Customers Pleasantly Surprised at New Kmart
By George Anderson
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| Kmart is testing the sale of Craftsman tools in nine stores around the country. |
Former Kmart employee and current Kmart shopper Brian Linke summed it up. “Kmart has really come up,” he said. “This store is the nicest looking Kmart in a long time. It’s a
lot cleaner. There’s more variety and it’s very comfortable — a lot more open and customer friendly.”
Mr. Linke is not alone in his assessment of the “new” Kmart in Troy, Mich., according to executives with the retailer.
Julie Younglove-Webb, vice president of space planning at Kmart who is responsible for store renovations said, “Sales have been strong so far. We are really surprising customers with the products.”
The products include Kmart mainstays such as Martha Stewart Everyday and Joe Boxer as well as new additions from Sears including Craftsman tools and some Kenmore appliances.
The Kmart in Troy is one of nine nationally currently testing Sears’ products in its stores. Other “new” Kmarts are located in Boca Raton, Fla., White Plains, N.Y., Bohemia, N.Y., Silver Spring, Md., and Burbank, Calif.
Sears’ brands, however, are not the only thing new to this Kmart.
The interior design of the store has been made more colorful and less cluttered with more visual displays of product including the use of mannequins modeling clothes.
According to The Detroit News, Kmart’s new look is “more like specialty retailers like the Gap or Marshall Field’s.”
The changes are just what Kmart needs, according to retail analyst Gary Ruffing, “Kmart has been shooting a smaller gun with less ammunition than Wal-Mart and Target while expecting to hit more customers,” he said. “Now they can play a more offensive position with these brands and it should help draw new customers to stores – a whole new strategy.”
Moderator’s Comment: Is Kmart on the right track with the store and product changes it is making? What else will it need to do if it intends to be a
power retailer feared by the competition? –
George Anderson – Moderator
Anyone in the toy business lived through the seemingly endless “new format” efforts Toys R Us went through in the past decade. Some of them would have generated exactly the same description applied to the new Kmart format. Strangely, none of the “stores of the future” provided the silver bullet the chain was looking for.
TRU’s issue, and Kmart’s challenge, was the sustainability of the expense and business model inherent in the new format. Wider, cleaner aisles mean more frequent stocking, more frequent cleaning, and one hopes, faster turning merchandise. More visual displays implies trained people to set them up, and more importantly, to rotate the product displayed.
The additional expenses associated with the new store format can be modeled. What is paying for them? Increased sales per square foot? Why? How reasonable are those assumptions? How sustainable are the early gains? Higher net gross margins? Why? What merchandise management and planning changes are in effect to produce lower markdowns or better initial buying? Kmart would be well advised to drive into the nuts and bolts of sustaining these formats before rolling them out anywhere.
Best Buy, in the mid 90’s, designed, econometrically modeled, and tested an array of store formats and operational strategies. The time frame for the tests was sufficient to determine sustainability. From the results of this effort has come extraordinary success. Kmart’s challenge has been met. At least once. Beware: the number of retailers who have failed is staggeringly larger than the number who have succeeded.
I have no idea who their target consumer is and how they are different from Sears with these new additions. Are they going upscale and looking for new consumer targets or are they trying to get current consumers to trade up? They certainly need to do something with their stores because all the ones I have been in are in pretty bad shape. My recollection was the early Kmarts with the Blue Light Specials were organized well and clean. The stores now are very different. Good luck, but I am not holding my breath on them making the transition work!
Everyone loves to bash these guys, but I give them lots of credit for moving so quickly to try some new things and leverage their mutual strengths. Before, they were dated store concepts who each had only a few interesting brands to attract shoppers. Now, pooling their strengths, they can offer a much broader product portfolio that offers a lot more suction into their stores. And it sounds like they are also upgrading the store experience to support the “new” offering. Obviously lots of bugs to work out, but I hope they keep moving in this direction.
Is it the right track? I think its the only track. Time will tell. If some of the early test stores are not immediately successful, my guess is they will just pull the plug, sell off what is left, and distribute the billions in cash to shareholders while they have it. It really makes no sense to invest the billions sitting around in cash into a format that will only make it disappear. Not sure who would buy all the real estate since Kmart bought their biggest real estate customer.
Most of us are taking this “wait and see” attitude. There are no Kmarts where I am but I do remember them being messy and cluttered. It would be good for business as far as Sears is concerned. From a logistics standpoint, it will help drum up business for us, though it also could be a nightmare as to which DC gets what stores. Some DC’s may actually close as a result of the takeover.
When the merger of Kmart and Sears was announced, I applauded as the two organizations each had assets and advantages which could work towards the revitalization of at least one of them. I haven’t had the chance to see the Burbank store, but now that I know what is going on, I will get there.
I think that testing new store formats, merchandising crossover, and breaking from traditional thinking about what a discount store or for that matter a mass merchandising store, is all about, is exactly what Kmart/Sears needs to be studying. Both store groups weren’t created overnight, and recreating them won’t make this job any quicker.
Sears/Kmart should document what these tests are meant to find out, record the real results of these tests, determine what refinements are needed, and test again. And for heavens sake, forget what all the retail periodicals have to say as they give their own critique about these tests. Wal-Mart has become respected for its determination to find the right answer, through many attempts, to introduce a new product or service. Sears/Kmart would do well to find that same resolve.
Wouldn’t it be great if shoppers had real alternatives to where they shop, if nothing else to keep number 1 and number 2 on their toes?
I think Jerry’s view about hits it. The difference in comparison, however, is confidence and message. There is a huge difference in the market’s confidence in Wal-Mart’s ability to try new paths, new products, new offerings – experiments – if you will, and that of Kmart/Sears ability to do the same. Neither have a strong record in confidence either in the industry or the market. They haven’t exactly had a clear message to the market or to the consumer from either [Sears or Kmart] about who they are or who they intend to be.
Wal-Mart, on the other hand, never strays from their message, and intent on who they are in the market and who they intend to be. Even though they never became a used car dealer, no one ever doubted their ability or confidence that it might have worked. That’s the difference with Sears/Kmart. There’s not a lot of confidence in their ability to try things and create a formula for success.
Now, on the other hand (that would make three), I give them credit, and wish them the best. I’d really like to see a success here and there to give them and us more confidence. And, as Jerry mentions, it would be great to see a challenge again in the market to keep number 1 and 2 working harder as well. Customers like reasons and they are simply not that loyal today. Give them a reason to try you again, please them, and they just might shift. There a ways away from that at this point, but you never know. I’d like to see it get interesting anyway. It just might.
Kmart has had a number of things working for it over the years. Unfortunately, it has also had many things working against it. On a more positive note, I expect that the merger will do nothing but improve the market position of Kmart, and Sears for that matter.
Working to its advantage over the years have been the prime locations that its stores have had. Many of these locations are free from big box competition simply because they lack the open parcels of land that would be necessary in order for big box competition to build. Although Wal-Mart is attempting to enter these markets with their “neighborhood markets,” I have observed that in many cases those markets do not compete head-on with the neighboring Kmarts, as the two sell vastly different arrays of merchandise. While Kmart has a full hardlines offering, and a wide softlines array, the neighborhood market next door will only have a grocery offering. Yes, this does compete with Kmart’s pantry offering, but Kmart shoppers utilize the pantry as a time and place convenience rather than a staple, and thus are not totally drawn based on price.
Kmart will improve its position as it continues to improve its exclusive brands, and sells higher quality merchandise at value prices.
Consumers are looking to buy nice products at decent prices, and Kmart/Sears will be the place for them to find those products.