Shop Talk

OLD IS NEW

One of the best brand-building moves Snyder and his team made turned out to be no move at all.

Unlike rival Walmart, Kmart had never abolished the layaway shopping option that was almost a retail staple back in 1962, when the chain was founded. Focus group research told the retailer that credit-squeezed shoppers were likely to want the layaway option as a budgeting tool during the holiday shopping season. Under the plan, shoppers can put items in layaway for eight weeks, paying a 10% down payment and then a quarter of the cost every two weeks until the item is bought.

So Kmart took what seemed an obsolete '50s relic and turned it into one focus of its holiday campaigns. Kmart agency Draftfcb Chicago featured the hold policy in broadcast spots, print ads in women's and lifestyle magazines, and in online display ads on money-tips Web sites.

“We chose [layaway] to be the centerpiece of the holiday campaign because we owned it,” Snyder says. “Our research told us our shopper was going to make the best budget choices she could during this recession, and she used it like crazy.” Layaway sales for Q4 2008 were up $120 million over the same time the year before.

The chain is continuing to stress layaway in the spring quarter for things like Easter clothing and outdoor furniture. “It's a smart way to get the things a family needs without running up a bunch of credit-card debt and finance charges,” Snyder points out.

STAR VEHICLES

Another marketing adjustment begun under Snyder's predecessor, former CMO Bill Stewart, is continuing to make its effect felt: highly integrated chainwide promotional campaigns around entertainment properties. Where before these were largely restricted to in-store activations, now these campaigns reach to print ads, circulars, out-of-store promotions and contests.

Kmart is often taking on the role of official promotional partner, not simply selling licensed merchandise. For example, the store was the “Official Batman Headquarters” for last year's “Dark Knight” release and partnered with candy maker Reese's to hand out a free ticket to the movie with the purchase of three bags of Reese's items. Visitors to the Kmart.com Web site could also download Batman wallpapers.

In March, Kmart climbed into the ring with World Wrestling Entertainment for the 25th anniversary of Wrestlemania. Pop-up stores within Kmart units offered licensed products — from WWE apparel and bedding to toys and games. And customers who spent more than $50 on those items got a $10 discount on the April 5 pay-per-view broadcast of the slugfest.

“We found our customer has a much greater affinity for bonding with entertainment characters than their Sears counterparts, whether it's Nickelodeon, Disney, ‘The Dark Knight’ or the WWE,” he says. “It's a concerted effort on our part to take the elements of those properties and bring them in-store with merchandise that gives us a tremendous take-up from our target customer.” The chain will run another big promotion around the “Transformers” sequel due out in late June.

INTERNET INTENTIONS

With the holiday shopping season over, Snyder and Kmart are now taking the time to find the right way to engage those frugalistas online. The chain is now considering building a site that will both aggregate money-saving tips and also give shoppers a chance to engage in conversations with the brand and with one another.

In some ways, Kmart's still at the shallow end of the interactive learning curve. Its Facebook page seems to be largely a communications tool for store employees. And an experiment with social media incurred blogger wrath last December. Working with Izea (formerly PayPerPost), Kmart gave $500 gift cards to six influential bloggers and sent them on a shopping spree, asking only that they report on their Kmart experience. The bloggers disclosed the gift and were not required to be positive in their comments. They also received a second gift card to give away to one of their blog readers in a contest.

The social-media effort got strong buzz, with 2,000 contest entries in the six blogs and a reach of about 500,000 people by Dec. 5. But that attention quickly turned to a flood of Twitter criticism by bloggers who thought Kmart's effort smacked of paying for good blog posts.

Snyder chalks it up to experience. “We are very much about testing and learning, and this was just one approach we took to see what kind of measurable indication we could get from social media. We got some learning from it, and we'll build on that learning.”

Admittedly, none of these marketing tactics will do Kmart as much good as a strong rebound in consumer confidence or housing starts. They also won't make the aisles wider or the stores newer. But Snyder says the chain's store ops teams have stepped up efforts to make basic improvements in neatness and ambiance, and that the frugalista who is Kmart's core customer will trade a few décor niceties for a high-quality product at a good price.

“She wants the store to be clean and bright, easy to navigate, well stocked, and populated with service people who are willing to help,” he says. “But she's not expecting the Hanging Gardens of Babylon. The value proposition is compelling enough for her.”

KMART'S STORY

so far

1962	Sixty-year-old chain store S.S. Kresge opens first Kmart discount department store in a suburb of Detroit. Seventeen other Kmart stores open the same year.
1966	Founder Sebastian S. Kresge dies at age 99.
1966	Sales top $1 billion mark for the first time. Number of stores climbs to 915, including 162 Kmart stores.
1977	In 1976, sales at Kmart stores accounted for 94.5% of Kresge's domestic consolidated sales. Name changed to “Kmart” to reflect that shift.
1981	2,000th Kmart store opens. At year end, there were 2,055 Kmart stores in the U.S., Canada and Puerto Rico.
1985	Jaclyn Smith apparel collection launched: deal expanded to home decor in 2008.
1987	Kmart sells off remaining Kresge U.S. stores to McCrory Corp.
1987	Kmart introduces Martha Stewart, entertainment and lifestyle spokeswoman and consultant.
1997	Kmart launches Martha Stewart Everyday line of bed and bath fashions, and complementary paint line.
2002	Kmart files for Chapter 11 bankruptcy protection. At the time, the company had 2,114 stores. The bankruptcy led to the closing of about 600 stores and the termination of 57,000 employees.
2003	Kmart exits Chapter 11 bankruptcy protection as Kmart Holding Corp.
2004	Kmart combines with Sears, Roebuck & Co. in an $11 billion deal that creates Sears Holdings Corp.