Kmart - Reasons of Failure

Reasons of failure

Loads of reasons lead to the bankruptcy of Kmart, as fierce industry competition, poor marketing strategies, unsuitable store location, rapid expansion, terrible supply chain management, out-dated information technology, customers’ unsatisfactory, staffing and ethical issues, etc. But now, I focus on the reasons of Kmart’s failure related to inventory management.

In the late 1980s and early 1990s, Kmart went through a period of rapid expansion. The company acquired a portfolio of category-dominant chains to complement its core business, the Kmart discount store. Although the unreasonable expansion did enlarge the scale of Kmart, it ignored the arrival of low profits towards retailers. It was useless to start multinational operations and acquire diversified companies. Due to poor management and overextension, this strategy eventually brought Kmart to near-bankruptcy in the mid- 1990s. To avoid this occurrence, Kmart began selling off all business units and interests that were not related to the core discount stores.

Many things about Kmart were “broken,” including the supply chain and the computer systems intended to track sales and inventory, which contributed to poor inventory management. Firstly, it was a double-edged sword that Kmart and Fleming Company assigned a contract Fleming Company was the only food supplier to Kmart. The action that Fleming Company decided not to supply anymore to Kmart resulted in the stockout in Kmart. As a result, shoppers have complained for years about this phenomenon so customers were less likely to go shopping in Kmart. Then, the sale of Kmart dropped a lot. In order to promote its sales, Kmart tended to lower the price. Prices, while low, have been regularly undercut by Wal-Mart whose strategy is cost leadership. In addition, poor customer service and long line to wait have been long associated with the customer experience at Kmart, with only 40% customer satisfaction in 2000.