Kmart--Another one bites the dust?

RobertN · Jan 20, 2002

X-Mart does as you mention, but they do it while selling enmass Chinese and other import items, which they buy cheap to begin with, and then sell cheap.

Although many vendors sell cheap imports, many small stores can't get those big discounts.

It's funny, the Walmart in Spearfish SD sets aside the whole front of the parking lot for "Bikers only" during Stugis bike week. So, all of us bikers who forgot something, ride in on our Harleys, which are half Japanese, to buy cheap chinese import camping gear to get through the week! Only in America...

RPM · Jan 20, 2002

This is an interesting thread. To really understand what happened to K-Mart, you just need to compare them to Wal-Mart.

Wall Street has consensus on two points:

1. K-Mart had no consistent strategy. On the one hand they tried to position as a discounter - on the other hand they wanted to go more upmarket (e.g. all the Martha Stewart stuff). When this happens you lose your identity and it impacts employees sense of direction as well as customers identification with what it is the store does best. Wal-Mart has always positioned themselves as a discounter with a wide array of products. No confusion about that.

2. K-Mart does not have the scale to survive. Wal-Mart's operations dwarf those of K-Mart. The last game K-Mart had to play was bringing back the blue-light special -- which was a disaster. First, it played havoc with their suppliers - there was little coordination with them before announcing a product would be on sale which had a ripple effect of production problems. Second, it played into Wal-Mart's hands. The death knell for K-Mart was when Wal-Mart announced recent price cuts that took them to the same 'blue-light' levels (on average) as K-Mart. The difference is that Wal-Mart is big enough that it can do this and still make a profit. K-Mart was doing it as a 'loss-leader' to get people in the stores.

Also, re: hard economic blow for a lot of communities

I doubt this will be a major blow for anyone. K-Mart will go into Chapter 11 bankruptcy and will reorganize, closing unprofitable stores. These stores employ very few people so loss of jobs should be low -- and if the store is unprofitable in the first place then it's unlikely that too many people are actually shopping there. It WILL be a very visible loss to small malls where K-Mart is often an 'anchor' store though. People will just go elsewhere to buy the same stuff.

K-Mart may be bought by a competitor, but it's unlikely to happen soon in my opinion. The first course of action will probably be to decide who they are (discounter or try to go up-market) and show that they are profitable before anyone thinks of buying them. If competitors want the store locations they'd be better off watching them liquidate and getting the stores at fire-sale prices.

One other point that Wall Street predicts - Martha Stewart will drop her association with K-Mart. Not good for the image you know ...

Patrick

Tom_Trees · Jan 20, 2002

K-Mart had no consistent strategy. On the one hand they tried to position as a discounter - on the other hand they wanted to go more upmarket 

Part of this is historical. Kmart was the discount division of the S. S. Kresge Company, set up to combat Target and other discounters. Anybody seen any Kresge stores lately? The one in Elkhart, IN, disappeared shortly after the Kmart opened locally - with fewer staff and lower-quality merchandise. The local Target stores have been more up-scale than the local K-Marts for several years. (Is Target still Dayton-Hudson? I ought to look it up).

Wal-Mart's operations dwarf those of K-Mart.

Indeed. Notice how much better products scan now than they did ten years ago? Wal-Mart threatened selected suppliers would be sold on consignment, and paid when the product was sold. And if the scanner didn't read the label, the product would just go into the customer's bag . . .

We've now got three Meijer stores in the general area, three (that I know of) Wal-Marts (two 'super', one regular) along with two Sam's Clubs, and two Target stores in operation, and a Super Target in construction. And two K-Marts, althugh I think one of the K-Marts was just renamed a 'Big-K' or some such sillyness.

One of the problems I've had with K-Mart, and the reason I haven't been in one in years, has been their incredibly complex merchandise accounting process for clothing. Scan the price - then tear off the department tag - then press the appropriate department button on the register - then slide the tag into one of a half-dozen or so slots on the front of the register. It's like the scanner isn't hooked up to *anything* and is just pulling a bar-coded price off the label. I switched to Sears and Target for clothing before Wal-Mart or Meijer spread into the area because of this incredible inefficiency.

One of the largest data warehouse operations running is the one Wal-Mart keeps on their products, stores, and customers. They can tell which advertised items sold better because of the ads, what additional items were purchased with the promoted items, and what product mixes work best for each store in the chain. I haven't heard anything about a K-Mart data warehouse.

Tom

RPM · Jan 20, 2002

One of the largest data warehouse operations running is the one Wal-Mart keeps on their products, stores, and customers. They can tell which advertised items sold better because of the ads, what additional items were purchased with the promoted items, and what product mixes work best for each store in the chain. I haven't heard anything about a K-Mart data warehouse.

Yup - can't manage what you can't measure.

I don't know if they still do it, but Wal-Mart used to hold a sale shortly after they opened each new store. Not just a new store in town type sale - but one in which they were quickly moving out inventory that wasn't selling. Takes an amazingly short time for them to target the consumers in an area and figure out their purchasing patterns. It's fairly boring work and requires massive attention to detail, but that's why they're at the top of the heap.

It's to the point now where most economists and market trackers for various segments of the consumer products industry acknowledge that WalMart has by far the best statistics in the US on consumption habits. Many (if not most) of WalMart's suppliers buy back this point-of-sale statistical information from WalMart so they can better market their own products.

Patrick

Anonymous Poster · Jan 21, 2002

You folks would enjoy bigbox.com, a satire of all these mega retail chains that some local hardware store owner has put up on the web.
And what is it with all those diapers all over the parking lot? Is it a rule that you have to wait till your kids have a full pant load before making a trip to stock up?

-HG

PitbullMidwest · Jan 21, 2002

Many (if not most) of WalMart's suppliers buy back this point-of-sale statistical information from WalMart so they can better market their own products.

Maybe someone should tell Thomson Consumer Electronics (RCA). They are constantly begging us for production increases because WalMart "caught them off guard". We love their business but they are a bit of a pain since they rarely know what their customer wants.

BHarrison · Jan 21, 2002

What a hilarious site!

...except for the part about the little girl. That was horrible. I had no idea about all those people being killed. Next time I go shopping, I will definitly pay more attention.

StoneHeartFarm · Jan 22, 2002

RPM

From the news yesterday, it looks like Martha Stewart is going to stick with them. Its a good thing.

SHF

DFB · Jan 22, 2002

In today's news the AP reports that Scotts Co. is going to hold back shipments of their lawn and garden products, and that a primary food and consumables supplier Fleming Cos., also cut off most shipments as of yesterday. Fleming says Kmart owes them $78 million.

DFB