CONAWAY DETAILS KMART’S FUTURE AS BLUELIGHT SPECIAL RETURNS

Byline: David Moin

NEW YORK — Chuck Conaway is changing the current culture of Kmart Corp. by bringing back some of the old.
On Monday, Conaway announced the return of the “BlueLight Special” after a 10-year hiatus and answered the big-picture question everybody has been asking: how he’ll differentiate a struggling Kmart from nimbler competition. His answer: “We have to be the authority to mom. That’s our sweet spot.”
Faster-growing chains, particularly Wal-Mart and Target, have been squeezing Kmart out of market share for years, with better technology, replenishments and pricing. And Conaway, in his first press conference since becoming chief executive officer of the $40 billion Kmart last June, acknowledged their competitive advantages. “At Wal-Mart, it’s about price,” he said. “Target does a great job in delivering style and a value proposition.
“But nobody is talking about the customer. That’s wide open.”
During the Nineties, Kmart’s marketing campaign appealed to “the busy, budget-conscious mom.” While the target audience might be the same this decade, the strategies have changed. Conaway, before unveiling the recharged BlueLight special at the W Hotel here, contended that Kmart has implemented the “building blocks for becoming the [shopping] authority for mom,” since he joined the chain. Generally, they involve merchandising initiatives with other parties for exclusive women’s, children’s and home products, and improving the flow of goods, which was inconsistent through the Nineties. He cited Kmart’s upcoming in-store Disney shops to be partially stocked with exclusive clothing and toys; the $4.5 billion supply chain deal with Fleming Companies Inc. to provide substantially all of the food and consumables to Kmart stores and supercenters, and the deal with Tibbet and Britten to own and operate Kmart’s warehouse operations in Greensboro, N.C., and Morrisville, Pa. Last year, Kmart had 15,000 trailers loaded with merchandise lurking behind stores, but they’re gone now, due to better flow, Conaway said.
Kmart also has deals with Sesame Street for exclusive product, and last month, the chain’s Kathy Ireland brand extended into large sizes. Ireland, among the crowd attending Kmart’s press conference, said she wants to expand the brand further with Kmart, and is considering enhancing girls swimwear.
But it’s still the Martha Stewart home and gardening collection that’s the main draw to the store. Some say Stewart rescued Kmart, when it was worse off.
In other news, Kmart’s 2001 advertising expenses will be cut by $200 million, because in the past year in-stock positions, pricing and customer service have improved, according to Conaway.
Breaking out statistics to underscore his point, Conaway said this year, 89 percent of those visiting Kmart make a purchase, while last year, 80 percent did. He also said Kmart is in-stock on wanted items 88 percent of the time, compared to 79 percent last year, and has a goal of 92 percent to 95 percent. Last week, Kmart staged its first vendor fair, to help meet new goals.
The company also is spending $1 billion in technology to speed transactions, including adding faster scanners, and has a policy of “line busters,” meaning that if there are three or more people on a checkout line, another register will be opened or a customer’s basket of items will be scanned while in line, and the customer will get a “price card” to show cashiers.
Kmart officials said all 2,109 stores, as of last Sunday, have new BlueLight areas in the middle of the selling floor which are impossible to miss. They’re under a round blue canopy, 11 feet in diameter suspended from the ceiling, with flashing blue lights and music.
Periodically each day, a single item from any department gets discounted for a limited time. BlueLight specials are also offered online at BlueLight.com. Shoppers never know which products will be BlueLight-ed, since they’re never advertised, creating anticipation in the stores.
The BlueLight special was created by former Kmart assistant manager Earl Bartell. He introduced it to management in 1965, first as a red light, then amber, and ultimately blue. He got a $25 gift certificate for the innovation.
It was dropped in 1991, as it degenerated into a wheel cart piled with inferior clearance goods and became an industry joke.
With BlueLight back on, “there’s a new mind-set,” said Brent Willis, executive vice president and chief marketing officer for Kmart. “We are now using it to give our customers the products and brands they really want at incredibly low prices.”
Despite the ad cuts, Kmart said it will support the launch of the BlueLight special with the largest marketing push in its history — through national broadcast, print, in-store and outdoor ad campaigns — which begins this week. The BlueLight Special will also be supported with an online ad campaign at BlueLight.com and other Web properties. Kmart’s ad agency, TBWA/Chiat/Day developed the new BlueLight advertising, and includes American icons, like the Statue of Liberty torch in blue, and flying saucers beaming down to earth in blue.
Recently, Kmart’s comp-store gains have shown some improvement, in the 4.8 percent range for most of last year, until the fourth quarter’s 2.1 percent. While inching closer to the level of the competition, it could be a while before Kmart shows sign of a deeper turnaround.
“The economic environment will make it difficult to project a substantial growth for the company until the winter of 2001,” said retail analyst Walter Loeb, in his most current newsletter. But he added: “I am excited about the aggressive initiative of this company. Under the leadership of Chuck Conaway, Kmart is focusing on the customer as the number one priority.”
Bob Buchanan, retail analyst with A.G. Edwards & Sons, reacting to the BlueLight revival, expressed some skepticism. “It’s important in retailing to get merchandise right first and then worry about marketing. I’d much prefer to see improvements in men’s and women’s apparel and other key parts of the merchandise ahead of a major marketing initiative.
“Emphasizing the mom is the most intelligent part. Somehow, some way, Kmart needs to differentiate its program,” he said. “They still got a lot of clearance.”
Shares of Kmart rose 8 cents to close at $9.48 Monday on the New York Stock Exchange, short of the 52-week high of $9.75.
The Troy, Mich.-based chain suffered a 40 percent drop in profits in the fourth quarter, ended Jan. 31.

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