Kmart - What Went Wrong?

Good Essays
Kmart's main weakness was that it had an aspiration to be all things to all people – its dabblings in drug stores, home improvement stores, bookstores, cafeterias and specialty stores in the 1980s and early 1990s seemed to spread the company very thin. This focus on diversification is just one example of how the retailer has often not made the wisest choices when faced with a tight spot. By the 1980s, just before the rise of Wal-Mart, Kmart had become complacent. It believed it would be the king of discount retailing, now and forever. It didn't perform an accurate SWOT analysis, but to be fair, who could have seen the rise of Wal-Mart to the position of the world's number-one retailer? Still, as Wal-Mart built new stores in town after town, supported by cutthroat pricing and solid logistics, Kmart's complacency would cost them. Part of the problem was that as Wal-Mart was pouring money into information technology (IT), Kmart's IT budget continued to shrink – not just once, but several years in a row. While Wal-Mart's logistics and supply chain management got sharper, Kmart's stagnated. And while Wal-Mart was able to squeeze more value out of its stores and its systems, Kmart lost ground. By the time Kmart had finally decided to start devoting more resources to IT, it was so far behind Wal-Mart that catching up would have been a near-impossible task without the recession in the early part of this decade. With the effects of the recession taken into account, Kmart instead was consigned to also-ran status among discount retailers. Another problem was that Kmart did not correctly anticipate customer needs. For instance, let's say that Kmart buys a new style of shirt and stocks it in pink, yellow, green and blue. Further, let's say that the blue shirts sell out immediately; the store is left with inventory of the three other colors. Yet Kmart doesn't reorder the blue ones because 75 percent of its inventory is still unsold – it's still got plenty of

You May Also Find These Documents Helpful

  • Good Essays

    Bob’s Supermarket was founded in the early 1960’s. Bob’s, stored cared a lot about the customers and the services that was rendered to them. The former operators of the store owned it for more than 19 years and seemed to have lost interest in running the store. After the store was purchased, there was an increase of sales and profits that by more than forty percent. Bobs Supermarket offered its customers high grade-A quality products (Parnell, 2014). Some of the key facts and critical issues for Bob’s was the competition. Their main competitor was Walmart. This caused great concern for the company and other small business like Bob’s Supermarket. Another critical issue for Bob’s Supermarket was the recession that impacted Bob’s. Many…

    • 343 Words
    • 2 Pages
    Good Essays
  • Good Essays

    I worked for giant U.S. retailer JCPenney for 12 years 1987-1999, then again October 2011-August 2013. JCPenney hired CEO Ron Johnson November of 2011 and let him go April 2013("Ron Johnson (businessman) - Wikipedia," n.d.) . I was with JCPenney Johnson’s entire stint as CEO and I must say I “drank the Kool-Aid”, I was ready to follow whatever changes he wanted to make.…

    • 508 Words
    • 3 Pages
    Good Essays
  • Good Essays

    JCPenney Case Study

    • 3784 Words
    • 10 Pages

    Was the Fair and Square strategy overall effective Do the elements of the strategy work together or compete with one another to provide a coherent strategy Did the Fair and Square strategy simplify J.C. Penneys pricing structure and make it more straightforward for customers or did it confuse customers What, if anything, is missing or be changed From this case, the Fair and Square strategy almost changed everything in J.C. Penney. However, in my opinion, the overall of this strategy is not effective. Technically, the Fair and Square strategy is trying to give customers the maximal benefits and build the win-win between customers and retailer. J.C. Penney is an American based department store and it was established over 100 years. With the developing of new retail formals, such small specialty sores, and e-commerce, the company was keep losing market share and revenue. Therefore, the purpose of the new strategy is stop losing money and customers, as the case described, recreate a golden age department store that appealed to all Americans, across age, income, and geographic demographic. However, from the result of J.C. Penneys first earning report after the new strategy, the company lost 163 million, including total sales revenues and gross margin decreasing. From J.C. Penneys Stock Performance, since the company launched the new strategy, although J.C. Penneys stock price was rise for one and half month, it kept declining in the rest of time. According to the case, investors sending the companys stock down 20, the biggest single day drop in over four decades. In addition, customers were moving away from J.C. Penney because the whole strategy removed Sales, clearance, and coupons, instead of complicated pricing tags. Also, J.C. Penney is more focus on younger shoppers in this plan, so the loyal customers were leaving before the new ones coming. Thus, the result of the Fair and Square strategy is totally departed from its original purpose. By the textbook Marketing…

    • 3784 Words
    • 10 Pages
    Good Essays
  • Good Essays

    As Walmart is a Cost Leader by strategy, technology innovation is a critical success factor for the company. By using advanced technology in its operations, it would help them in becoming more cost effective as well as keeping them competitive in the international market (Duke, 2010). As technology becomes the most “fundamental of all business changes in recent years” (Blocher, Stout, Juras & Cokins, 2013), Walmart is on schedule to remaining the benchmark within its market throughout the world.…

    • 370 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Wal-Mart is a giant of the retailing industry yet is not immune to the pressures of globalized trade, supply, and competition. Wal-Mart’s profit sustainability is always ‘in doubt’ unless it continues to fight off various competitive conglomerates or large size retailers such as Amazon and Target. Mergers on the scale of Wal-Mart are rare yet the marketplace shifts based on the continued expansion of physical and online retailers like Amazon and Amazon’s many partner/provider organizations. To stay ahead of the various operational and governmental threats, Wal-Mart’s focus is on maintaining their low cost…

    • 1894 Words
    • 8 Pages
    Better Essays
  • Powerful Essays

    Target Corporation

    • 4839 Words
    • 20 Pages

    References: Heller, Laura. “Wal-Mart remains the price leader, but competitors are closing the gap.” DSN Retailing Today 2 Aug. 2004: 8-10. Klinefelter, Jeffrey, Neely Tamminga, and Melissa Mullikin. “Target Corporation.” Piper Jaffray 22 Sep. 2004. Kozloff, Emme, Ian Gordon, and Robert Higginbotham. “A Look at the Stand-Alone Target.” Bernstein Research Call 23 Sep. 2004. Kozloff, Emme, Ian Gordon, and Robert Higginbotham. “Discount Retail.” Bernstein Research Call 16 Oct. 2004. Lightfoot, Paul. “Wal-Martification.” ALsysinc.com 1 Jun. 2003. Schlosser, Julie. “How Target Does It.” Fortune 18 Oct. 2004: 100. Stinson, Jeff. FTN Midwest Research. 29 Sep. 2004. “Target Corp. Fighting a War on Two Fronts.” CIBC World Markets Equity Research 24 Mar. 2003. “Target Corporation.” International Directory of Company Histories Vol. 61, St. James Press, 2004. Weinswig, Deborah. Target Corporation November Credit Review, Smith Barney. 27 Dec. 2004.…

    • 4839 Words
    • 20 Pages
    Powerful Essays
  • Good Essays

    The economic crisis that started in 2007 affected the business of upscale department stores countrywide. Upscale department stores understand that the items they sell are considered discretionary items, so when there is an economic downturn, they are one of the first industries to be hit. When looking over the Nordstrom Annual Reports from the last few years, there are two things evident: this company has a lasting strategy and they work hard to continuously evolve this strategy. Their strategy includes constantly evaluating risks in the market such as economic conditions, competitive market forces, availability of merchandise, and growth. With an incredible sense to stay ahead of the trends, minimize turnover time, and serve their customers with an uncanny ability, they have easily become one of the top department stores in the country. Nordstrom’s core strength revolves around their customer-first attitude, customer loyalty and their aptitude for merchandising. “Going forward we want to be more than just customer focused. Instead, we’re working to become a truly customer-driven organization.”[1]…

    • 710 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Loreal Case Study

    • 2157 Words
    • 9 Pages

    Kiehl’s reputation for being exclusive and of high quality made it highly coveted. However, at the time of acquisition, there were no more than some placements in 5 high-end department stores and its original New York store. The mail-order system Kiehl’s had in place was a success but it was slowly showing its weaknesses. Demand was growing but the company had limited ability to meet them.…

    • 2157 Words
    • 9 Pages
    Good Essays
  • Better Essays

    The U.S. economy has been hit hard due to soaring oil prices, the threat of inflation, and high unemployment rate, resulting in low consumer confidence. Consumers have been hit especially hard and are trading down in consumer staples and what they spend their discretionary funds on. Superior quality products with world class customer service and its new inventory system are the key reasons why Nordstrom is still a leader in the retail industry. Through an analysis…

    • 15399 Words
    • 62 Pages
    Better Essays
  • Best Essays

    Wal Mart and Its Usgae of It

    • 3325 Words
    • 14 Pages

    IT systems are the heart of retail operations and hence play a central role in alleviating pressure points in the retail sector. The converse also holds true—retailers who do not manage their IT landscape effectively will find that, in time, the IT systems become part of the problem rather than components of the solution. Wal-Mart, “America’s low price leader”, recognizes this challenge and has decided to be part of the solution. This paper will examine the IT infrastructure within the merchandising retail space while focusing attention on Wal-Mart’s utilization of decision support systems and enterprise applications as it impacts and counteracts Porter’s Five Forces. The paper will also speculate on the future use of IT at Wal-Mart during the next 2-3 years as Wal-Mart continues to strengthen its position in the retail space.…

    • 3325 Words
    • 14 Pages
    Best Essays
  • Good Essays

    What Happened at Kmart

    • 617 Words
    • 3 Pages

    Kmart, once the leader in the discount store industry, has found itself surpassed by Wal-Mart and Target in recent years and is now facing the possibility of closing its doors. The differences among the companies' successes can be seen in their business models and strategies. Wal-Mart focused on decreasing expenses and Target established its market placement as a high-quality low-cost discount store. In contrast, Kmart used a promotions-driven business model. Because of this, Kmart focused on trying to generate sales from promotions, rather than trying to cut expenses to increase their profits…

    • 617 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Gloabal Market

    • 360 Words
    • 2 Pages

    Wal-Mart has implemented lean initiatives to increase profits even before the economic downturn. In 2005, the company implemented a plan to target wealthier consumers—outside of their normal blue collar clientele—with a more modern marketing campaign (Kabel, 2006). The company also began stocking more high-end merchandise to cater to this group of consumers (Kabel, 2006). In order to stay in business, a company must work to increase business during good economic times as well as bad. The combination of the two strategies Wal-Mart has used (just in time and targeting a wealthier customer base) shows that the company knows how to adapt to changing markets; they have awareness of what lean initiatives to implement during economic upswings as well as downturns. In addition to managing a changing market through business lean initiatives, Wal-Mart also focuses on meeting strategic goals to increase the bottom line for the company. One tactic the company started implementing involves opening stores in more urban areas. However, the stores will be much smaller than the typical 150,000 square foot “big box” model. These “Smallmart” stores will allow the company to enter areas where large open areas are few and far between .This strategy allows the company to access a previously unobtainable customer base as well as bring jobs to places with high unemployment and fresh food options where not many exist. The store plans to implement the smaller store format in Chicago, San Francisco, Detroit, and New York.…

    • 360 Words
    • 2 Pages
    Good Essays
  • Good Essays

    The Kmart Corporation which is known for their blue light special, is also known for it’s collapsed corporation. In 2002 Kmart Corporation was the United States second largest discount retailer. Kmart was widely known for their "blue light specials" campaign which alerted customers of special deals located under designated blue light areas inside their stores. However, in January 22, 2002 Kmart Corps revealed the corporation had filed for chapter 11 bankruptcy protection. Suspected speculation seemed to be no big surprise of the Corporations financial rendering. Many Corporations can fail due to poor management and the inability to adapt into the ever changing market place. Kmart’s decent into bankruptcy evolved into a downward spiral…

    • 263 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    Kmart

    • 2816 Words
    • 7 Pages

    On January 22, 2002, Kmart filed for Chapter 11 bankruptcy protection. It was the largest retailer ever to do so and shocked many people. Kmart had made retail history when its founder, the Kresge “five and dime store” chain, invented the concept of the discount store. The first Kmart was established in Detroit in 1962, the same year Wal-Mart opened its first store in Rogers, Arkansas. By the end of 1963 Kmart had 63 stores converted from Kresge’s.

In the following years, however, Wal-Mart expanded quickly by following a strategy of everyday low prices. Wal Mart used information technology (IT) to track sales in all its stores and to replenish its fastest selling products. Wal-Mart demonstrated its willingness to spend needed funds on IT by installing registers with bar-code scanners in each store during the late 1970s and early 1980s, which fed the sales data into the back-end store computers. The result was Wal-Mart sales data were always current and store managers knew what was selling well and what was not. In time many orders were routed straight from theWal-Mart store to the appropriate supplier, and the delivery went from that supplier directly to the store. Wal Mart recently developed an extranet to work closely with key suppliers on problems such as how to increase sales on specific products. Many analysts believe Wal-Mart has the most sophisticated supply chain systems in the industry.

By 1983, with its cutting edge information systems, Wal- Mart was already spending only two cents per dollar getting goods to its stores while Kmart was spending five cents. From that differential alone, Wal-Mart could sell the same product at a price 3 percent lower than Kmart, an important saving to many shoppers. In 1990 Wal-Mart passed Kmart as the largest discount chain with annual sales of $32.6 billion for Kmart’s $32.3 billion. Wal-Mart was well on its way to becoming the world’s largest retailer. In December 2001, Target, Kmart’s other major competitor, passed…

    • 2816 Words
    • 7 Pages
    Powerful Essays
  • Better Essays

    Business Analysis

    • 1148 Words
    • 5 Pages

    One lesson learned from this analysis was that the Wal-Mart (2012) website shows that Wal-Mart out sells and out pays Target by almost seven to one. Sears Holdings Company was chosen for this analysis because of the turmoil going on with the Kmart stores going through bankruptcy. After reviewing the financial statements of Wal-Mart, Target, and Sears another lesson was learned. The lesson learned is that a company under capable direction and management can be successful beyond belief. For example, Kmart has been around since 1899 (Sears Holdings Corp, 2012) and Wal-Mart was launched in 1962 (Frank, 2011). Kmart has been around 63 years before Wal-Mart was established and Kmart is closing stores and terminating employment of their staff. Even though Kmart went through a chapter 11 bankruptcy, The Company still managed to emerge from the Chapter 11 reorganization process 15 months after they filed for Chapter 11 in the United States Bankruptcy Court for the Northern District of Illinois on January 22, 2002 (Sears Holdings Corp, 2012). While Wal-Mart continues to open new stores all…

    • 1148 Words
    • 5 Pages
    Better Essays