It was unconceivable to think Kmart could ever be thought of as chic, cool or hip around eight years ago but today Kmart is being looked upon as suburban style gurus. In 2008 Kmart was languishing behind big and market competitor brands like Big W and Target, and had a turnover of $4 billion dollars per year but still the company was making zero profit and was not able to overcome the breakeven point. The company was hanging on the edge of bankruptcy for years, that’s when Australia’s ex-McDonald chief Guy Russo was given the responsibility to revive the brand, and results were miraculous. Over the years Kmart survived like a Hero from zero profit to $289 million EBIT by the end of year 2014.
What changed over the years?
When Guy Russo took over, the business model of Kmart was bolted and there was no clear strategy to follow, confusing price structure and too many products. As managing director of Kmart Guy Russo had a target of 30days to start turning the company around, his reinvention strategy was as swift as it was surprising. In matter of years Kmart was able to shrug off bankruptcy and become Australia’s most profitable retail business by following Russo’s cut-price chic concept and brand reconstruction. With the winning combination strategy of low everyday prices and on-trend products the rebranded Kmart has been strongly embraced as prominent fashion and homewares retailer in Australia.
One of the prime marker of Kmart’s current success has been social media. There is an explosion of social media buzz since 2014 around the brand. The “Cult of Kmart” has been taken over by countless shares and post of Australian women on Instagram and Facebook regarding their personal styles and purchases with other like-minded Kmart followers.
Pricing Model of Kmart
When Guy Russo took over back in 2008 his priority was to eliminate an ineffective pricing model that was followed form long time, which attracted customers with discounts but required Kmart to sell their items below cost. Hence, moving away from in-store sales and discounts Kmart shifted to permanent low-pricing model. The new strategy worked wonders as by the year 2013 Kmart was selling around 150 million more products per year as compare to back in 2008. A press release on website of Kmart media centre (Kmart 2015) announced further price reductions across two hundred product lines, with Guy Russo managing director of Kmart reaffirming “We have always been honest with customers about our strategy – and we will continue to do so. We promised not to play games with customers, and instead offer simple, honest pricing”.
Adopting low-price strategy over discount was also a result of Kmart’s shame and pride research in May 2011. The aim was to make a campaign which will develop a feeling of pride in customers instead of burden of shame. The outcomes was the campaign “1000 Mums”, where one of the suburban Melbourne store of Kmart invited around 1000 “real Mums” to make a guess of few everyday products as shown in the video below, which than became the rebranding television campaign for Kmart.
It is never too late to reinvent your brand- is one of the important lesson learnt form Kmart’s example and story. This also reflects that pricing strategy is more than just giving discounts, right pricing model will allow company to make profit even when the company is selling their products with low price tags.
Cut-price chic: Six strategies that made Kmart cool 2015, Creative Revolution, retrieved 26 April 2016, <http://www.creativerevolution.com.au/mi/cut-price-chic-six-strategies-made-kmart-cool>.
How Kmart beat the odds on everyday low prices 2014, Business Think, retrieved 27 April 2016, <https://www.businessthink.unsw.edu.au/Pages/How-Kmart-beat-the-odds-on-everyday-low-prices.aspx>.
Kmart 2015, Kmart Remains Committed To Saving Aussies Money, media release, 20 February, Kmart Media Centre, retrieved 28 April 2016, <http://mediacentre.kmart.com.au/LatestNews.aspx?udt_385_param_detail=149>