K-mart Fall of a Retailing Giant

Presented By: Sagar Sheth, Sarjak Kikani, Sahil Gupta, Rutvik Pandya

KRESGE/K MART
S.S Kresge started S.S Kresge Company (Kresge) , a retail chain in Detroit, US in 1899 with a low pricing strategy. In 1912 Kresge expanded to 85 stores, worth $10 million . In 1959 Kresge came up with idea of discount departmental store named Kmart . In 1962 first Kmart launched in Michigan and started 17 more outlets in the same year and also expanded their business to Australia. By 1977 ,out of Kresges sales (95%) were being generated through Kmart store .

1980-99
K marts service and quality reduced in comparison to their competitor walmart which entered in 1980 Wal-Mart's everyday low pricing model and good customer services led to a slow down in Kmarts performance alarmingly To sustain in market Kmart diversified their product line by acquiring few well known retail chains(walden book Co.) Kmart took huge expansion plan like- opening of one-stop-shop grocery shop along with discount stores ,acquiring specialty chains like TSA, Office Max , Borders Inc In 1990 s k mart had 2114 stores in all the 50 states of US and by 1999 it started an e commerce company bluelight.com

BANKRUPTCY
In 2001-02, to throw a tough fight against its competitors Wal-Mart &Target , Kmart adopted everyday low price strategy named as Blue Light Always . Though this strategy was backfired as customers didnt respond to this low price . Kmart posted a loss of $95 mn for the second year of that year Kmart decided to cut down advertisement cost by 20% , resulting as sales didnt pick up even in shopping season . Kmart posted a loss of $ 224 mn in 3rd quarter of 2001 Company recorded a total loss of $2.4 bn in 2001. As Kmart declared bankruptcy, the stock price fell down 70% and its market capitalization came down from $2.7 bn to $900mn.

REASONS FOR KMART FAILURE

Poor supply chain management Lack of funds Competition from other big players Recession in retail industry Poor inventory management Unable to maintain relationship with suppliers Poor infrastructure Poor customer services No market initiatives

REORGANIZATION INITIATIVES AND FUTURE PLANS

o Reorganization of Kmart started in 2003 o ESL Investments (ESL) and Third Avenue Value Fund were two be the main investors o Savings Are Here to Stay Promotion- Kmart started store events , lucky draws ,and money saving offers o They Renovated their stores by making wider aisles, brighter lighting and faster check-outs o They Improved Relationship with Suppliers o More Freedom was given to Store Managers for operational smoothness o Better Marketing Strategy was Implemented . o In the first week of MAY 2003 Kmart finally emerged from bankruptcy