performance standards. (Crawford, 1C) The results were disheartening for Kmart. Target and Wal-Mart led every single category in the surveys including: access (ease to shop), price/value, product assortment, service, how enjoyable the store is to shop at, and trust. In fact, the only category in which Kmart got more votes than Target or Wal-Mart was in trust, but only with the 65 and older age demographic. Not exactly cause for celebration. Kmart needs to find out what it needs to do in order to improve these statistics. They should find out what's most important to their customers and how they can improve on these attributes. More importantly, they need to make sure that the individual Kmart stores will follow the guidelines set by the organization. Wal-Mart and Target have obviously done their research on the subject, as you can see from the following chart:

Marketing and perception are not the only areas in which Kmart needs work. Wal-Mart prides itself on having the world's largest data warehouse, along with a database larger than twice the size of Kmart's. In fact, Wal-Mart's IT department is the most admired in retail. (Nannery, 72) In addition to admiration, this system also creates more efficient production, which makes for higher productivity and in turn, greater customer