Kmart Case Study

KMART CORPORATION

FACTS-

Kmart was formed in the late 1950's to challenge new forms of discount stores. They are a descendant of an organization Sebastian S. Kresge. The average Kmart store is around 100,000 square feet. In 1987 Kmart was the largest discount retailer in the United States. They currently have 2,223 stores and last year they had over $25 billion in sales which is nearly double that of Wal-Mart. In 1991 they opened their Kmart superstores. The superstore is a 150,000 square feet and is expected to gross $40 to $50 million dollars in revenues. It will also remain open 24 hours a day.

SYMPTOMS-

One symptom is that Wal-Mart has lower prices than Kmart which makes them very hard to compete with. Kmart has to try to get out of the really urban areas so they can compete more realistically with Wal-Mart. They need to keep their appearance and service above par or this also will result in problems.

PROBLEMS-

Kmart's biggest problem is obviously the widespread of Wal-Mart all over the United States. They have to find a way to compete with Wal-Mart's regional distribution centers. These centers ensure the Wal-Mart customers that they are going to get the best product for the best price. Since Kmart does not have these centers they still need to pay all of the fees that deal with shipping and handling. Kmart needs to do something quick. In a recent survey 49% of people said that they would drive right past a Kmart to go to a Wal-Mart. The average Wal-Mart customer visits the store 32 times in a year, meanwhile the average Kmart customer only visits 15 times in a year. They have to be in financial trouble since they are getting pressure from vendors to pay their bills on time.

ALTERNATIVE SOLUTIONS

Kmart needs to find a certain area that they are better at then Wal-Mart. They are not going to be able to beat their prices so they have to provide better customer service. They have select a specialized department that they can dominate and at least take away a little of the business from Wal-Mart. For example develop a top of the line auto care station for tune ups, inspections, oil changes etc. They have to research and find rare products that Wal-Mart does not carry.