Kmarted: Where No Business Wants To Be
When retailer Kmart filed for bankruptcy, it was at the time the largest retail bankruptcy in history and a major turning point for a century-old company.
So how did the mighty Kmart fall so fast? There were many factors involved in the decline but a large part of the issue is simply that they got stuck in the middle without a niche they could dominate.
Stuck in the Middle Without You
Kmarts fiercest and largest rival, Walmart, has long been running away with the game. Faced with a foe many times its size, Kmart initially tried to undercut Walmart with lower prices. This proved futile, as Walmart, with its greater buying power and more efficient supply chain, could easily trump Kmart in this area.
When confronted with the reality, Kmart attempted to move more upscale and target higher-end customers, even going so far as to ink a deal with Martha Stewart. Unfortunately, there were already entrenched competitors in that area, including most notably Target, and Kmart’s brand had for so long been associated with “cheap” that it was a difficult transition.
The move went so poorly that Kmart and Martha Stewart parted ways last year as Stewart openly accused the chain of damaging her brand with shoddy stores and poor marketing.
Kmart found itself squeezed without a niche and no real hopes of finding a new one. A big part of why it continues to shuffle store concepts and close underperforming stores today.
Avoiding the Fate
One company that has done a better job at avoiding the fate is Subway. The chain of sandwich shops found itself in a tight spot, pinched between local sandwich restaurants that were usually cheaper and higher-end chains such as Quiznos.
However, Subway took two steps to carve out a niche for itself, first targeting the health-conscious with its marketing campaign, launching the now-famous “Jared” marketing campaign in 2000, and then launched the $5 footlong campaign in 2008, which kept the brand strong during the recession.
Subway saw the dangers and responded quickly, avoiding the issue altogether, completely avoiding being “Kmarted.” As a result, the company has grown in franchises steadily for the past five.
All in all, the contrast of the two stories highlights the importance of finding and dominating a niche, something Kmart has failed to do but Subway has managed to do very well.
However, a new niche doesn’t have to mean a whole new approach to doing business. Rather, it can just be a new marketing campaign or a new audience for the same product. Subway realized this and thrived where Kmart is continuing to flounder.
For Kmart to survive, let alone thrive, it needs to find a niche for itself that goes beyond being in the few places Walmart isn’t. Otherwise, most likely there are even darker days ahead for the company.
How would you avoid being “Kmarted”?