Kmart Keys to Success

Presented by: Robert Shaw Yasmin Anandwala Eric Findley Ardita Kalaja Winfield Pollidore Sanjay Mengi

Kmart - Introduction
Yasmin Anandwala

Kmart Keys to Success

Industrial Analysis Kmart Profile SWOT (Strength, Weakness, Opportunity, and Threat) Kmart versus Wal-Mart Survey 3 Marketing Keys to Success
Leverage Urban Minority Market Strengths

Implement CRM Strategy

Improve Supply Chain Management - IT Conclusion

Kmart - Analysis

Robert Shaw Yasmin Anandwala

Kmarts Strength
Clothing lines Exclusive Joe Boxer product line Route 66 Carry a variety of products at a low cost Martha Stewarts products Home Goods Store Locations Urban areas Stores located in easily accessible areas Market in the Urban areas effectively Able to get a large multi-cultural consumer group Offered lay away plan for people who need to pay on installments

Kmarts Weakness
Chapter 11 Bankruptcy Protection Low marketing budget Many low profit suburban stores Ineffective Supply Chain Management Negative publicity Marketed the suburbs like the urban areas Did not change the image of the company as the demands of the consumers changed Did not offer variety that appealed to the middle class

Kmarts Opportunities
Re-position store Adopt Urban Strategy Integrate Supply Chain Management Sell to Carrefour (Paris based retailer) Need to change the negative image of K-Mart Improve the product line carried to keep the middle class Design the store to be more organized and attractive

Kmarts Threats
Wal-mart and Target Increasing Market Share Having to liquidate company Suppliers raising prices Profits declining Martha Stewart getting bad press Urban areas are becoming more suburban like Youths rejects K-Marts Urban strategy

K-Mart Opportunity Threat Matrix

1 Credit can be down rated 2 K-mart getting bought 3 Supplier raise costs 4 Martha Stewart pulls out
Probability of Occurrence Level of Impact on Company

High

Low

High

2, 4

Low

Market Share Analysis

Kmart vs Wal-Mart
Kmart opened 1962 (Originally Kressege) In 1987, 2,200 outlets Market share 34% In 1994, sales $34 billion Wal-Mart opened 1962 In 1987, 980 outlets Market share 22% In 1994 $82 billion in sales

Retail Preference Survey

Selection Criteria 15 Female and 5 Male Wayne County area Average age over 35 All were frequent shoppers

Survey Results
80% people preferred Kmart Favorable location 100% visited store in last six months 50% would not care if Kmart went out of business 100% never visited web site

Marketing Key #1 Leverage Urban Minority Market Strengths

Eric Findley

Facts
Kmart strongest locations are its urban clusters (away from Target and Wal-Mart) where Kmart is uniquely popular among (multicultural population) African Americans and Hispanic customers Multicultural consumers represent 39% of the nearly 30 million people who shop at Kmart each week. African Americans and Hispanics alone account for 32% of Kmart's shoppers.

Kmart Market Profile by Race

7%
African American and Hispanic Consumers

32%

61%

Other Muliticultural Consumers Majority Consumers

Demographic Trends
Hispanic population going to increase at a faster rate than the rest of the nation Multicultural consumers control $1.2 trillion in joint-purchasing power at a market segment growth rate seven times faster than the general population Urban African-American community's $560 billion in buying power Urban youth consumer has become big business because of their buying power ($300 billion) and influence over the mainstream consumer market

Market Trends and Attitudes

Shoppers are increasingly bypassing its aging mall stores to shop at newer urban and suburban strip malls Emerging trend of retail development in innercity districts around the United States

Market Trends and Attitudes

Urban youths: Tend to be individualistic, they dont respond to anything outside of their reality Dont care about the status quo Urban youth consumers: tend to be trend and style conscious

Market Trends and Attitudes

"What works in urban cities, works in suburbia, but not vice versa," Generation X & Y influenced by urban culture (70% of hip-hop music sold to whites living in suburbs) and fashion that characterizes its identity Minority groups last year accounted for 27.3 percent of the suburban population in the 102 largest metropolitan areas

Urban Minority Strategy Recommendation

Kmart develop niche marketing strategy to concentrate on Urban and Minority Gen X and Gen Y Market Make Kmart the hottest place to shop & trendy place to shop Eventually strategy will penetrate Suburbia Partner with rap/music artist and professional sport players to endorse and promote shopping at Kmart Youth market responds well to role models and celebrities (Master P and Converse) By capturing the urban market you can capture the mainstream market

Popular Apparel Urban Brands

Kmart would do best to understand and promote brands similar to those represented by Urban Minorities Popular Urban Brands

Phat Farm FUBU Rocawear Ecko Sean John

Other Popular Apparel Urban Brands

Other Popular Brands Levis Nike Kangol Kenneth Cole Rockport

 In understanding and targeting urban minorities: Kmart needs to tailor its products to each communitys ethnic mix Give store managers autonomy to stock merchandise that suits their customers tastes since urban trends change quickly To stay popular Kmart may want to change its image from discounter to reflect premium discounter (Urban discounted Marshall Fields)

Urban Minority Strategy Recommendation

Marketing Key #2 Implement CRM Strategy

Ardita Kalaja Winfield Pollidore

K-Mart CRM
What is CRM? Customer Relationship Management CRM Process Discover Assemble Deliver Does partnership make sense?

K-Mart CRM

K-Mart CRM
How can CRM help K-Mart Refine the Customer Focus (Positioning) Create value for the Customer Enhanced Automated Checkout Personal Online Shopping (EchoMail) Re-Focus the Retailer approach Targeted Incentives vs. Visible Incentives

CRM-Creating value for the Customer

Recognizing the importance of creating unique ways to delight the customers - Self-Service Technology (NCR Self-Checkout, Pre-Cashier Checkout) - Bilingual Capability Meets Needs of More Shoppers

Personal Online Shopping (EchoMail)

Link the Blue Light Special to In Store Incentives Personalization tools help customers with purchases and let merchants cross sell The product keeps track of customers' actions over time, building a broader base of knowledge about the individual and driving proactive marketing, such as prompting new offers at the site or triggering E-mail advertising

K-Mart CRMRecommendations
K-Mart should recognize the importance of creating unique ways to delight the customers Targeted Incentives vs. Visible Incentives Effective ways to personalize Online Shopping. Identify every non-value-added cost from each element of its supply

Marketing Key #3

Improve IT Supply Chain Management

Sanjay Mengi

K Mart IT Incompetence
Five CIOs in seven years (One step forward, another step back) Incompetence SCM technology in retail industry In 2001, $195 million write off in H/W & S/W Real time data not shared with suppliers

Wal Mart IT Facts

Information technology matterswhen it delivers "everyday low prices" Mastery of technology by treating IT as core competency Just-in-time inventories - Best SCM in retail industry Continuous improvement in technology by intelligent IT spending Over 5 Year period invested over $600 million in IT Running technology with a vision

Wal-Mart IT Integration
Real time data and mission-critical information shared with suppliers worldwide Wal-Mart use telecommunications to link directly from its stores to its central computer system and from that system to its supplier's computers. This allows automatic reordering and better coordination Some 3,800 vendors now get daily sales data directly from Wal-Mart stores 1,500 have the same decision and analysis software that Wal-Mart's own

Trend of Weak Supply Chain Management

Order Size

Customer Demand

Distributor Orders

Retailer Orders Production Plan

Time

FINANCIAL SERVICES PARTNERS

RETAIL PARTNERS
CONSUMER CHANNEL MANAGERS BRICKS & MORTAR CATALOGUES INTERNET LAST POINT OF VALUE CREATION CONSUMER DELIVERY FOCUSED PURCHASING IS CORE COMPENTENSE MANAGES THE DELIVERY MOMENT OF TRUTH

CONSUMER DISCRETE PRODUCTS GOODS MANUFACTURING PARTNERS PARTNERS

BRAND / CATEGORY MANAGERS FOR COMMUNITY USUALLY BOTH MANUFACTURER & SERVICE PROVIDER PURCHASING IS CORE COMPETENSE PROVIDES MARKETING MOMENTS OF TRUTH BRAND / CATEGORY EQUITY FOCUSED SPECIFIC PRODUCT MANAGER FOR COMMUNITY PRIMARY MANUFACTURER OF SPECIFIC PRODUCT PRODUCT EQUITY FOCUSED PURCHASING IS INTEGRATED / DRIVEN BY MANUFACTURING DIRECTLY SUPPORT CPG PARTNERS PROVIDES PRODUCT MOMENTS OF TRUTH

PROCESS MANUFACTURING PARTNERS

SPCEIFIC PRODUCT MANAGER FOR COMMUNITY PRIMARY MANUFACTURER OF SPECIFIC PRODUCT PRODUCT EQUITY FOCUSED PURCHASING IS INTEGRATED / DRIVEN BY MANUFACTURING DIRECTLY SUPPORTS DISCRETE PARTNERS PROVIDES SUPPLY MOMENTS OF TRUTH

RAW MATERIALS

CONSUMERS

TRANSPORTATION / LOGISTICS PARTNERS

Local and Global Optimization in Supply Chain

Push-Pull Supply Chains

PUSH STRATEGY

PULL STRATEGY

Push-Pull Boundary

IT Recommendations
Involve suppliers during system development and enhancement Share On-line data with suppliers Engage best CIO in retail industry and sign long term contract Adopt offshore model to reduce substantial IT cost

Conclusion
Restate Recommendations Urban Strategy Introduce clothing line which continue to appeal the youth Locate stores in newer strip malls CRM Focus on putting customers first Make shopping easier on line and in the stores IT Integration More involvement with suppliers Use a electronic system to replenish stock