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The
Bluelight Never Had a Chance Kmart's Lack of Marketing Strategy Was Its Downfall By Kevin J. Clancy Ending weeks of speculation, discount retailer Kmart finally filed for bankruptcy protection in January, becoming the largest retailer ever to do so in U.S. history. Most industry analysts attribute the immediate cause of the company's bankruptcy filing to a lackluster holiday season and stiff competition from WalMart and Target as the chain's more fundamental problem. True, with more than 4,000 stores and aggressive expansion plans, WalMart is a retail force to be reckoned with. Its advanced inventory management system, leverage with suppliers, and cost-conscious corporate culture have enabled the industry giant to produced solid margins while offering the lowest prices. Target is also a formidable competitor, offering fashionable items at reasonable-but not the lowest-prices. But competition isn't the root cause of Kmart's consistently poor performance. After all, U.S. brands in other industries have survived…even thrived… in spite of intense competition-Apple, Wendy's, and ExxonMobil, to name a few. The real reason Kmart has lost market share for 20 of its 40 years of existence? Simply put, the company never had a marketing strategy. By strategy, we mean a framework to guide its decisions in pursuit of performance objectives. Historically, Kmart depended on the WalMart's focus of expanding into rural markets—places where other retailers did not go—and Target's on regional markets to maintain its market share. Other than just being in the market, Kmart did little to protect its geographic advantages. Though the company continued to open new stores and bought several specialty chains, including sporting goods, office supplies, and books stores, conditions at existing locations declined as cleanliness, service quality, and the selection of merchandise all became problems. Thus, when WalMart and Target inevitably entered into Kmart's territory, Kmart had given its customers every reason to go someplace else. The marketing moves Kmart made in an attempt to regain market share in the 1990s proved to be unrelated, isolated events. Kmart converted stores to the "Big Kmart" format—larger and brighter stores with more categories of merchandise and signed an exclusive deal to distribute Martha Stewart's line of products—bed and bath fashions and house paints created by the famous home and garden icon. But the same inventory and service problems still persisted, and—unless you had to have a Martha Stewart bath mat—there was no reason to go to Kmart. Most recently, Kmart resorted to dropping its prices. The retailer developed advertising to promote the price cuts and brought back the Bluelight, a once-popular reward program for Kmart shoppers to suddenly save on select items, but the only things guiding these decisions were hopes and prayers. Not surprisingly, WalMart had the advantage in the low price game, responding with further cuts Kmart could not beat. And that was that. Unless Kmart finally realizes it needs to develop a marketing strategy, the future does not look bright for the Bluelight. Only if company management makes an investment of time and resources in discovering a financially optimal target, a compelling positioning-a reason to give customer to go to Kmart and not a competitor-and building the capabilities to deliver, it will not make it out of bankruptcy.
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