Kmart Bounces Back to Hold Its Own Against Bigger Competitors in Tough Economy

In a tough economy, price and value mean a lot to the customer, but Kmart has been weathering the economic downturn by providing even more incentives to its shoppers. The focus on building up brand names and offering convenient innovative purchasing plans have been paying off handsomely, according to the company.

“We have added a lot of new great brands to the store and flexible payment options like layaway, buy online/pick up in store,” Mark Snyder, Kmart’s chief marketing officer, said, adding that this has “really added to the value that we give to our customers.”

Though second-quarter sales show a slight decline of 1.4 percent in overall sales, throughout the recession, when many retailers saw their sales nosedive, Kmark at times experienced positive comparative sales growth from the previous quarters.

Though fierce competition lies ahead, especially against its larger competitors Target and Walmart, which have also navigated through the recession well, the picture for Kmart looks promising after years of struggling.

Kmart Corp. filed for bankruptcy in 2002 and then merged with Sears in 2005. Kmart is now a wholly owned subsidiary of Sears Holdings Corporation. It was one of the largest retailers to seek bankruptcy at the time. Only a third of its stores survived and a quarter of its employees remained.

"When Kmart bought Sears, we thought it really didn’t seem like it was going to fly,” says analyst Charles Brown with CB3 Financial Group. However, Brown attributes the company's turnaround in large part to pushing it own brands and Sears’ well-known lines, such as Kenmore, Craftsman and Lands’ End.

Amid the recession, Kmart has since introduced new lines of clothing, some designed to appeal to blacks and Latinos, who make up a third of the retailer’s consumers. Snyder says new exclusive brands, such as teen star Selena Gomez’s apparel line, Dream Out Look, are selling “really, really well.”

The introduction of unique payment options also drive sales these days, according to Brown. “One of the brilliant moves that Kmart has done is to partnership with Facebook in e-gift certificates, so you can actually go onto their site and send a gift certificate to your friend’s Facebook site," he said.

Kmart now offers its traditional layaway plan online, giving customers additional flexibility as they try to stretch their dollars. Shoppers make a 10 percent down payment, pay off the balance biweekly and pick up their items just in time for Christmas or Hanukkah.

Snyder calls the layaway option Kmart’s hallmark service: “Our customer doesn’t have to run up a lot of credit card debt and she is very happy when she takes her purchases home – they are completely paid for.” In the grips of recession, Kmart added 3 million layaway customers from 2008 to 2009 alone.

When asked about Kmart’s reputation for rundown stores with cluttered aisles and dirty floors, Snyder says stores are now clean and clutter-free with better layouts.

In stores today, he said, customers will find “style, sensibility and increased quality of merchandise.”

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