Pundits to Kmart: make more of home

TROY, MI — Home could be a pivotal differentiator for Kmart as it works to rebuild its business after its expected emergence from Chapter 11 bankruptcy next week, suppliers and industry-watchers told HTT.

"Target is known as the discount store that focuses on apparel, and Wal-Mart is known as the low-price store on commodities, making room for Kmart to be the discount store for home," said Britt Beemer, chairman, America's Research Group, Charleston, SC. "Kmart still has good strengths in Martha Stewart and other brands because they are well merchandised. And between Target and Wal-Mart there is still an opportunity for Kmart to be positioned as a discount home store if it builds up on its Martha Stewart brand as its flagship identity and gives it more space in the store."

The power of the Martha Stewart Everyday continues to be one of Kmart's chief assets, in the eyes of many. Analyst Walter Loeb suggested there is even more Kmart can do to leverage the brand.

"It should use its Martha Stewart brand in more categories because it would help give it more consumer confidence about the quality of its product offerings," said Loeb, president, Loeb Associates New York.

But, home alone won't solve Kmart's problems, said Bart Weitz, director of the Miller Center for Retailing at the University of Florida, Gainesville. Nor is home a slam-dunk.

"The biggest hurdle for Kmart is picking the strategy to help it into the future. Also, its operational costs are too high," Weitz said. "Target very effectively focuses on its soft lines for home with its cheap chic, posing competition there. And Kmart can't compete with Wal-Mart because of the pricing. So Kmart is in a difficult position to find its own niche."

On a positive note, Kmart seems to be improving its relationships with vendors, said Salo Grosfeld, president, J.R. United. Kmart is no longer hitting his company with chargebacks; it's paying on time and it appears to have achieved some buying discipline, ordering only what it needs, he said.

"They are becoming financially responsible," Grosfeld added. "I just hope they don't swing all the way in the direction where it's only about dollars and cents, and they forget about merchandising."

Kmart does have some merchandising opportunities it can exploit, said Bud Frankel, president and ceo, The Arlee Group. It has the widest discount selection in window, and could dominate the category once it re-assorts by fabrication, he said. In the decorative pillow department, it's more competitively priced than its rivals, but needs to concentrate on more basics with more colorways. And, in table linens, it's pricing is "very, very competitive," he said.

"And its chair pads business is priced lower than Target and is competitive with Wal-Mart," Frankel added. "But, Kmart needs to concentrate more on $10 retails versus $12 and $14."

The decision is split on whether Kmart should exit some categories altogether to focus more resources on margin-builders such as home and apparel. That strategy, however, could endanger Kmart's ability to deliver on its urban strategy, noted Frank Scalice, evp, Town & Country.

"It can't arbitrarily give up other product categories that are important to its minority customer bases looking for discounts," he said. "Kmart can be the top-dog in its urban locations and it is doing some of the things it needs to do to become just that.