Kmart

Kmart is an American chain of discount retail stores, roughly equivalent to Wal-mart and Target.

A Century of Success

Kmart was founded when Sebastian Spering Kresge opened a five and dime store in downtown Detroit in 1899, selling all items for either 5 or 10 cents. Kresge's store was a dramatic success, and he began expanding his operation, such that by 1912 he had 85 Kresge stores and annual sales of $10 million.

The company kept growing. In 1962, Krege president Harry Cunningham decided to get into the discount retail market, opening the first "Kmart" discount store in the Detroit suburb of Garden City, MI. By 1966, 162 Kmart stores and 753 Kresge broke the $1 billion mark in annual sales.

In 1977, with nearly 95 percent of S. S. Kresge Company sales coming from Kmart stores, the company decided to officially change its name to "Kmart Corporation." In 1987, the last of the old Kresge stores were sold so the company could fully concentrate on discount merchandising.

From 1899 through the 1980s, Kresge/Kmart was one of the most successful retail chains in America - so successful, that from 1984 to 1992, the company went on a shopping spree, buying several businesses including Builders Square (1984), The Sports Authority (1990), a 90 percent stake in OfficeMax (1991), and the Borders chain of bookstores (1992).

Hard Times

But in the 1990s and 2000s, Kmart has run into financial trouble. Heavy competition from Wal-mart and Target exposed weaknesses in Kmart's antiquated restocking system. While customers still flocked to the stores, Kmart was slowly killing itself because stock was sitting on the shelves too long or not arriving in time, as opposed to the "just-in-time" computerized restocking systems pioneered by companies like Wal-mart. As Kmart tried to keep prices low, despite higher internal costs, it began to lose money - losses it could no longer cover due to a cash shortfall from the buying spree.

A 1994-1995 brush with bankruptcy amid falling earnings forced Kmart to sell or spin off its new acquisitions and close more than 200 stores, affecting about 10,000 employees. CEO Joseph Antonini got the axe as well, and was replaced by Floyd Hall.

But modernizing the internal beauracracy of a chain of almost 2000 stores has proved easier said than done, and Kmart has continued to struggle financially. In 2000, the company closed another 72 stores and with its stock price hovering at a dismal $3 per share through the 2001 fiscal year, Kmart opted to file for restructuring under Chapter 11 of the US Bankruptcy Code in January of 2002.

In some ways Kmart's success was responsible for its downfall. As other stores were spending cash on hand to update aging inventory systems, Kmart did not, instead going on an irresponsible buying spree. Perhaps because the chain had always been so successful, throughout its entire history, Kmart executives lost sight of what had been responsible for that success in the first place - a constant effort to improve and become more profitable. In the late 1980s, Kmart must have seemed like an unassailable giant in the retail world, but it was a giant that was rotting from the inside.

Today Kmart is still a massive and potentially successful chain of over 1,800 stores. Many companies have recovered from chapter 11 bankruptcy in the past, and it remains to be seen whether Kmart and its executives will have the vision and tenacity to return to their successful ways of old.

It comes as no surprise to myself and my peers that Kmart has failed, and none of us have business degrees. We realize that it failed simply because no one wants to shop at a Kmart anymore. Here's why:

Kmart does not effectively advertise

Wal-Mart and Target both have well designed advertising campaigns that are pushed heavily here in the south. These campaigns are very effective, creating in our minds that these two stores are places you want to spend your money. The advertising put on by Kmart is seen (by us) much less frequently on television and in print, is less catchy, and lacks the flash and polish put on by their competitors.

Kmart has carried the Martha Stewart line of products for a long time, but when was the last time I heard about it? Oh, probably never. I might have read a CNN press release that mentioned Martha's line of goods sold in Kmart stores, but the Kmart guys sure didn't push hard enough for it to stick in my mind.

Kmart does not stock as many things as their competitors

One reason I don't bother to go to Kmart anymore is because I may not find what I'm looking for. If I go to Wal-Mart or Target, I am virtually guaranteed to find the items (and brand names) that I want. I don't like having to go from store to store to store to get everything I need.

Kmart does not cater to the "grocery store in a store" paradigm

At least not here. Most of my friends and co-workers have grown accustomed to buying household goods, groceries and other items during a trip to a single store. This is a paradigm that I believe has grown into a "weekly trip to the store" where people buy most of their necessities. Wal-Mart and Target make this possible (Wal-Mart more effectively so than Target with their Wal-Mart Supercenter meccas found on every city block). Kmart, well, forget it.

Kmart is absolutely filthy

The inside of a Target store is spotless. It is absolutely spic-and-span. You feel like you're shopping in a clean and safe environment. Wal-Mart is generally not as well-groomed as Target, but still passably so. Both stores keep their goods stocked, organize them well, and keep the aisles clean and tidy.

The inside of every Kmart I've ever been to looks like it was hit by a tornado. Items seem tossed everywhere, things are unorganized and merchandise that is moved around by a customer doesn't get quickly straightened by the store employees. The inside of Kmarts are also less pleasing to the eye and dirtier. I don't want to shop in a place like that when I can just go across the street to Target.

Kmart is a ghost town

The unpleasantness of shopping at Kmart has led to fewer customers. Lately, if I go to a Kmart, there are only a handful of other customers in the store. This reinforces the feel that Kmart is lame and that I ought to be shopping somewhere else.

The bottom line

Kmart needs to change their business model to come more closely in line with that of their biggest competitors. Once they can make their stores a place where people want to shop, they will climb back out of this hole they've made for themselves.