Kmart – Keys to Success Presented by: Robert Shaw Yasmin Anandwala Eric Findley Ardita Kalaja Winfield Pollidore Sanjay

1. Kmart – Keys to Success Presented by: Robert ShawYasmin AnandwalaEric FindleyArdita KalajaWinfield PollidoreSanjay Mengi

2. Kmart - Introduction Yasmin Anandwala

3. Kmart – Keys to Success • Industrial Analysis • Kmart Profile • SWOT (Strength, Weakness, Opportunity, and Threat) • Kmart versus Wal-Mart • Survey • 3 Marketing Keys to Success • Leverage Urban Minority Market Strengths • Implement CRM Strategy • Improve Supply Chain Management - IT • Conclusion

4. Kmart - Analysis Robert Shaw Yasmin Anandwala

5. Kmart’s Strength • Clothing lines • Exclusive Joe Boxer product line • Route 66 • Carry a variety of products at a low cost • Martha Stewarts products • Home Goods • Store Locations • Urban areas • Stores located in easily accessible areas • Market in the Urban areas effectively • Able to get a large multi-cultural consumer group • Offered lay away plan for people who need to pay on installments

6. Kmart’s Weakness • Chapter 11 Bankruptcy Protection • Low marketing budget • Many low profit suburban stores • Ineffective Supply Chain Management • Negative publicity • Marketed the suburbs like the urban areas • Did not change the image of the company as the demands of the consumers changed • Did not offer variety that appealed to the middle class

7. Kmart’s Opportunities • Re-position store • Adopt Urban Strategy • Integrate Supply Chain Management • Sell to Carrefour (Paris based retailer) • Need to change the negative image of K-Mart • Improve the product line carried to keep the middle class • Design the store to be more organized and attractive

8. Kmart’s Threats • Wal-mart and Target • Increasing Market Share • Having to liquidate company • Suppliers raising prices • Profits declining • Martha Stewart getting bad press • Urban areas are becoming more suburban like • Youth’s rejects K-Marts Urban strategy

9. K-Mart Opportunity Threat Matrix Probability of Occurrence • 1 – Credit can be down rated • 2 – K-mart getting bought • 3 – Supplier raise costs • 4 – Martha Stewart pulls out

10. Market Share Analysis

11. Kmart opened 1962 (Originally Kressege) In 1987, 2,200 outlets Market share 34% In 1994, sales $34 billion Wal-Mart opened 1962 In 1987, 980 outlets Market share 22% In 1994 $82 billion in sales Kmart vs Wal-Mart

12. Retail Preference Survey • Selection Criteria • 15 Female and 5 Male • Wayne County area • Average age over 35 • All were frequent shoppers

13. Survey Results • 80% people preferred Kmart • Favorable location • 100% visited store in last six months • 50% would not care if Kmart went out of business • 100% never visited web site

14. Marketing Key #1Leverage Urban Minority Market Strengths Eric Findley

15. Facts • Kmart strongest locations are it’s urban clusters (away from Target and Wal-Mart) where Kmart is uniquely popular among (multicultural population) African Americans and Hispanic customers • Multicultural consumers represent 39% of the nearly 30 million people who shop at Kmart each week. • African Americans and Hispanics alone account for 32% of Kmart's shoppers.

16. Kmart Market Profile by Race

17. Demographic Trends • Hispanic population going to increase at a faster rate than the rest of the nation • Multicultural consumers control $1.2 trillion in joint-purchasing power at a market segment growth rate seven times faster than the general population • Urban African-American community's $560 billion in buying power • Urban youth consumer has become big business because of their buying power ($300 billion) and influence over the mainstream consumer market

18. Market Trends and Attitudes • Shoppers are increasingly bypassing its aging mall stores to shop at newer urban and suburban strip malls • Emerging trend of retail development in inner-city districts around the United States

19. Market Trends and Attitudes • Urban youths: • Tend to be individualistic, they don’t respond to anything outside of their reality • Don’t care about the status quo • Urban youth consumers: tend to be trend and style conscious

20. Market Trends and Attitudes • "What works in urban cities, works in suburbia, but not vice versa," • Generation X & Y influenced by urban culture (70% of hip-hop music sold to whites living in suburbs) and fashion that characterizes its identity • Minority groups last year accounted for 27.3 percent of the suburban population in the 102 largest metropolitan areas

21. Urban Minority Strategy Recommendation • Kmart develop niche marketing strategy to concentrate on Urban and Minority Gen X and Gen Y Market • Make Kmart the “hottest place to shop” & “trendy” place to shop • Eventually strategy will penetrate Suburbia • Partner with rap/music artist and professional sport players to endorse and promote shopping at Kmart • Youth market responds well to role models and celebrities (Master P and Converse) • By capturing the urban market you can capture the mainstream market

22. Popular Apparel Urban Brands • Kmart would do best to understand and promote brands similar to those represented by Urban Minorities • Popular Urban Brands • Phat Farm • FUBU • Rocawear • Ecko • Sean John

23. Other Popular Apparel Urban Brands • Other Popular Brands • Levis • Nike • Kangol • Kenneth Cole • Rockport

24. Urban Minority Strategy Recommendation • In understanding and targeting urban minorities: • Kmart needs to tailor it’s products to each community’s ethnic mix • Give store managers autonomy to stock merchandise that suits their customer’s tastes since urban trends change quickly • To stay popular Kmart may want to change it’s image from discounter to reflect premium discounter (Urban discounted Marshall Fields)

25. Marketing Key #2Implement CRM Strategy Ardita Kalaja Winfield Pollidore

26. K-Mart CRM • What is CRM? • Customer Relationship Management • CRM Process • Discover • Assemble • Deliver • Does partnership make sense?

27. K-Mart CRM

28. K-Mart CRM • How can CRM help K-Mart • Refine the Customer Focus (Positioning) • Create value for the Customer • Enhanced Automated Checkout • Personal Online Shopping (EchoMail) • Re-Focus the Retailer approach • Targeted Incentives vs. Visible Incentives

29. CRM-Creating value for the Customer • Recognizing the importance of creating unique ways to delight the customers - Self-Service Technology (NCR Self-Checkout, Pre-Cashier Checkout) - Bilingual Capability Meets Needs of More Shoppers

30. Personal Online Shopping (EchoMail) • Link the Blue Light Special to In Store Incentives • Personalization tools help customers with purchases and let merchants cross sell • The product keeps track of customers' actions over time, building a broader base of knowledge about the individual and driving proactive marketing, such as prompting new offers at the site or triggering E-mail advertising

31. K-Mart CRM-Recommendations • K-Mart should recognize the importance of creating unique ways to delight the customers • Targeted Incentives vs. Visible Incentives • Effective ways to personalize Online Shopping. • Identify every non-value-added cost from each element of its supply

32. Marketing Key #3Improve IT Supply Chain Management Sanjay Mengi

33. K Mart – IT Incompetence • Five CIOs in seven years • (One step forward, another step back) • Incompetence SCM technology in retail industry • In 2001, $195 million write off in H/W & S/W • Real time data not shared with suppliers

34. Wal Mart – IT Facts • Information technology matters—when it delivers "everyday low prices" • Mastery of technology by treating IT as core competency • Just-in-time inventories - Best SCM in retail industry • Continuous improvement in technology by intelligent IT spending • Over 5 Year period invested over $600 million in IT • Running technology with a vision

35. Wal-Mart IT Integration • Real time data and mission-critical information shared with suppliers worldwide • Wal-Mart use telecommunications to link directly from its stores to its central computer system and from that system to its supplier's computers. This allows automatic reordering and better coordination • Some 3,800 vendors now get daily sales data directly from Wal-Mart stores • 1,500 have the same decision and analysis software that Wal-Mart's own

36. Retailer Orders Distributor Orders Production Plan Trend of Weak Supply Chain Management Customer Demand Order Size Time

37. FINANCIAL SERVICES PARTNERS RETAIL PARTNERS CONSUMER CHANNEL MANAGERS BRICKS & MORTAR CATALOGUES INTERNET LAST POINT OF VALUE CREATION CONSUMER DELIVERY FOCUSED PURCHASING IS CORE COMPENTENSE MANAGES THE DELIVERY MOMENT OF TRUTH CONSUMER PRODUCTS GOODS PARTNERS BRAND / CATEGORY MANAGERS FOR COMMUNITY USUALLY BOTH MANUFACTURER & SERVICE PROVIDER PURCHASING IS CORE COMPETENSE PROVIDES MARKETING MOMENTS OF TRUTH BRAND / CATEGORY EQUITY FOCUSED DISCRETE MANUFACTURING PARTNERS SPECIFIC PRODUCT MANAGER FOR COMMUNITY PRIMARY MANUFACTURER OF SPECIFIC PRODUCT PRODUCT EQUITY FOCUSED PURCHASING IS INTEGRATED / DRIVEN BY MANUFACTURING DIRECTLY SUPPORT CPG PARTNERS PROVIDES PRODUCT MOMENTS OF TRUTH PROCESS MANUFACTURING PARTNERS SPCEIFIC PRODUCT MANAGER FOR COMMUNITY PRIMARY MANUFACTURER OF SPECIFIC PRODUCT PRODUCT EQUITY FOCUSED PURCHASING IS INTEGRATED / DRIVEN BY MANUFACTURING DIRECTLY SUPPORTS DISCRETE PARTNERS PROVIDES SUPPLY MOMENTS OF TRUTH RAW MATERIALS CONSUMERS TRANSPORTATION / LOGISTICS PARTNERS Local and Global Optimization in Supply Chain

38. Push-Pull Supply Chains PUSH STRATEGY PULL STRATEGY Push-Pull Boundary

39. IT Recommendations • Involve suppliers during system development and enhancement • Share On-line data with suppliers • Engage best CIO in retail industry and sign long term contract • Adopt offshore model to reduce substantial IT cost

40. Conclusion • Restate Recommendations • Urban Strategy • Introduce clothing line which continue to appeal the youth • Locate stores in newer strip malls • CRM • Focus on putting customer’s first • Make shopping easier on line and in the stores • IT Integration • More involvement with suppliers • Use a electronic system to replenish stock