The penalty that businesses pay when they overlook the power and value of strategic branding is usually fatal, especially when facing savvy competitors. Attention Kmart Shoppers! The bankrupt discounter is ending its 40-year presence in Houston, closing all 17 area stores and eliminating hundreds of jobs as the nationwide chain sheds low-performing stores. The giant retailer, formerly among the best known within the U.S., announced this past week it would shutter another 326 stores and lay off 37,000 workers nationwide. It is a classic demonstration of an organization failing to comprehend the critical need for competitive positioning in a highly competitive economic environment.
Kmart had the pole position. Kmart originally resonated with the marketplace. It had been unique in the own new retail category. Which was a good initial step in a two-step process for positioning a brand name. Nevertheless they ignored the crucial step: They did not identify themselves in the market using the category they created. How should they did that? Again, two steps: Craft an extensive and focused communications strategy built across the category concept, then manage it diligently year-in and year-out.
Oh, yeah: Don’t forget to raise the bar to potential competitors by requiring which they spend millions on advertising just to go into the game. Promote the category as opposed to contest with your competition. Unsophisticated management becomes distracted when they see their 100% market share decline to 90%, then 80%, etc., as competitors emerge, but competitors are necessary to drive sales growth in a new category. 50% of any million dollar category is preferable to 100% of a $500,000 category.
The Blue Light Special Questions for today: How can a business selling goods cheaper than their competitors go bankrupt for lack of sales? Don’t buyers ferret out less expensive costs and keep a business alive? Not if their brand sinks.
Category competition increased. It’s instructive to evaluate Kmart with Target and Walmart. Kmart’s ultimate failure in the industry was virtually guaranteed by permitting Target and Walmart to distinguish themselves successfully with Kmart’s low-cost idea of retailing. Perhaps Kmart expected their lower prices to become enough. How wrong they were.
Retail sales success is because of three intertwined factors: Product. Price. Location. Prices must attract buyers. Products must be desirable. And store locations should be convenient. Kmart succeeded most of the time on all three fronts.
The Houston Chronicle (January 15, 2003) reported how Kmart customer Bob Franchville bought a bath set through the Westheimer Kmart store for $9.95. “I used to be in your own home Depot earlier, and it also cost $60 there,” he stated. Kmart’s price was a fraction of a competitor’s and the store’s location is prime. But Home Depot was getting 6-times the price for the very same product.
Less expensive costs, not enough. The answer is that both Target and Walmart have built more powerful brands than Kmart. Neither have less expensive costs than Kmart. But, despite having the cheapest prices, https://www.storeholidayhours.org/kmart-holiday-hours-open-closed-today/ is not the preferred retailer among shoppers. Think it over. Many businesses believe they can obtain a competitive advantage by offering goods at a lower price and Kmart represents kjgvei startling, real-life case background of how wrong that strategy can be.
At this particular eleventh hour, the Kmart management’s prayer is to improve cashflow, not by increasing sales but by reduction of costs. If this type of were a game of chess, Kmart is hearing the word “Checkmate!” looking at the competitors. When a company competes without having a preferred brand, the only move left would be to reduce costs, close stores and abandon customers and markets. Where does that lead? The incredibly tragic ripple effect extends, unfortunately, to a legion of suppliers, manufacturers and related industries. And just how is it possible to overlook the devastation this caused with thousands upon thousands of shareholders and employees who had vested their trust in Kmart’s leadership?
The course has become forever changed. Even though Kmart emerges from bankruptcy, Target and Walmart is still there, stronger than ever. Their positions as category leaders are firmly established in the minds from the purchasing public. If Kmart’s solution to tomorrow’s problem is to seal more stores and surrender both customers and competitive turf, it won’t be a long time before Kmart’s Blue Light is switched off. Forever. Kmart abdicated the throne they built. Competitors could not have access to overcome Kmart’s leadership position if Kmart had not given it away.