Kmart might never be cool, but maybe the ailing chain can be faster.
This story first appeared in the June 17, 2015 issue of WWD. Subscribe Today.
Over the past year and a half, Kmart has stacked its apparel ranks with executives from quick-on-their feet chains such as Zara, Topshop and Victoria’s Secret in an effort to overhaul its apparel business and be quicker to react to trends.
“We are moving from a predictive buying model that tries to understand what customers want, to one that is much more real-time based on member [or customer] demand. That’s quite different,” said Andrew Clarke, Kmart’s senior vice president and president of apparel, who joined the chain last fall after working at European retailers Pimkie, Marks & Spencer and New Look.
“What we are trying to do is to reengineer that traditional two-season buying cycle model, to something broadly based on four seasons,” he said. “It is a model that has constant newness flowing to the sales floors and keeps a significant amount of open-to-buy flexibility within each season. We are in the early days of this and we are getting some tangible results now.”
The stakes are high.
The strategy at Kmart is an important piece of the overall Sears Holdings Corp. “transformation” that chairman and chief executive officer Edward Lampert has been touting to salvage the company. Many retail analysts see the transformation as more of a slow disappearing act in light of the store closings, property sale-leasebacks, real estate partnerships and asset sales to raise money. Lampert has himself put money into the business, which continues to post steep losses and comp-store sales declines.
In addition to trying to move quicker, Kmart also wants to pump up its private brand penetration to tighten control over the supply chain, reduce reliance on market brands and continue to cull weak labels such as Sofía Vergara, which had a four-year run until being discontinued this year. Also on the agenda: growing the contemporary side of the private brand business for some flair, building an ath-leisure apparel component and a wider men’s wear offering.
Kmart apparel business — said to range between $2 billion and $3 billion in volume — has been profitable in the recent past. Yet it’s been difficult for Kmart Apparel to reach its goals partly due to charges from Sears Holdings related to marketing and real estate, according to people who have been close to the business. “We generated a lot of volume but we had to give away a lot of cash,” said a source. There have been other issues. “In the past, overassorting has been a problem,” the source added. With the changeover in talent, with many from flashier, fashion-forward stores, “the challenge will be to draw the right balance between fashion and commodity.”
Time may be running short for the $31.2 billion Sears Holdings, which in 2014 had $1.3 billion in less revenue from fewer stores. Lampert told shareholders earlier this year that the corporation is failing to generate the money to fund the transformation quickly enough.
Certainly, the apparel brass at Kmart has been transformed. Clarke is just a part of the new team. He reports to David Pastrana, chief of staff for apparel, who joined in March 2014 after working at Topshop and Zara. And Rachel Rushforth Worrell, formerly with Victoria’s Secret, became senior vice president of design for Kmart and Sears in January. The apparel merchant team is based in San Francisco while the design team is in New York.
Asked whether enough is being invested in the Kmart apparel business to make it competitive, Clarke said, “The apparel business is a very important part of the Sears Holding Corporation transformation and investments are being made. We are a very large part of the transformation story and we need to be a credible apparel retailer. We are getting a lot more things more right.”
Clarke said the team is changing how it develops product, so the process is not as long, and it’s better able to react to trends. “We are reducing the number of touch points in product development process. The first thing is how we get faster vendors,” and rethink the vendor base. “It’s weeks, not months…to translate what our members want and chase those repeat orders.
“How do we understand in real time what the product opportunity is?” Clarke asked rhetorically. “It’s about reading the results of yesterday and doing something about it today, daily product reviews to repeat [best-sellers], aligning merchant, sourcing and design teams to react faster and resist predicting too far out, weekly buying activities, constant reattribution of in-season open-to-buy.”
Clarke said he’s focused on “really building our private contemporary business,” noting “a number of brands have been merged into a much more overarching Attention brand….We are rationalizing. Some of that is in-house and some of that is understanding the relevance of the collaborations we have had.
“There is a customer coming into Kmart who is really, really responding to some of the more contemporary elements of our collection. Woven joggers in men’s wear — they just can’t get enough. Early season testing on Maritime striped shirts were sellouts that we chased back for summer with a selection of tops from $16.99.” For fall, the apparel will reflect Seventies trends, including flared denim and gypsy tops.
Recently, Impact by Jillian Michaels was launched to build momentum around the ath-leisure trend. “They’re stylish pieces as well as functional,” Clarke said, noting such properties as wicking and quick-drying.
Kmart has a reputation for low prices and bargains like a six-pack of tube socks for $6, or $30 work boots. “A business like Kmart you can imagine is all about cost and buying product a long time in advance….We are changing our focus so it’s all about getting the right product. We are finding we don’t need to be the cheapest. The notion of being the cheapest is quite a short-term strategy. Someone can always come along and undercut you. When we are getting product right, we’re selling it at regular price.”