Why Kmart Still Sucks, Losing Stores, Staff, Customers

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Adam Levine Celebrates The Launch Of His New Women's Collection For Kmart And Shop Your Way
Michael Kovac/Kmart/Getty ImagesAdam Levine has a new fashion line at Kmart.
In "Rain Man," autistic savant Raymond Babbitt (Dustin Hoffman) said it best in 1988: "Kmart sucks." Almost a quarter century later, that catchphrase rings true as Kmart closes more stores, lets go more employees and loses more customers. Kmart and Sears are both part of Sears Holdings (SHLD). It was brought out of its 2002 bankruptcy by hedge fund whiz Eddie Lampert with the promise of a turnaround,

The Writing on the Walmart

The first Kmart -- founded in 1962, originally part of the Kresge chain -- preceded the first Walmart (WMT) by only four months, its death sentence signed at its birth. In the 1960s, Kmart grew to 600 stores, but it has since barely doubled that number. Walmart, meanwhile, has grown to 11,000 stores in 27 countries by perfecting its aggressive strategy of negotiating its suppliers down to bare-bone margins to get those everyday low prices.

Kmart limps along, the Jonah of discount chains, never earning the status of J.C. Penney (JCP), Target (TGT), Kohl's (KSS), Macy's (M) and Sears. Those blue light specials began in 1965 and have continued on and off, but Kmart has still struggled. It remains one of the larger U.S. mass market retail chains.

Last holiday season Kmart sought customers but got controversy instead with a racy holiday ad for its private label Joe Boxer underwear. It has tried other similarly edgy ads and fashion lines by celebrities Adam Levine and Nicki Minaj, but America's not buying it. At least not young or rich America. Of these big boxes, Kmart has the oldest and poorest trending shoppers.

And while J.C. Penney spent a fortune upgrading its stores under CEO Ron Johnson, Kmart started looking down at heel in the early '80s, prompting the "Rain Man" quote. Much like shopping at Sears, the attitude is still careworn.

A recent Friday afternoon visit to one Kmart -- in an upscale neotraditional town where townhouses rent for $3,000 -- revealed rusty shelving and fixtures and a rundown feel, especially in comparison to J.C. Penney or Kohl's. Salesclerks outnumbered customers by almost two to one, but not once was I asked if I needed help. Although clothes littered the floors, sales associates were hanging out or aimlessly wandering. In one hour, I saw one lone employee straightening shoes. And why should they bust their butts when annually hundreds see their jobs disappear?

Shop Their Way? Or No Way?

More and more, Kmart and Sears are depending on their joint Shop Your Way shopper loyalty program and online and mobile sales, offering in-store pickup of items bought online at either website. According to the recent chairman's letter to shareholders, Shop Your Way comprises 72 percent of sales at Sears and Kmart in the fourth quarter of 2013.

The company plans to phase out promotional pricing, like those blue light specials, in favor of solely rewarding loyalty points. J.C. Penney learned the hard way that its middle income shoppers love coupons and promotions, so Kmart is taking a decided risk with this strategy. (Kohl's has its coupons, and Walmart its everyday low pricing.)

Kmart depends highly on some Sears brands -- like Craftsman, Diehard and Kenmore -- to bring in customers. But it just can't compete with the private label brand king Walmart or Target with its more popular and trendy private label brands.

Maybe Sears Holdings doesn't want to throw good money after bad in Kmart's case. Lampert may boast in his blog about turnaround progress, but there is also a page on the corporate website dedicated to the sale and lease of store properties. After closing 172 stores in 2012, the company recently announced the closing of 80 stores this year. It didn't specify which were Kmarts but added there would likely be more closings of underperforming stores. That could be plenty, as its last earning release showed Kmart same-store sales were down 2.2 per cent, an improvement over the previous year's 4.6 percent, but the loss to Sears Holdings' shareholders in 2013 was a remarkable $1.4 billion.

Etailer Who Shall Not Be Named

Lampert admits in his blog that shopping behavior has changed thanks to an etailer who shall not be named (like Voldemort in the Harry Potter series), but it's obviously Amazon.com (AMZN). He also promises a rapid transition to a digital and social platform to service those Internet-savvy shoppers. Analysts hint more darkly that Kmart as a bricks-and-mortar shopping presence may sooner rather than later be as fictional as "Rain Man's" Oak Street Kmart in Cincinnati.

Walmart and Target have in-store pickup, flashy websites and apps, so whatever competitive advantage Kmart has seems to rest solely on the shoulders of its Shop Your Way members. Possibly, the Kmart blue light special may move to the virtual cloud, but Kmart as a physical retailer isn't long for this world.


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16 Comments

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jalssdev

Their customer service is appalling! I know from personal experience. They failed to ship me something then refunded me, asked me to pay full price and wait 5 days for a refund of the difference b/t sale price and the full price, even though I paid the sale price originally. I posted on their facebook page and they asked me to refrain from posting to their wall so I don't bog down their feed. Check it out here: https://www.facebook.com/kmart/posts/10154744801285593?comment_id=10154744873385593&offset=0&total_comments=5&notif_t=feed_comment

Friday at 11:01 AM Report abuse rate up rate down Reply
Randall Lind

They never have anything every time I would go in to store a lot of the shelf's were empty. Also they don't invest in their stores,

October 09 2014 at 6:31 AM Report abuse rate up rate down Reply
nani92335

I would much rather shop at K-mart than Wal-Mart but lately I have been going to Target because the K-mart closest to me is very dirty ,clothes off racks thrown all over not neat at all the changing rooms are locked except one and of course no one manning it with clothes in it where people just try on stuff and no one returns to the racks,plenty of sales people but they seem to ignore you ,they actually walk in a different direction if they see you are looking for one..lol never get asked if you need help. Once when I tried to buy some cologne they did not have a key to get into the enclosed glass shelf they said it was lost ?? I left they did not seem to care ,the prices are never marked so when you get to the check stand is when you know how much the item is, if it is on sale the checkout clerk does not know and has to look it up , bathrooms have been redone nice but it would be nicer if someone cleaned them . I had been shopping at K-mart since I was a teenager but they have changed at Target If a item is 2 for $10.on sale you have to buy 2 or you pay full price maybe $6 or $7 for one where at Target if its 2 for $10. and you buy one it will be $5. that is why I am no longer faithful to K-Mart . I like K-marts shoes , and clothing but the frustration is to overwhelming to shop there

September 21 2014 at 7:15 PM Report abuse rate up rate down Reply
Lisa

I'd rather shop at K-Mart, instead of Wal-Mart any day, just wish our local one closed and now have to drive 40 minutes to get to the nearest one.

September 09 2014 at 6:42 AM Report abuse rate up rate down Reply
Michelle Poe

I work at Big Kmart and I love my job. Our store is not going anywhere and I not only prefer working for Kmart then Walmart bur also prefer shopping at Kmart. They have started renovating and updating our store and daily we are winning back our old consumers because they are just tired of Walmart. Our merchandise holds up for years, where as, if you bought the same thing from Walmart it would not hold up. Most of Walmart's electronic merchandise is refurbished you are not getting a new one. Yes, most people are shopping of the internet now, but that is across the board for all retailers, just not Kmart. Internet sales have hurt all retailers!

September 08 2014 at 3:04 PM Report abuse rate up rate down Reply
LNOFT97

I'll stop at K-Mart because it's convenient and nearby, but it is a sad place. Quiet as a tomb, mostly empty, and the store dressing rooms in the back are unmanned. Anyone can go back there with anything, I'm surprised half the store inventory isn't being smuggled out the door. K-Mart is good for drugstore items, underwear, sweatshirts and socks, and cheap kids clothes. Also one of the last places on earth that carry cheapie elastic-waist pull on slacks for old ladies, or for just wearing around the house. Not all of us are 18 year old stick insects who need stiletto boots and size 2 jeans costing $200.

August 23 2014 at 10:53 AM Report abuse rate up rate down Reply
rriley9945

The last K Mart I went into was down south about 6 years ago. The lights were lowered I guess to minimize the electric bill and there were fans blowing instead of air conditioning. Shelves were a mess. I could sense the low morale of the staff. I bet state run stores in the old Soviet Union must have been just like this.

August 19 2014 at 12:58 PM Report abuse rate up rate down Reply
Ryan Healey

It is VERY easy to go to YouTube and find the clip in Rainman where DUSTIN'S HOFFMAN'S character clearly says "Kmart Sucks" not Tom Cruise. I am really stunned someone would post something saying otherwise without checking first.

July 30 2014 at 12:01 PM Report abuse rate up rate down Reply
kevin.burke30

Actually, the comment the writer attributes to Dustin Hoffman's character was actually spoken by Tom Cruise's character. And, my wife and I do shop at Kmart.

July 29 2014 at 1:11 PM Report abuse rate up rate down Reply
1 reply to kevin.burke30's comment
kajumellecat

Actually Kevin, Tom said the phrase at the beginning of the movie and Dustin Hoffman said it at the end of the movie.

August 24 2014 at 6:27 PM Report abuse rate up rate down Reply
Brian Sichko

Article was wrong about barely doubling in size since the 1960s after opening 600 stores. Kmart was larger and had more sales than Walmart until 1991. Kmart operates nearly 3,000 stores and over 250 Super Kmarts when it went into bankruptcy in 2002. It has since then been reduced to about 1100 stores and 6 Super Kmarts...

July 29 2014 at 9:57 AM Report abuse rate up rate down Reply