K-Mart Statistical Research

Synopsis

Banks Consulting Corporation is a privately owned and operated consulting firm located in New Orleans, Louisiana and in business for the past fifteen years. Banks Consulting has been hired by K-Mart Corporation to identify any problems or issues that have caused a severe drop in sales in the six southern-most states.

In this report, we have identified several key points that relate directly to K-Mart in regards to the quality and type of products carried. This report also shows the issues pertaining to its customers and the feelings towards K-Mart that are expressed by this customer base.

Table of Contents

Synopsis 2

Table of Contents 2

History 3

K-Mart's Problems 5

Merchandising 7

Findings 9

Research Strategy and Instrument 10

Survey Sample and Explanation 12

Comparative Look at

Target and Wal-Mart 16

Budget 20

Survey Results 21

Conclusion and Recommendations 23

References 25

History

K-Mart was an idea more than one hundred years ago, Sebastian Spering Kresge opened a five-and-dime store in downtown Detroit. The store that Kresge built has evolved into an empire of more than 1,800 stores and an Internet presence that reaches millions of customers. The K-Mart name has become a symbol of America, standing for quality products at low prices.

When Kresge opened his first store in 1899, he sold everything for 5 and 10 cents. The low prices appealed to shoppers and allowed him to expand to 85 stores in 1912, with annual sales of more than $10 million.

As time went on, prices may have changed, but the business philosophy stayed the same -- offer consumers products they need prices they can afford. By the mid - 1920's, the S.S. Kresge Company was opening locations that sold items for $1 or less, a forerunner to the current discount store.

S.S Kresge Company was one of the first retailers to convert stores to checkout operations and to open stores in shopping centers. In 1962, with Harry B. Cunningham as president, the company opened the first K-Mart discount department store in a suburb of Detroit. Seventeen other K-Mart stores opened the same year.

Mr. Cunningham, as president set a new standard for K-Mart. In 1966, sales topped the $1 billion mark for the first time. The number of K-Mart stores in increased to 162. With business doing so well, Mr. Cunningham decided to relinquish his duties to Robert E. Dewar, former Kresge president.

In 1977, nearly 95 percent of S.S. Kresge Company sales were generated by K-Mart stores. To reflect this dramatic impact, the company officially changed its name to K-Mart Corporation. Ten years later, K-Mart sold the remaining Kresge stores to fully concentrate on discount merchandising.

By the early 1980's K-Mart Corporation had more than 2000 stores in the U.S., Canada and Puerto Rico. During this time K-Mart acquired Walden Book Company and Home Centers of America, which was renamed Builders Square. K-Mart also started incorporating others into their line of clothing. Jaclyn Smith signature collection of sportswear was launched in 1985.

K-Mart has had multiple lines of independent clothing that they have acquired. In 1994, K-Mart launched the Kathy Ireland® swimwear and bodywear collections. In 1996, K-Mart launched Route 66® a line of causal apparel for the family. K-Mart's last venture of this sort, 1997, was to launch Martha Stewart with a line of bed and bath fashions and complementary 256 - color paint line. During this year, K-Mart debuted Sesame Street®, an exclusive line of clothing for newborns, infants, and toddlers under a long-term agreement with Children's Television Workshop.

The year 1997, was a big year for K-Mart. The corporation introduced its new Big K-Mart store format and logo. K-Mart opened and converted 1,245 Big K-Mart stores representing 62 percent of the chain's stores. In 1999, K-Mart celebrated its 100th anniversary as a retailer. K-Mart also started the BlueLight.com website, a E-commerce company.

The turn of the 21st century brought on some changes for K-Mart. In 2001, K-Mart and Martha Stewart Omnimedia, Inc. announced a new long-term merchandising agreement. K-Mart also expanded the Martha Stewart Everyday brands to include two new collections: Martha Stewart Everyday Keeping, an assortment of storage and organizational products, and Martha Stewart Everyday Decorating, an array of home decorating products. During this year, K-Mart signed a $4.5 billion arrangement with Fleming, making them the sole food and consumables distributor for the company's stores. K-Mart also announced it will develop, produce and sell two new exclusive product lines through licensing agreements - Disney® children's clothing and JOE BOXER® apparel and home fashions.

K-Mart's Problems

On January 22, 2002, because of an extremely disappointing holiday season and the rapid decline in its Liquidity, K-Mart Corporation and 37 of its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws. More to the point, we have found there were far more circumstances that contributed to K-Mart's decline. However, inflation has not been a significant factor on K-Mart over the past three years. Current Chief Operating Officer (CEO) James B. Adamson stated, ". . .we do not expect it (Inflation) to have a significant impact on operations in the foreseeable future, unless global or geo-political situations substantially affect the world economy" (Annual Report, 2002).

Identifying K-Mart's issues, pursuant to its filing for Chapter 11 reorganization,