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THE MORNING BUZZ: Blue Light Blues

17 Feb, 2002 By: Thomas K. Arnold

You've got to feel sorry for Kmart. The venerable mass merchant, long a key player in video sales, is in the throes of bankruptcy, struggling to keep its shelves stocked with core products in what I believe is an uphill fight to retain customer loyalty.

The once-mighty chain, which just before the holidays was crowing about its elaborate video promotions for The Grinch and other hot video titles, is reduced to issuing press releases about any positive tidbit it can come up with. Just a few days ago, the chain issued a release trumpeting the support it is getting from business and community leaders -- including the free use of 10 billboards in Detroit.

I found that last press missive a bittersweet one. It's great to see people rallying around Kmart, but it's also sad to see the chain relying on free billboards to promote itself.

I sincerely hope I'm wrong, but I don't see Kmart surviving this mess. In many ways, Kmart has failed to keep up with the times, and in the process the chain has lost its niche.

Wal-Mart has become the place to go if all you want is low prices on a vast selection of goods. Target has positioned itself as a mini-Wal-Mart for yuppies, a discount convenience store, if you will, for an overall higher grade of goods.

Kmart has become stuck in the middle and the sad thing for the chain is that there really is no middle.

When I was growing up, Kmart was the low price leader, period. The chain should have remained there, or completely repositioned itself, as Target did, when it became clear Wal-mart would claim the cheapo prize.

Instead, Kmart tried a mish-mash of the two. Its premium brands, like Martha Stewart, were too far and too few to really change the store's character. Meanwhile, Kmart played the pricing game all wrong. Instead of keeping a careful eye on, say, a Wal-Mart moving into its business area and adjusting prices on key items accordingly, the chain tried to remain the low-cost leader in everything -- something it couldn't, and really didn't need to, do.

Compounding this image problem was what I call the "Can't Let Go Syndrome" -- maintaining underperforming stores long after common sense would have dictated closure -- and shoddy merchandising.

Granted, none of the mass merchants are known for their savvy merchandising, but at least Wal-Mart and Target appear to be trying. A typical Kmart store still reeks of confusion and, in today's fast-paced in-and-out-society, structure and order at retail is essential.

As I stated previously, I sincerely hope Kmart weathers this crisis and emerges stronger, better and more viable. But it's going to take a lot to turn this creaky old ship around.

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