The penalty that businesses pay when they overlook the power and worth of strategic branding is generally fatal, specially when facing experienced competitors. Attention Kmart Shoppers! The bankrupt discounter is ending its 40-year presence in Houston, closing all 17 area stores and removing hundreds of jobs as the nationwide chain sheds low-performing stores. The giant retailer, formerly one of the better known in the United states, announced this past week it would shutter another 326 stores and lay off 37,000 workers nationwide. It is a classic demonstration of a business failing to comprehend the critical necessity for competitive positioning in a highly competitive economic environment.
Kmart had the pole position. Kmart originally resonated using the marketplace. It absolutely was unique in their own new retail category. That was a positive starting point in a two-step process for positioning a brand name. Nevertheless they ignored the crucial step: They did not identify themselves in the marketplace with all the category they created. How should they have done that? Again, two steps: Craft a comprehensive and focused communications strategy built around the category concept, and then 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 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 get 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 an organization selling goods for less than their competitors go bankrupt for lack of sales? Don’t buyers ferret out affordable prices while keeping a business alive? Not if their brand sinks.
Category competition increased. It’s instructive to compare Kmart with Target and Walmart. Kmart’s ultimate failure in the marketplace was virtually guaranteed by letting Target and Walmart to identify themselves successfully with Kmart’s low-cost idea of retailing. Perhaps Kmart expected their less expensive costs to be enough. How wrong these people were.
Retail sales success is because of three intertwined factors: Product. Price. Location. Prices must appeal to buyers. Products has to be desirable. And store locations should be convenient. Kmart succeeded oftentimes 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 used to be in your own home Depot earlier, plus it cost $60 there,” he said. Kmart’s price was a small fraction of a competitor’s and the store’s location is prime. But Home Depot was getting 6-times the cost for the very same product.
Lower prices, inadequate. The correct answer is that both Target and Walmart have built more powerful brands than Kmart. Neither have lower prices than Kmart. And yet, despite the cheapest prices, Kmart hours will not be the favorite retailer among shoppers. Think it over. Most companies believe they could acquire a competitive advantage by giving goods at a lower price and Kmart represents kjgvei startling, real-life case background of how wrong that strategy may be.
Around this 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 title of chess, Kmart is hearing the phrase “Checkmate!” from its competitors. When a company competes without a preferred brand, the only 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 neglect the devastation this caused with thousands upon thousands of shareholders and employees who had vested their trust in Kmart’s leadership?
The category is currently 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 in the purchasing public. If Kmart’s means to fix tomorrow’s concern is to seal more stores and surrender both customers and competitive turf, it won’t be long 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.