The penalty that companies pay when they ignore the power and worth of strategic branding is usually fatal, particularly when facing experienced competitors. Attention Kmart Shoppers! The bankrupt discounter is ending its 40-year presence in Houston, closing all 17 area stores and eliminating numerous jobs as the nationwide chain sheds low-performing stores. The giant retailer, formerly among the best known within the United states, announced this past week it could shutter another 326 stores and lay off 37,000 workers nationwide. It is a classic example of a business failing to know the critical necessity for competitive positioning in a highly competitive economy.
Kmart had the pole position. Kmart originally resonated using the marketplace. It was unique in its own new retail category. That was a good initial step in a two-step process for positioning a brand. However they ignored the crucial step: They failed to identify themselves in the industry using the category they created. How if they have done that? Again, two steps: Craft a comprehensive and focused communications strategy built across the category concept, then manage it diligently year-in and year-out.
Oh, yeah: Don’t forget to increase the bar to potential competitors by requiring that they spend millions on advertising just to get in the video game. Promote the category instead of contend with the competition. Unsophisticated management becomes distracted whenever they see their 100% market share decline to 90%, then 80%, etc., as competitors emerge, but competitors are essential to drive sales growth in a new category. 50% of the million dollar category is better than 100% of any $500,000 category.
The Blue Light Special Questions for today: Just how can a business selling goods cheaper than their competition go bankrupt for insufficient sales? Don’t buyers ferret out less expensive costs while keeping an organization 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 market was virtually guaranteed by permitting Target and Walmart to recognize themselves successfully with Kmart’s low-cost idea of retailing. Perhaps Kmart expected their affordable prices to get enough. How wrong these were.
Retail sales success is caused by three intertwined factors: Product. Price. Location. Prices must attract buyers. Products should be desirable. And store locations has to be convenient. Kmart succeeded in many cases on all 3 fronts.
The Houston Chronicle (January 15, 2003) reported how Kmart customer Bob Franchville bought a bath set from your Westheimer Kmart store for $9.95. “I used to be in the home Depot earlier, and it cost $60 there,” he stated. Kmart’s price was a fraction of a competitor’s and the store’s location is prime. But Home Depot was getting 6-times the purchase price for the very same product.
Less expensive costs, insufficient. The answer is that both Target and Walmart have built stronger brands than Kmart. Neither have affordable prices than Kmart. Nevertheless, even with the best prices, what time does Kmart close today is not really the most preferred retailer among shoppers. Think it over. A lot of companies believe they are able to gain a competitive advantage by giving goods at a lower price and Kmart represents kjgvei startling, real-life case past of how wrong that strategy could be.
Around this eleventh hour, the Kmart management’s prayer is always 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 the competitors. Each time a company competes without a preferred brand, the sole 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 can you really neglect the devastation this caused with a multitude of shareholders and employees who had vested their trust in Kmart’s leadership?
The course has become forever changed. Even when Kmart emerges from bankruptcy, Target and Walmart is still there, stronger than ever before. Their positions as category leaders are firmly established inside the minds in the purchasing public. If Kmart’s solution to tomorrow’s problem is to seal more stores and surrender both customers and competitive turf, it won’t be a long time before Kmart’s Blue Light is switched off. Forever. Kmart abdicated the throne they built. Competitors could not have overcome Kmart’s leadership position if Kmart had not given it away.