Kmart vs Target – Sibling Rivalry or Competition Amongst Friends??

Earlier this calendar year (2016), Coles Group appointed Guy Russo (current CEO of Kmart) to be the joint CEO of Kmart and Target.  What a great way to combine efficiencies and streamline processes for each brand one would initially assume.  But really?  Two store brands within the Coles Group with what appears on the outset, to be very similar in its offerings to consumers cannot jointly prosper in the current market, can they?

What makes the task for Guy Russo even more challenging to say the least, is the concerning financial performance of his newly acquired store brand Target – only marginally turning around 4 years of profit losses in 2015.[1]  Along with facing competition from its sister company, Kmart and retail players (such as Big W), Target is continuing to ‘save face’ with shareholders in the wake of scandalous behaviours relating to supplier rebates.[2]

Let’s briefly rewind and examination the situation facing Kmart post takeover of the Coles Group by Westfarmers, circa 2006/2007.  Kmart was a chain-store brand promoting everything to everyone, resulting in declining sales and negative profit results.  In 2008, Kmart appointed Guy Russo as CEO who described Kmart as “trying to be The Reject Shop as well as Harrods”.[3]  He began analysing the current business model and determined to implement a 3 step staged plan – discovery, renewal, growth.

We can apply Russo’s plan to our learning of STP (segmentation, targeting and positioning).  Firstly, the discovery was derived from collaborative research by Forethought Research and BWM Dentsu.  Extensive analysis and study was completed on customer behaviour, testing consumer stimuli and cogitative reaction to purchasing intentions and expectations.  This customer-based assessment identified core segregation groups to target and ultimately lead to a fundamental change in Kmart’s offering of discounted prices on a huge range of products to everyday low prices.  With more consumers visiting stores and strengthening its brand identity, Kmart continued gaining a greater understanding of its market position which subsequently facilitated greater manipulation of the 4P’s – product, price, place, promotion.  Product lines were reduced; supplier relationships consolidated; service delivery improved and store layouts were designed more strategically for optimum customer satisfaction.[4]

In conjunction with renewed business operations and to further advance itself in the competitive retail consumer market, Kmart embarked on a range of promotional activities aimed at its target audience.  The launch of the “1000 mum’s” advertising campaign in 2011 demonstrated Kmart’s initial success of its everyday low prices.  It also provided key inputs to the attributes of its target customers and enabled further promotional planning to grow and magnify its market position.  Later in 2013, Kmart launch another brilliant promotional campaign – “Bom Bom”.  The campaign provided linkage between value, quality and price – affordability and desirability simultaneously.  Listen to the commercial link below – Who doesn’t bop along to the upbeat tempo music and enjoy the emotive side of colourful graphics and seeing young children happy???[5]

Back to the current period and it is clear that Kmart has managed to achieve success on multi-levels.  Firstly from a B2C micro level, whereby individual customers are comfortable in shopping within a store offering quality products at everyday low prices and increasing its brand reputation and loyalty amongst its audiences.  And secondly from a business macro level, cost effectiveness and inventory management improvements have seen financial results improve, including sales revenues increases and profitability rise by 10.4% in FY15.[6]

So, what will Guy Russo’s approach to improving the performance of Target be?  Will it follow the Kmart model in undergoing a vast amount of research to understand customer needs and better strategically segment its branding to enable more effective targeting of promotional activities?  Surely it doesn’t seem feasible for both brands to come out of top?  How will each manage to maintain a competitive edge over one another?  Applying the principles of segmentation should allow marketeers to identify and distinguish the different target segmentation audience – as long as each is able to market a tailored strategy of the strengths offered to its customers.

Russo is quite optimistic about the future of both Kmart and Target operating harmoniously side by side. Recently he stated “I do think they can survive together. It’s about commercials first, giving back a bit more to shareholders, then getting the dynamics right with the model”.[7]  I guess time will only tell to determine the outcome of Target.

Author: Rhonda Gailey

Student ID: 97121127

 

[1] http://www.smh.com.au/business/retail/kmart-posts-standout-performance-while-target-wins-most-improved-20150820-gj3uyb.html

[2] http://www.afr.com/brand/chanticleer/wesfarmers-investiges-how-target-used-suppliers-to-boost-profit-20160330-gnuale

[3] http://advertisers.careerone.com.au/hr/hr-best-practices/workforce-management/improving-employee-relations/leadership-turned-kmart-around-russo.aspx

[4] https://www.business.uq.edu.au/sites/default/files/events/files/ Repositioning Kmart: This time with feeling john-roberts-abstract.pdf

[5] http://www.bwmdentsu.com/2015/04/kmart/

[6] http://www.wesfarmers.com.au/docs/default-source/results-presentations/2016/2016-half-year-results-presentation.pdf?sfvrsn=0

[7] http://www.cmo.com.au/article/596258/kmart-ceo-details-priorities-turn-target-around/

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