Kmart : What Led to Kmart’s Failure?


Kmart Corporation is an American big-box department store chain headquartered in Hoffman Estates, Illinois, United States. The company was incorporated in 1899 as S. S. Kresge Corporation and renamed Kmart Corporation in 1977. The first store with the Kmart name opened in 1962. At its peak in 1994, Kmart operated 2,486 stores globally, including 2,323 discount stores and Super Kmart Center locations in the United States. As of January 31, 2022, ten stores remained in operation. From 2005 through 2019, Kmart was a subsidiary of Sears Holdings Corporation. Since 2019, Kmart has been a subsidiary of Transform SR Brands LLC, a privately held company that was formed in 2019 to acquire assets from Sears Holdings.

Why did Kmart fail?

Kmart‘s profitability and sales peaked in 1992, and have since declined due to competition with Walmart, Target, and Internet Shopping. In 1994, Kmart announced that it would be closing 110 stores. Unlike its rivals Walmart and Target, Kmart failed to invest in computer technology to manage its supply chain. The following are the reasons why Kmart fails.

No focus on rural areas

While Walmart forayed into rural America, Kmart focused solely on the suburbs and refused to veer off the bad path.

Walmart created well-organized supply chains and quickly gathered rural customers with ‘always low prices.

The technology worked, and Walmart quickly surpassed Kmart in sales.

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This tells us that the pumping out store method used by Kmart may not be the best idea because when Walmart overtook Kmart, it had fewer stores.

This goes back to the first reason to have a good strategy. Kmart had no strategy other than to expand at any cost.

The shopping experience was lacking

As Leinwand pointed out, Walmart gives you the no-frills experience, while Target focuses on being stylish. Kmart, on the other hand, was not paying any attention to its in-store experience, which surprised people,

Kmart didn’t catch up to the digital age

While Walmart, Target, and Kmart were battling it out, something else was happening in the background. The Internet was getting bigger and spreading more widely.

But as always, Kmart was adamant and didn’t respond to the change. It refused to catch the wave of the Internet and focused entirely on traditional shopping.

This didn’t work in Kmart’s favor as all of its competitors listened to DID and started providing a better online experience as well.

Kmart could have dominated the fashion scene—but wasn’t

Kmart was always good at selling discounted apparel. Even when the rest of its store shelves were empty and barely visible, they still managed to sell well-made apparel with a few good brands being sold at floor level.

This strength could have been his knight in shining armor but the focus was not the way it should have been.

Going back to Leinwald’s idea in the Harvard Business Review, it may have been part of his ‘mode of play’, but it was a missed opportunity.

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Supply could not meet demand

As Kmart began selling store by store as well as getting rid of some of its businesses, its ability to buy in bulk and supply in bulk was compromised.

Kmart never really had a supply chain strategy that could support the company’s low-cost model of business. So, when stores started closing, this big problem could no longer be ignored.

Kmart never changed its supply chain strategy because of innovation. Any changes made were because they were following in Walmart’s footsteps or because they were playing catch-up.

When supply chain technology improved, Kmart didn’t reach it and when it finally did, it was too late.

Ignoring something as important as supply eventually caused Kmart to shut down supply altogether.

Even at the peak of its 2000 stores in the 1980s, Kmart could have focused on building relationships with its major suppliers, but did not.

Overall, the lack of a supply chain strategy can well be termed as one of the reasons for Kmart’s ruin.

Sears and Kmart collaboration – the final nail in the coffin

After Kmart filed for bankruptcy in 2002, Eddie Lampert thought it was worth saving and got Kmart out of debt by 2003.

In what he thought would be a great move, Lampert merged Sears and Kmart to catch up with Walmart. It didn’t work well with any customer base.

Sears’ home goods and Kmart’s home goods didn’t work well together, and the overall decline in Kmart’s reputation hit a new low.

This eventually led to Sears Holding filing for bankruptcy in 2018, meaning that Kmart, a company that was once one of the most profitable companies in the world, filed for debt twice in 16 years.

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Kmart today

Kmart’s failure is often attributed solely to the acquisition of the company by Sears Holding.

Lampert’s terrible decisions are seen as the reason for the failure of both Sears and Kmart.

While it’s easy to blame Eddie Lampert for everything, it’s also unfair. The lack of direction and focus that Kmart faced was the build-up of decades of bad decisions.

Since Kmart had ‘no way to play,’ it’s easier than ever for Walmart to be the top dog in the discount store world.

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