The penalty that companies pay when they overlook the power and worth of strategic branding is generally fatal, especially when facing experienced 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 one of the better known within the United states, announced this past week it could shutter another 326 stores and lay off 37,000 workers nationwide. It is a classic example of an organization failing to comprehend the critical necessity for competitive positioning in a highly competitive economic environment.
Kmart had the pole position. Kmart originally resonated with all the marketplace. It absolutely was unique in their own new retail category. That was a positive initial step in a two-step process for positioning a brand name. However they ignored the crucial step: They failed to identify themselves in the marketplace using the category they created. How should they have performed that? Again, two steps: Craft an extensive and focused communications strategy built across the category concept, and after that manage it diligently year-in and year-out.
Oh, yeah: Don’t forget to boost the bar to potential competitors by requiring that they spend millions on advertising just to go into this game. Promote the category as opposed to compete with the competition. Unsophisticated management becomes distracted once they see their 100% market share decline to 90%, then 80%, etc., as competitors emerge, but competitors are necessary to get sales growth in a new category. 50% of the million dollar category is better than 100% of a $500,000 category.
The Blue Light Special Questions for today: Just how can an organization selling goods for less than their competitors go bankrupt for lack of sales? Don’t buyers ferret out lower prices while keeping a business alive? Not if their brand sinks.
Category competition increased. It’s instructive to compare and contrast Kmart with Target and Walmart. Kmart’s ultimate failure in the industry was virtually guaranteed by letting Target and Walmart to identify themselves successfully with Kmart’s low-cost idea of retailing. Perhaps Kmart expected their affordable prices to get enough. How wrong these were.
Retail sales success is a result of three intertwined factors: Product. Price. Location. Prices must attract buyers. Products should be desirable. And store locations has to be convenient. Kmart succeeded in many cases on all 3 fronts.
The Houston Chronicle (January 15, 2003) reported how Kmart customer Bob Franchville got a new bath set from the Westheimer Kmart store for $9.95. “I was in your own home Depot earlier, and it cost $60 there,” he explained. Kmart’s price was a small part of a competitor’s as well as the store’s location is prime. But Home Depot was getting 6-times the purchase price for the very same product.
Affordable prices, inadequate. The answer is that both Target and Walmart have built stronger brands than Kmart. Neither have lower prices than Kmart. And yet, even with the best prices, what time does Kmart open today will not be the preferred retailer among shoppers. Think about it. Most companies believe they are able to obtain a competitive advantage by providing goods on the cheap and Kmart represents kjgvei startling, real-life case background of how wrong that strategy can be.
Around this eleventh hour, the Kmart management’s prayer would be to improve cash flow, not by increasing sales but by reduction of costs. If the were a game of chess, Kmart is hearing the term “Checkmate!” looking at the competitors. Each time a company competes without having a preferred brand, the only real move left would be to reduce costs, close stores and abandon customers and markets. Where does which lead? The incredibly tragic ripple effect extends, unfortunately, to a legion of suppliers, manufacturers and related industries. And just how is it possible to neglect the devastation this caused with thousands upon thousands of shareholders and employees who had vested their trust in Kmart’s leadership?
The category has become forever changed. Even if Kmart emerges from bankruptcy, Target and Walmart is still there, stronger than ever. Their positions as category leaders are firmly established in the minds in the purchasing public. If Kmart’s means to fix tomorrow’s concern is to close more stores and surrender both customers and competitive turf, it won’t be well before Kmart’s Blue Light is turned 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.