K-mart's upper management is attempting to bring K-mart "upmarket"without losing the chain's discount image. The goal is to change the store'simage from a no-frills discount store to a retailer of quality, brand-namemerchandise offered in modern, attractive displays. K-mart is attempting tochange with its typical customers, who are now more educated and sophisticatedthan earlier in the store's history. K-mart assembled a senior management teamto evaluate the impacts that emerging social, economic and political changes inthe United States would have on the future of the business. This team was calledthe F-Team.
Once the F-Team completed it's report, K-mart management asked forspecific marketing strategies to address each scenario from the F-Team's report.Of all items in the report, America's changing social class and income structureis of particular importance. The primary customer base for K-mart has been themiddle class group. This group comprises about 32 percent of the population.Members of this group often buy products that are popular and trendy. They tendto be very concerned with fashion.
Middle class size is in decline due to theinfluences of international competition. There is increased competition betweencountries for the labor pool. Third world workers are willing to accept wagesthat are up to a third less than United States workers will accept for the sametasks. American labor premium is disappearing, causing a significant downwardmobility and an associated diminution of living standards and purchasing power.
The group affected is K-mart's predominate customer base. This is cause of greatconcern to the upper management. According to the case study, this scenario willplace the top group in the new social structure of the United States at about 25percent of households, while the bottom will represent close to 65 percent. Thebottom (K-mart's customers) will suffer decrease purchasing power as a result ofthis shift. Upper management must create a public image makeover in order toattract customers from the smaller, but more affluent upper middle class. Properdecisions by upper management will have the desired impact on imaging andpositioning.
This will cause K-mart to occupy a distinctive place in the targetmarket's mind. The goals must be carefully set in order to attract customerswith higher incomes, and at the same time, not alienate those already shoppingat discount stores. New programs designed to help change the store's imageinclude: 1. A new advertising campaign in which designer Martha Stewart usesK-mart products to decorate her farmhouse 2.
Use of pro golfer Fuzzy Zoeller inads to promote golf equipment 3. Co-sponsorship of a race car driven by MarioAndretti 4. In-store greeters and a toll-free customer response number. K-marthas also been working to be identified with fashion.
Everything the stores carrywill be considered fashionable, chic and popular. According to the case study,the efforts towards this goal have been successful. K-mart increased sales by7.8 percent during 1992. The nature and extent of change will be decided byupper management and formulated in the offices of K-mart's headquarters, wherethe retailer's management team will evaluate every aspect of the company'soperations.
A revival is not implausible. After all, K-mart follows in thefootsteps of such chains as Sears, JCPenney, and Montgomery Ward, all of whichhave accomplished turnaround feats of impressive magnitude. But despite theevidence of past turnarounds by similarly beleaguered chains, the thought ofK-mart making such a radical change successfully seems remote. After all,generations of customers have the image of K-mart as a cheap discount storeburned into their brains.
The "blue light specials" invoke images ofdesperate shoppers madly running into or over each other to get their specialbuy. That image will most easily be changed in the children of K-marts presentshoppers. K-mart's chief attribute in the highly competitive discount storearena is convenient locations. Unfortunately, location alone may not be enoughfor the Troy, Michigan-based retailer that invented discount store retailing 33years ago.
K-mart needs more; it needs a new focus and a new image, and it needsthem quickly. At a similarly difficult juncture in Sears' history, theChicago-based retailer had more going for it than does K-mart. Sears chairman EdBrennan hired a well-respected chief executive, Arthur Martinez, who executed amasterful turnaround program. Martinez instituted the successful "SofterSide of Sears" ad campaign; sold off Sears' huge franchise-making butmoney-losing catalog operation and redirected catalog customers into the stores;emphasized credit opportunities through the company's Sears charge; and stressedthe retailer's golden reputation with consumers in hard lines and durables,especially with its Kenmore, Die-Hard and Craftsman labels. K-mart's task isjust as daunting, if not more so. And its list of attributes as perceived byconsumers appears slimmer than Sears' was.
As a result, the chain may be forcedto reinvent itself into a different kind of retailer, one outside its roots.Unlike Sears, K-mart doesn't have a huge catalog operation to mine, nor creditcustomers with whom to communicate. Its hundreds of old, sub-par stores haveleft shoppers with a dated image of the retailer--even though its new discountstore prototype and Super K-mart Center programs are outstanding. According toGeorge Rosenbaum, president of Leo J. Shapiro & Associates, a Chicago-basedconsumer research firm, the future of K-mart could be two-pronged: one insupercenter retailing through Super K-mart Center, the other a strategy forreinventing the discount stores.
The supercenter, or combo retailing has beenvery successful for Wal-Mart. Maybe this can work for K-mart as well. Salesfigures point to K-mart's less-than-stellar productivity statistics: less than$150 per sq. ft. of sales compared to more than $300 per sq.
ft. for Wal-Martand $225 for Target. The reason: Wal-Mart has the price/value equation sewed upwith consumers, and Target firmly holds the fashion/quality position. This makesthe challenge even more daunting.
K-mart could maintain its power retailerposition by rediscovering its niche in apparel, strengthening its home decordepartments, growing the supercenter division and finding the right marketingand advertising message to convey its new image and identity.Bibliography1. Kotler, P. (2000).
Marketing Management (The Millennium Edition). UpperSaddle River, New Jersey: Prentice-Hall, Inc. 2. McDonald, W. (1999).
SelectedCases in Marketing Management Upper Saddle River, New Jersey: Prentice-Hall,Inc. 3. Strnad, Patricia. (1988, July). K-Mart's Antonini Moves Far BeyondRetail "Junk" Image.
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