Retail formats in operation

Big Kmart

Big Kmart signals a different kind of Kmart. These stores are bigger brighter and offer big savings big value, big selection, and big convenience. Big Kmart stores are designed to increase store sales by increasing the frequency of customer visits. The format focuses on three distinct businesses – home fashions, children’s apparel and consumables and features an expanded food area known as the Pantry

The layouts make it easier for customers to shop by placing the departments their customers want to shop in near one another and closer to the front of the store. Few facts about Big Kmart are

1) The average Big Kmart carries nearly 100,000 stock keeping units (SKUs)
2) Big Kmart stores average between 84,000 to 120,000 sq ft in size
3) The first Big Kmart opened in Chicago, Illinois on April 23, 1997.

Kmart Super Centers

Kmart Super Centers are combination full service grocery and general merchandise stores. Most Kmart super Centers (KSC) operate 24 hours a day and offer special services. Kmart Super Centers range in size from 140,000 to 190,000 sq ft. KSC feature in house bakeries, USDA fresh meats, and fresh seafood delivered daily of course a full delicatessen and a variety of specialty food kiosks. Some facts:

1) The average KSC carries between 100,000 and 150,000 SKUs.
2) There are currently 59 KSC.
3) Traditional Kmart stores – The traditional Kmart store is the most people recognize.
4) Traditional Kmart stores average between 80,000 and 110,000 sq ft in size.
5) Kmart stores carry a full selection of general merchandise and include a pharmacy
6) The average Kmart store carries between 60,000 and 80,000 SKUs.
7) The first Kmart store opened in garden City, Michigan in March 1962.

Promotional pricing to blame:

Promotional pricing had always been the forte at Kmart. In the year 1990, arch rival Wal-Mart over took Kmart in sales. When Mr Conaway arrived on the scene, he tried to wean the company away from the strategy. Rashly, Kmart reduced its aggressive newspaper advertising too rapidly and lost customers in drives as a result. At the same time, it cut prices on 38,000 items and promoted them with expensive television commercials, which failed to lure younger shoppers. Then Wal-Mart countered by using its greater efficiency and economies of scale to fight back in pricing The outcome was a 1% drop in Kmart’s same store sale sin December and an 8% increase in those of Wal-Mart.

Restructuring the supply chain

On September 6, 2001, Kmart announced that it will restructure certain aspects of its overall operations. The focus of this restructuring program was on the supply chain infrastructure including the reconfiguration of Kmart’s distribution center network and implementation of new operating software across is supply chain.

Reconfiguration of the distribution center network entailed the replacement of two aging distributions centers with two state of the art facilities, which was aimed at improving the productivity the flow of goods to nearly half of the stores .In addition the distribution of slower moving goods would be centralized to one newly designated center to improve efficiency across all other centers and facilitate the expansion of the Blue Light Always campaign. New operating software was implemented cross Kmart’s supply chain and completion of the implementation was expected by the end of the second quarter of 2002.

In conjunction with these actions, Kmart expected to record special charges totaling approximately $195 million ($124 million, after taxes) over the next three quarters. Approximately $130 million of the charges related to the impairment of supply chain software and hardware that would no longer be utilized and to accelerated depreciation on assets that would continue to be used until their replacement. Approximately $65 million of the charges related to costs of exiting the outdated distribution centers. Cash outlays related the supply chain strategy were approximately $45 million.

Approximately $150 million of the charge would be recognized in the third quarter of 2001. As certain components of the Company’s supply chain software would to be utilized until replaced, depreciation would be accelerated to reflect the revised useful lives and these assets would be fully amortized by mid 2002. The expected incremental depreciation aggregated $15 million in the fourth quarter of 2001 and $30 million in 2002.