Kmart: Fall of a Retailing Giant

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Case Details:

Case Code : BSTR056
Case Length : 16 Pages
Period : 2000 - 2003
Organization : Kmart
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Retail ing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Kmart Under Conaway

In May 2000, Conaway replaced Floyd as the CEO of Kmart - and things were never the same again. In addition to Wal-Mart, the company was struggling hard to compete with another discount retailer Target.

Competition from these two companies led to a fall in Kmart's market share (Refer Table I) and financial performance (for 2000, Kmart posted a loss of $ 244 million). Kmart had become infamous for not keeping its stores clean and for not stocking enough goods. Customers had to wait in long queues for shopping at its stores. Even Martha complained of distribution problems and the difficulty customers had locating her products. For such customers, she said, "If you are frustrated, keep looking." Conaway identified the following as Kmart's major problems: poor inventory management (resulting in empty store shelves); lack of customer focus; and a poor, undifferentiated marketing strategy...

Towards Bankruptcy

Under the above circumstances, Conaway's and Schwartz's (who joined in September 2002) 'obsession' to beat Wal-Mart and Target was untimely. Conaway and Schwartz wanted to leave no stone unturned in their quest to beat the competition.

In 2001, while Kmart posted a loss of $ 1.3 billion on sales of $ 36 billion, Wal-Mart posted a profit of $ 6.7 billion on sales of $ 217 billion (Refer Exhibit III for a brief note on the industry environment for these companies). In fiscal 2001-02, Kmart reduced its prices significantly, hoping to beat Wal-Mart and Target. Under this initiative, named the BlueLight Always campaign, the company planned to sell over 50,000 items at everyday low prices. Reportedly, the directors of the company including Adamson expressed their displeasure with regard to the BlueLight Always program. In fact, Adamson recommended a trial-run of the program. However, Conaway went ahead with a full-fledged implementation of the program...

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