Kmart

K-Mart: Creating the Forgettable Experience?

Many papers have been written, and many lectures given to business students about the fall of K-Mart. I suppose the reason for the widespread use of this case is based on the clear examples of what not to do. This is a much more interesting and compelling argument than focusing on all of the businesses that got it right. The beginning of the end for this retail giant began in Garden City, Michigan in 1962. K-Mart got its start as a spin-off of the chain of popular retail stores called Kresge, owned by Sebastian S. Kresge. K-Mart invented the concept of discount retailing and not long after it opened grew larger than its parent company, which before K-Mart, was the largest retailer in the country. K-Mart was definitely a change leader, focusing on low prices and understanding the customer (Zyman, 2002, p. 220). This was a huge hit with consumers. K-Mart enjoyed dominance over its competitors from the time it opened its first store through the mid 80s. Because of their superior business position and the size of the operation, K-Mart became complacent while their competitors, Wal-Mart and Target, were relentlessly pursuing improvements in supply chain management and marketing strategies (Zyman, 2002, p. 220). By 1990, Wal-Mart had moved past K-Mart and captured the lead in market share with its every day low price strategy. In the aftermath, K-Mart has struggled to come up with a strategy that would put them back on top of the discount retailer world. None of them have worked, and to be more precise most of them have failed miserably causing more damage. As a result of the failed business strategies, the company filed for chapter 11 bankruptcy in 2002. K-Mart merged with Sears Roebuck and Co. in 2004 to produce Sears Holdings Corporation. The purpose of the merger was to create a "broader retail presence and improved scale...improved operational efficiency in areas such as procurement, marketing, information technology, and supply chain management" (Kmart Holding Corporation, 2004). One of the strategies that have been implemented as a result of the merger is a hybrid store called Sears Essentials. This "off-mall" approach is basically a combination of Sears and K-Mart's most popular and convenient products. The first of these stores were opened in 2005, but did not produce the desired results. As a result, Sears announced that it would drop the Essentials plan altogether and begin implementing a new store format called Sears Grand, a superstore concept. The plan calls to convert 14 existing K-Mart stores and 50 existing Essentials stores (Jones, 2006).

Section Two: Critical Action Comparisons

The fact that K-Mart was the dominant player for many years confirms that at one time they had a successful business strategy. At the peak of their performance, they invested heavily in a marketing plan that included weekly sales campaigns and coupons which attracted bargain shoppers that had grown accustomed to the weekly specials. They also utilized in-store promotions called blue light specials that would randomly appear within the store and offer deeply discounted prices for a short time. Even though most saw this as a gimmick, it endured the K-Mart brand to millions of customers. These strategies were very effective in building customer loyalty, as evidenced by the fact that K-Mart customers preferred promotional shopping over "consistent value". Their stores were concentrated in urban areas in order to capitalize on the greatest penetration of potential customers, which would prove to be a mistake years later as urban sprawl led to the isolation of their stores. One of the recent positive strategies has been to use the presence within urban areas to its advantage. Mike Duff of DSN Retailing Today writes, "Kmart has been one of the few retailers in recent years to embrace inner city environments and populations. Ethnic consumers constitute about 39% of the nearly 30 million people who shop at Kmart each week. Kmart will promote itself as providing a range of goods that better suit the needs and aspirations of ethnic consumers" (Duff, 2002, p. 2).

Once they started feeling the pressure from other retailers like Wal-Mart and Target, they began shifting their business strategies. They started focusing on branding and product differentiation by tying names like Sesame Street and Martha Stewart to their products. This may have worked better had they not made the huge mistake of going head to head with Wal-Mart as an everyday low price retailer. The problem with this strategy was that they did not have the efficient logistical supply chain that Wal-Mart had. Therefore, they could not effectively compete on price alone. This is a clear example of strategies that are in conflict with each other. According to Schroeder, it is clear that "the strategy for the operations function must be linked to the business strategy and other functional strategies, leading to a consistent pattern of decisions" (Schroeder, 2003, p. 13). In this case, the strategy of product differentiation was clearly not in accord with the low price strategy. They also reduced their marketing efforts which further compounded the problem. When they were not able to meet the low price position they advertised, customers stopped coming in because the weekly discount campaigns that originally drove the volume had been marginalized. This was a critical error because "Loyal Kmart customers preferred promotional shopping over "consistent value". That's why they shopped at Kmart in the first place" (Strategy Development Group, 2002, p. 1).

Section Three: Reflection

I believe that the problems faced by K-Mart have little to do with their marketing strategies. The real issues that led them down the path they are on are predominately based on unbelievably