An early version of an Advertising Age article online yesterday offered a surprise for Kmart fans. According to the initial draft that went online, Kmart saw its sales dip only two percent in the most recent quarter while rivals Target and Wal-Mart Stores were down by a higher number. Alas, the joy in Blue Light land was not to be enjoyed for long when a correction was made showing Wal-Mart Stores' performance was actually in positive territory. Target, on the other hand, did see a bigger sales drop than Kmart.
Even though Kmart did not outdo rival Wal-Mart, there is some hope that the chain is finally getting an idea of how to turn itself around. For one, although year-over-year comparisons are against a pitiful base, the chain has found ways to minimize some of the worst effects of the recession.
The chain's layaway program offers core customers an opportunity to save for gifts that is not available at Wal-Mart and Target locations.
The company has also sought to offer "bargains" to its shoppers without getting into an unwinnable low price tit-for-tat with Wal-Mart. Kmart recently reintroduced its "Blue Light" specials with unadvertised sales on select items in stores for an hour at a time.
Mark Snyder, chief marketing officer at Kmart, is encouraged by the initial results of the Blue Light test.
"We know it has a lot of equity, and we know that when it's done well it's meaningful to the customer and has the ability to energize our associates and store experience," he told AdAge.com. "We got some great traction through apparel, home electronics and a couple of other categories like sporting goods and seasonal. [Continued testing] will tell us whether this is a great long-term strategy for us to have in the promotional arsenal."
Serving a less affluent demographic was the impetus behind Kmart's decision to resurrect layaway. It also is behind the chain's test of the Smart Assist program in Michigan. The program offers the unemployed a 20 percent discount of store brands for up to six months. With unemployment at high levels across the country, an expansion of the program could bring in large numbers of new shoppers to Kmart stores.
"Everyone else is talking about things on sale and food and consumables, and Kmart has all of those things," Mr. Snyder said. "But even in a recession, where price and value are so important, you can't forget about the importance of going to the marketplace with a differentiated message."
A point of difference for Kmart has been the addition of Sears brands within dedicated sections in its stores. The company recently converted a garden center at a store in Alabama to offer the first full-line major appliance department in one of the mass merchant's stores.
One area where Kmart has yet to gain traction is in apparel. The company now has several hundred designers working in its studios and has plans to run a major print campaign this fall in Vogue, Glamour and Lucky.
"[We're] building credibility around quality and trend-forward style while we have the opportunity with a very willing audience," Mr. Snyder told AdAge.com.
Discussion Questions: Has Kmart hit on a strategy that will enable it to succeed in the competition for consumer dollars? Where do you see strengths or weaknesses that it can build on or address to strengthen itself going forward?