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Kmart swot analysis Essay

In 1899, Sebastian Spering Kresge opened a store in Detroit where he was solding everything for 5 or 10 cents.This store attracted hundreds of shoppers because of the low prices and allowed Sebastian Spering Kresge to expand to 85 stores in 1912; at this time he was making an annual sale of more than $10 millions. America experienced war and financial depression but Kresge stores still had a large success because families could afford these low prices products.

The stores also offered jobs when other businesses were not able to do so.In the 1920s Sebastian Spering Kresge opened stores that sold products for 1 dollar or less, that was the precursor of the actual discount store. However, nowadays prices are different in Kmart but the business philosophy is still the same : offering consumers what they need at low prices. In 1937, Sebastian Spering Kresge opened a store in Country Club Plaza shopping centre in Kansas City, Missouri. As the retail environment was getting more competitive, Sebastian Spering Kresge launched a newspaper advertisement, this advertisement was the precusor of radio promotions and TV commercials which followed 20 years later.

In 1959, Harry B. Cunningham became the president of the Kresge organisation helping the company to continue to be a leader in the competitive retail environment. The first Kmart discount department store opened in 1962 in Garden City, Michigan. Seventeen other Kmart store followed that year increasing the sales to more than $483 millions. In 1966, sales in 162 Kmart and 753 Kresge stores were of $1Billion mark.

In 1976, Sebastian Spering Kresge opened 271 Kmart stores in one year,this was the first time ever a retailer launched 17 million square feet of sales space in one year. By 1977, 95 percent of Kresge company sales were generated by Kmart stores, thus the company decided to change its name to Kmart Corporation. In 1990, Kmart gets a new logo and a new plan of 3.5 billion new store opening, enlargement and modernisation program.

In 1991, Kmart opened the first Kmart Supercenter (open 24 hours a day, 7 days a week) in Medina, Ohio. In 1996, Kmart are redesigned, making them cleaner, brighter and easier to shop. The frequently purchased products are moved to the front of the store and a new focus is placed on the Children’s and Home Fashions departments, the name changed for these remodelled stores and became “Big Kmart”. In January 2003, Julian C. Day become Chief executive of the company and achieved important objectives such as strengthening its balance sheet, reducing debt, focusing its store portfolio on the most productive locations, terminating leases for closed stores, developing a more disciplined, efficient organisation and lowering its overall operating costs. Kmart is now a new and vital enterprise which focus on delivering value to customers.

Company overview:

Nowadays, Kmart is owned by Sears Holding Corporation, in January 2011, Holdings had a total of 1.307 Kmart stores across 49 states, Guam, Puerto Rico and the U.S Virgin Islands. This is a total of 1278 discount stores averaging 93.000 square feet and 29 Super Centers, averaging 169.000 square feet. Most of the Kmart stores are one-floor, free-standing unit selling a wide range of products from consumer electronics to seasonal merchandise and services.

In January 2011, major home appliances were sold in 268 Kmart stores and the company started operating its own footwear business ( which was previously operated by a third party). 981 Kmart store have also their in-store pharmacies. Kmart super centre are operating 24 hours a day and have a full-service grocery with the merchandise selection of a discount store. Sears Auto Centers are also present in 20 Kmart stores; Sears Auto Centers offer professional automobile repair, maintenance services and full assortment of automotive accessories. 600 Kmart stores have also a new service (powered by MyGofer) which allow customers to buy online through kmart.com website and pick up in store.

Kmart Store Facts : Traditional Kmart stores size is 80.000 to 120.00 square feet, they carry a full selection of general merchandise and include a pharmacy. The average Kmart store carries between 60.000 and 80.000 SKU’s. Kmart Super Centers have a full-service grocery and a general merchandise stores, most of them are opened 24 hours a day and offer special services. Kmart Super Centers size is from 140.000 to 190.000 square feet, they offer in-house bakeries, USDA fresh meat, fresh seafood ( delivered daily), full delicatessen and variety of speciality food kioks. The average Kmart Super Center carries between 100.000 and 150.000 SKU’s.

Swot analysis : Companie’s strenght Kmart is the third largest US retailer in the US and has a strong market position which the company a good rank in the competition. A strong brand equity is one of the strengths of the company, indeed in 2006 Kmart had 1416 stores in 49 US states, in Puerto Rico and the Virgin Islands. Another strength of the company is the merge of Kmart with Sears Holding Corporation, which is the third largest broadline retailer in the US ( approximatively $55 billion in annual revenues).SHC own a wide range of brands such as Kenmore, Craftman and DieHard.

Companie’s weaknesses

Kmart has a limited geographical presence, indeed, the company operates only in the US, Puerto Rico and the Virgin Islands while its competitor Wal-Mart operates in the US, Canada, Mexico and the UK. Wal-Mart has also operations in Asia, Europe and South America. Carrefour also have extensive international operations. Compared to others companies, Kmart has a limited presence in the world and can’t take advantage of the benefits of diversification and increase its risk associated with these few markets.

The company has also a weak operating performance. During the fiscal year ended in December 2005, the company recorded revenues of $19094 million, that is a decrease of 3,8% over 2004.The company continued to decrease its revenues of 1,4% in 2005 and 0,2% in 2006. That means the company probably has an inefficient marketing and promotion strategies. In 2005, the operating profit of the company was $767 million, thus a decrease of 57.9% over 2004. Kmart’s operating margin declined from 9.2% in 2004 to 4% in 2005, that means the operating efficiency is declining. Weak operating performance in the long run can affect the financial stability of the company.

Kmart’s opportunities

The first opportunity for the company is increasing online retail spending, indeed, Kmart has expanded its online products portfolio. Online retail spending was expected to increase from $81 billion in 2005 to $95 billion in 2006. Online retail spending would reach $144 billion by 2010 and 71 % of online uses are likely to shop over the internet ( only 65% in 2005). In 2005, internet influenced 27 % of total retail sales, it will influence 50% in 2010. The company has to focus on strong online sales to benefit from growth in online retail spending.

The second opportunity for the company is the growth in private label products, indeed, private label products is growing up a lot in the U.S. One of five items sold in U.S supermarkets, drug chains and mass merchandisers is a store brand. Private Label Brands give higher margin than branded products, thus increasing the acceptance of the private labal products can have a favourable impact on the company’s margins.

Kmart can also take the opportunity of rising the US health care spending. As the population is getting older, people use more drugs, thus the US health care spending is expected to reach 4 trillion by 2015. By 2030, one in every five US citizens will be aged 65 or above ( predictions by the US Census Bureau and the National Institute on Aging ) Kmart’s threats are : Stiff competition, Slowdown in consumer spending and increasing rental rates.

References

Kmart corp, 2007, ‘Kmart Corporation SWOT Analysis’, p1 ( There is no Author, I found the articles by researching ” Kmart SWOT analysis” on Ebschohost)

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