The penalty that companies pay when they overlook the power and value of strategic branding is generally fatal, particularly when facing knowledgeable competitors. Attention Kmart Shoppers! The bankrupt discounter is ending its 40-year presence in Houston, closing all 17 area stores and eliminating countless jobs as the country wide chain sheds low-performing stores. The giant retailer, formerly one of the best known within the U.S., announced this past week it could shutter another 326 stores and lay off 37,000 workers nationwide. It is a classic example of a company failing to know the critical requirement for competitive positioning in a highly competitive economy.
Kmart had the pole position. Kmart originally resonated using the marketplace. It absolutely was unique in the own new retail category. Which had been a positive starting point in a two-step process for positioning a brand. However they ignored the crucial step: They failed to identify themselves in the industry with the category they created. How if they have performed that? Again, two steps: Craft a thorough and focused communications strategy built round the category concept, then manage it diligently year-in and year-out.
Oh, yeah: Don’t forget to boost the bar to potential competitors by requiring which they spend millions on advertising just to go into the game. Promote the category instead of compete with 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 drive sales growth in a new category. 50% of the million dollar category is superior to 100% of any $500,000 category.
The Blue Light Special Questions for today: How can a business selling goods for under their competitors go bankrupt for insufficient sales? Don’t buyers ferret out affordable prices whilst 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 be enough. How wrong these people were.
Retail sales success is caused by three intertwined factors: Product. Price. Location. Prices must interest buyers. Products has to be desirable. And store locations must be convenient. Kmart succeeded in many cases on all three fronts.
The Houston Chronicle (January 15, 2003) reported how Kmart customer Bob Franchville purchased a bath set from your Westheimer Kmart store for $9.95. “I was at Home Depot earlier, plus it cost $60 there,” he said. 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 similar product.
Less expensive costs, insufficient. The correct answer is that both Target and Walmart have built more powerful brands than Kmart. Neither have less expensive costs than Kmart. And yet, despite having the best prices, Kmart opening hours will not be the most preferred retailer among shoppers. Consider it. Most companies believe they are able to gain a competitive advantage by giving goods for less money and Kmart represents kjgvei startling, real-life case past of how wrong that strategy may be.
At this particular eleventh hour, the Kmart management’s prayer is to improve cash flow, not by increasing sales but by reducing costs. If the were a game of chess, Kmart is hearing the word “Checkmate!” from its competitors. Whenever a company competes with no 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 some legion of suppliers, manufacturers and related industries. And how is it possible to disregard the devastation this caused with a multitude of shareholders and employees who had vested their trust in Kmart’s leadership?
The course is now forever changed. Even though Kmart emerges from bankruptcy, Target and Walmart will still be there, stronger than ever before. Their positions as category leaders are firmly established inside the minds of the purchasing public. If Kmart’s answer to 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 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.