K-Mart

Kmart is the #3 discount retailer in the United States behind

Wal-Mart and Target. Kmart sells name brand and private label

merchandise, mostly to low and mid - income families. It has more

than 1,800 stores and currently employs more than 220,000

associates in all 50 states, Guam, Puerto Rico and the U.S. Virgin

Islands and owns an e-tailer BlueLight.com. As of Jan.30,

2002,Kmart had 124 Kmart Supercenters that combine a full grocery,

deli, bakery, video rental and 24 hour/seven-days-a-week

availability along with the general merchandise selection of a

Kmart discount store.

A core strength for the company continues to be the

expansion of Kmart Exclusive brands such as Martha Stewart

Everyday, Sesame Street, Jaclyn Smith, Kathy Ireland, and

Route 66. These brands-nationally available only at Kmart-

have progressively added to their assortments.




Despite that, the company filed for Chapter 11

Bankruptcy protection on January 22, 2002, after a year in

which its financial performance declined from unimpressive

to bleak. The filing came a day after Kmart's major food

distributor, Fleming Cos., said it had cut off most

shipments to Kmart because the discounter failed to make

its regular weekly payment for deliveries. Fleming said

Kmart, its largest customer, owed $78 million. This

bankruptcy filing let Kmart rid itself of unprofitable

stores and shrink the payroll. The company has closed 284

unprofitable stores and laid off about 22,000 workers to

pare costs. Kmart stores have fallen as consumers have

slowed their spending and as rivals like Wal-Mart Stores

and Target have tried to siphon off Kmart’s customers.

In this paper, I will try to suggest some solutions to

improve Kmart as a company as a whole and help increase

its sales.

First of all, Kmart needs to improve its marketing

technigues. The problem that it’s facing right now is

decreasing sales. What I think it should do is lower the

prices. It will definitely attract more customers. For

example, the reason that one of Kmart’s biggest



competitors, Wal-Mart is doing so well is because Wal-Mart

is known for its very low prices. Also, I think that Kmart

should increase eye-capturing advertising. Not only should

they increase the advertising, but they should try to

appeal to different kind of customers. Kmart should make

sure that its advertisements attract not only middle-aged

population-mostly housewives, but it ought to attract more

hipper/younger consumers. In addition, it needs to provide

better quality of items. One main reason why Target is a

successful retailer is because it offers designer items

and contemporary fashion at affordable prices. I believe

that Kmart will have more high-class customers if it will

be willing to improve the quality of items it offers.

Kmart should also attract customers by offering coupons

and discounts. For example, Ames offers 10% senior

discount. I’m sure that offering discounts will trigger

more customers based on my own experience. I used to work

for Associated Supermarkets and every Wednesday we offered

10% senior discounts, and by doing that we gained a lot of

elderly customers, which drove our sales up.

The other problem with Kmart is that its open to the

same type of shoppers. They should attract more





diversified customers. Kmart should do more to accommodate

the increasingly diverse character of its shoppers. It

needs to adapt its stores, from the layout to the stock to

the personnel, to make them more welcoming to the

immigrants. In traditionally white neighborhoods, Kmart’s

customer base is 30 percent Asian and 20 percent Latino,

and yet often they make no effort to hire people who

reflect those communities, or they make no changes to the

product lineup. Kmart should hire more diversified

employees like Advantica does. Advantica’s workforce is

highly diverse. Also, in order to catch the attention of

many immigrants, it should be willing to advertise in

different languages. For example, Denny’s does advertising

for Spanish customers. Kmart should carry products based

on ethnic neighborhoods. For instance, in areas with large

numbers of Asian shoppers, the stores should stock plenty

of clothes in petite sizes and have signs that make clear,

without words, where various products can be found. Store

layouts shouldn’t be confusing, they should be logical and

employees should be willing to help shoppers understand

the self-checkout registers that Kmart has installed in

many stores.





In addition, Kmart should focus on Spanish-speaking and

African-American shoppers because as research indicates,

many of them are loyal Kmart customers and more than 55

percent of all Hispanics in this country live within 15

minutes of a Kmart store. Kmart must advertise in Spanish,

hire Spanish-speaking employees and carry more items that

would attract Hispanic customers. As for African

Americans, Kmart should be carrying special products for

them, for example they require different hair and skin

products. Since they love music so much, the company can

use famous black singers to advertise for Kmart. Most

likely, this approach would appeal to the desired

audience.

Another thing that would benefit Kmart is improving

its management techniques. There is a poor Employee-

Customer relationship. And it’s a very important component

of a successful company. Improving it will definitely

benefit a company as a whole. Kmart can do a lot to

correct this problem. It can for example, offer

outstanding training. Besides that, they should make a job

training an ongoing process. Target offers an excellent





training, and promotes “fast, fun and friendly service”.

This works for them, because they have a great Employee-

Customer relationship.

Kmart should also consider giving employees

incentives. Incentives in the form of commission, for

example, really motivate employees to their best, because

they know that the more they sell, the more they earn. For

instance, Bloomingdale’s offers commission in addition to

the base salary to its employees. Working there as a sales

associate, I can note that its employees are always

polite, friendly and helpful, because we knew that our

earnings depend on how well we sell. Kmart may also

motivate its employees through recognition awards. They

can for example, give “Employee of the Month” award and

post a picture of that best employee for everyone to see.

This technique would really encourage employees to do

well. Every employee would want to be the employee of the

month, and will strive to do his/her best.

Another way to offer help to customers is what

actually Target does. At the end of most aisles, Target

stores have a red service phone that shoppers can use to

get help in finding necessary items.




Kmart should also watch its employees through cameras

and see how well they perform their duties and how

effective they interact with customers. Firing poor

performers would alarm others and they would improve.

In addition, the company should offer customers a

customer service number that they can use to make

complaints or praises. For example, Aldo, a shoe retailer,

always gives its customers a card, which has the name of

the sales associate that was helping that customer and a

customer service number for the purposes mentioned above.

One last suggestion that might improve an Employee-

Customer relationship is actually grading the employees

like Target does. Target managers grade store employees

regularly – green is good, yellow is alarming, and red is

trouble. A store with too many red grades, gets a special

visit from a district manager, who then returns at 11-day

intervals until he or she sees improvement.

Another factor that might have caused bankruptcy is its

poor management. I think what Kmart needs to do to correct

the problem of poor management is to fire all the

bad /inefficient managers with new highly qualified

managers. They might have new ideas that will help Kmart




enhance the ability to successfully lead itself through

the reorganization process and emerge from bankruptcy.

Kmart is very widely known by people living in

the United states. I think Kmart should take itself to

different countries, it should close out all the

unprofitable stores in the United States and instead open

some stores abroad. For example, Wal-Mart has stores in

nine foreign countries and now goes to Japan. Also, Exxon

Mobile’s 69 percent of total sales are foreign sales. So

Kmart should also expand more into the global arena.

I believe, and really hope that the ideas that I gave

will improve Kmart and help it emerge from bankruptcy,

although I realize that the change will not happen

overnight, it will at least take a couple of years.