February 19, 2016
Can Kmart find success selling liquidated merchandise?
It seems like Kmart has been looking for a strategy for decades (perhaps because it has been) that will help the chain go from teetering on the edge of disaster to achieving success. Kmart has tried Bluelight specials, “Ship my pants” commercials and Martha Stewart over the years, but nothing has worked — at least not well enough. Now, however, the company believes it may have found a way to get its business moving in the right direction — buying liquidated merchandise and selling it to customers in Kmart’s 962 stores, on kmart.com and through the retailer’s mobile app.
“The path to making Kmart great again starts with sourcing truly brag-worthy deals,” said Alasdair James, president of Kmart. “Just as when we brought back Bluelight Specials last year, we continue to find innovative ways to provide our Shop Your Way members with an extreme value proposition that can only be found at Kmart.”
According to a press release, Kmart’s Strategic Merchandising Group is actively looking for exceptional deals by purchasing “inventory from liquidated companies and other opportunistic situations.”
Richard Church, managing director of Discern Investment Analytics, told the New York Post that Kmart could be onto something.
“It has treasure-hunt appeal, and there are tons of liquidation buys out there,” he told the paper. “These deals will capture some attention from consumers if the buys and merchandise are good enough.”
- Kmart to Offer Truly Brag-Worthy Deals Through New Sourcing Initiative – Kmart
- Kmart to stock shelves with bankrupt companies’ products – New York Post
Source: kmart.com
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Nikki Baird
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Paula Rosenblum
Co-founder, RSR Research
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Discussion Questions
DISCUSSION QUESTIONS: Do you think that Kmart Strategic Merchandising Group will be able to deliver on its promise of brag-worthy deals? Will the offering of liquidation merchandise help turn Kmart’s business around?
Poll
I’m surprised they have lasted as long as they have. And no, I don’t think this will turn Kmart’s business around. Liquidation is already a crowded market between dollar stores, T.J. Maxx and Ross, and now the flash sale websites that are cropping up everywhere. These companies are all hunting after the same inventory, and the liquidation market is already consolidating as mainstream players absorb these concepts into their own operations — from HauteLook to Zulily to Gilt. It’s not all high-end liquidation, either. Zulily is by no means all high-end. There’s another upstart, Jane.com that is decidedly low-end.
This is just flailing. Perhaps the end is near after all.
One fundamental truth about the art of shopping is that shoppers want to search and discover in hopes of being surprised and delighted. If Kmart can tap into this “bazaar” behavior on a consistent basis then they may, in fact, be onto something. The challenge will be to logistically maintain and cycle this inventory in a manner that will entice shoppers to return to the store on a regular rotation in hopes of discovering that prize.
Whether Kmart can pull this off and not turn into a ravaged Goodwill-Dollar General, hybrid remains to be seen. I certainly wouldn’t bet on their success. It seems like a Hail Mary strategy.
Kmart’s time has past. For years the company has drifted without a core message and its sales plunged. Now it wants to be Marshalls or Overstock.com. It’s not going to work. The chain has become irrelevant to consumers.
This is wacky. I actually think they’re aiming a step below T.J. Maxx, Ross, etc. It sounds like they are emulating the old Building 19 in Boston, which went out of business in 2013 (note to former Bostonians like me … at some point, Skaggs joined the Building 19 family, and it’s gone too). Those guys sold seriously distressed merchandise that was liquidated for good reason, by chains that also got liquidated.
There’s already a place to buy and sell distressed merchandise. It’s called eBay.
Another step down the ladder to obscurity we go.
I recently visited a Kmart and frankly the entire store looked like it was offering distressed merchandise. Like any retailer, Kmart has its good and not-so-good stores, but as other panelist have commented, I do not see a viable niche for Kmart either by staying where they currently are (a downscale alternative to Walmart) or by being a liquidator of distressed merchandise.
My counsel would be to close more under-performing stores and focus on the Sears side of the business, where the brand is stronger and a discernible niche is still possible to cultivate.
The idea is sound in principle. Challenges for Kmart include the already crowded market for liquidated goods as well as having the right supply chain and infrastructure to support this model. Additionally, the large footprint of a typical Kmart store will work against full execution of such a strategy.
The best operators in this space have been doing this for years and have figured out how to create the treasure hunt experience and do so with high efficiency.
Perhaps this provides Kmart with some additional breathing room. But this comes very late in the game and the clock is ticking.
None of these strategies are new. Kmart has tried many new strategies, so many that it can be confusing to consumers. What does Kmart stand for? Low prices? Treasure hunt shopping? Spontaneous specials? Discarded inventory? With changing strategies and revolving door merchandise, what makes consumers loyal? Kmart has not found that key, core appeal yet — or they may have tried it but not settled on it.
So now Kmart is going to reinvent itself as a hybrid of a discount store, plus a mix of Marshalls and Big Lots? This doesn’t feel like the answer any more than several other “strategies” Kmart has tried over the past several years. Way past time to fold up the tent and move on.
No, they will not be able to mount a national promise of brag-worthy deals. There are too many competing outlets for distressed goods.
This is akin to Big Lots and others in various forms and formats, e.g., T.J. Maxx.
Lampert continues to string out his two formats in hopes of the REIT, or some other financial play, catching on.
Keep moving folks, nothing here to see.
Lampert is living proof: “retail ain’t for sissies!”
The concern I would have is in product presentation and fragmented product lines. For me one of the only strengths for Kmart was consistency in product offering and being able to find what I wanted because I knew Kmart had it. I can see a huge clearance presentation coming its way to Kmart with this strategy.
Over recent years, Kmart has had some interesting ideas but lacked the ability to deliver on them completely. I am not sure this will be executed any better but I’m willing to give it a look-see.
The jury is out for my 2 cents!
Kmart was left in the dust so many years ago by so many competitors. It is not easy to forecast or even imagine them being a significant player in the field again. How are they going to get people in the stores? Why go to Kmart when there are good deals in many other stores? Maybe liquidated merchandise is an answer. There has to be something — or else cut the losses and lock the doors.
Sorry, Kmart. Tuesday Morning already exists.
For those of us who used to take pride in working for Sears, this is embarrassing.
In my opinion, the best thing to do is to cut costs and improve the company’s image. Selling liquidated products may help, but the image is everything. Becoming profitable is the number one goal of image building. Satisfaction of the customer must continue to be the top priority.
Frankly, I don’t think Kmart is savvy enough to make this work. I doubt there is a steady enough stream of great liquidations to make this sustainable. Much of TJ Maxx’s and others’ outlet business isn’t based in actual liquidations, but in merchandise that is designed just for them by well known brands which is tweaked to lower the costs. I don’t think the Kmart has the talent or the relationships to make this happen.
This might work in the current environment where Burlington Coat, T.J. Maxx, Tuesday Morning ,etc. have been operating for decades selling excess or last season’s merchandise. I think if they try this approach, though, Kmart absolutely should change its name to something spunkier and newer with no reference to Kmart at all even as they use the old Kmart facilities. The Kmart brand name is just death and carries too much baggage for many shoppers who just never consider shopping there anymore.
In a Christmas grab bag gift exchange, I got a fun, casual winter scarf that had its Kmart hang-tag on. It’s quite nice and I’ve been wearing it for the last six weeks. I never would have thought to go shopping at Kmart for a winter scarf, and that sort of benign rejection of Kmart by consumers is sooo at the root of their problems.
First, Kmart was never great. Will Kmart deliver on its promise? No. Will liquidation merchandise turn Kmart around? No. Goodwill beat them to it.
Yes. Close-out and liquidation deals are available on a daily basis. All of the dollar stores are a testimony to this model when it is utilized correctly. Whether this will turn Kmart’s business around can only be determined in due time.
Let’s have a show of hands: how many saw “Kmart” and “liquidated” in the headline and thought…?
Will it work? Of course not; the only liquidation that offers hope is Eddie’s ownership in it. And then they would need a miracle, for the ages.
This is much tougher than it sounds to pull off.
First you need VERY capable buyers. Not sure Kmart can attract those.
Second, you need a great merchandise planning and allocation team (not all those dogs can hunt in 900+ stores). Not sure Kmart has or can build that team either.
It’s all about the execution on this play and, unfortunately, Kmart has shown little ability to execute well.
Kmart has not invested in their stores enough to keep them pretty and updated, so this new strategy of appealing to a more “discount seeking” customers could be their last chance to rebound. Their stores already look like they are stocked with distress merchandise….
With Ollies and Big Lots in the game already along with TJX, and others with liquidating niches (electronics, etc.) on the internet, Kmart will have to go for special purchases that they can easily sell quickly. They have the stores, they definitely have sales space within the stores, the only hold back is the type of liquidation merchandise they go after and how they price it.
I believe the merchandising group can deliver, but whether marketing/advertising can get the word and value of “liquidated” merchandise across to not only Kmart regulars, but to a broader customer base is in question.
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I’m surprised they have lasted as long as they have. And no, I don’t think this will turn Kmart’s business around. Liquidation is already a crowded market between dollar stores, T.J. Maxx and Ross, and now the flash sale websites that are cropping up everywhere. These companies are all hunting after the same inventory, and the liquidation market is already consolidating as mainstream players absorb these concepts into their own operations — from HauteLook to Zulily to Gilt. It’s not all high-end liquidation, either. Zulily is by no means all high-end. There’s another upstart, Jane.com that is decidedly low-end.
This is just flailing. Perhaps the end is near after all.
One fundamental truth about the art of shopping is that shoppers want to search and discover in hopes of being surprised and delighted. If Kmart can tap into this “bazaar” behavior on a consistent basis then they may, in fact, be onto something. The challenge will be to logistically maintain and cycle this inventory in a manner that will entice shoppers to return to the store on a regular rotation in hopes of discovering that prize.
Whether Kmart can pull this off and not turn into a ravaged Goodwill-Dollar General, hybrid remains to be seen. I certainly wouldn’t bet on their success. It seems like a Hail Mary strategy.
Kmart’s time has past. For years the company has drifted without a core message and its sales plunged. Now it wants to be Marshalls or Overstock.com. It’s not going to work. The chain has become irrelevant to consumers.
This is wacky. I actually think they’re aiming a step below T.J. Maxx, Ross, etc. It sounds like they are emulating the old Building 19 in Boston, which went out of business in 2013 (note to former Bostonians like me … at some point, Skaggs joined the Building 19 family, and it’s gone too). Those guys sold seriously distressed merchandise that was liquidated for good reason, by chains that also got liquidated.
There’s already a place to buy and sell distressed merchandise. It’s called eBay.
Another step down the ladder to obscurity we go.
I recently visited a Kmart and frankly the entire store looked like it was offering distressed merchandise. Like any retailer, Kmart has its good and not-so-good stores, but as other panelist have commented, I do not see a viable niche for Kmart either by staying where they currently are (a downscale alternative to Walmart) or by being a liquidator of distressed merchandise.
My counsel would be to close more under-performing stores and focus on the Sears side of the business, where the brand is stronger and a discernible niche is still possible to cultivate.
The idea is sound in principle. Challenges for Kmart include the already crowded market for liquidated goods as well as having the right supply chain and infrastructure to support this model. Additionally, the large footprint of a typical Kmart store will work against full execution of such a strategy.
The best operators in this space have been doing this for years and have figured out how to create the treasure hunt experience and do so with high efficiency.
Perhaps this provides Kmart with some additional breathing room. But this comes very late in the game and the clock is ticking.
None of these strategies are new. Kmart has tried many new strategies, so many that it can be confusing to consumers. What does Kmart stand for? Low prices? Treasure hunt shopping? Spontaneous specials? Discarded inventory? With changing strategies and revolving door merchandise, what makes consumers loyal? Kmart has not found that key, core appeal yet — or they may have tried it but not settled on it.
So now Kmart is going to reinvent itself as a hybrid of a discount store, plus a mix of Marshalls and Big Lots? This doesn’t feel like the answer any more than several other “strategies” Kmart has tried over the past several years. Way past time to fold up the tent and move on.
No, they will not be able to mount a national promise of brag-worthy deals. There are too many competing outlets for distressed goods.
This is akin to Big Lots and others in various forms and formats, e.g., T.J. Maxx.
Lampert continues to string out his two formats in hopes of the REIT, or some other financial play, catching on.
Keep moving folks, nothing here to see.
Lampert is living proof: “retail ain’t for sissies!”
The concern I would have is in product presentation and fragmented product lines. For me one of the only strengths for Kmart was consistency in product offering and being able to find what I wanted because I knew Kmart had it. I can see a huge clearance presentation coming its way to Kmart with this strategy.
Over recent years, Kmart has had some interesting ideas but lacked the ability to deliver on them completely. I am not sure this will be executed any better but I’m willing to give it a look-see.
The jury is out for my 2 cents!
Kmart was left in the dust so many years ago by so many competitors. It is not easy to forecast or even imagine them being a significant player in the field again. How are they going to get people in the stores? Why go to Kmart when there are good deals in many other stores? Maybe liquidated merchandise is an answer. There has to be something — or else cut the losses and lock the doors.
Sorry, Kmart. Tuesday Morning already exists.
For those of us who used to take pride in working for Sears, this is embarrassing.
In my opinion, the best thing to do is to cut costs and improve the company’s image. Selling liquidated products may help, but the image is everything. Becoming profitable is the number one goal of image building. Satisfaction of the customer must continue to be the top priority.
Frankly, I don’t think Kmart is savvy enough to make this work. I doubt there is a steady enough stream of great liquidations to make this sustainable. Much of TJ Maxx’s and others’ outlet business isn’t based in actual liquidations, but in merchandise that is designed just for them by well known brands which is tweaked to lower the costs. I don’t think the Kmart has the talent or the relationships to make this happen.
This might work in the current environment where Burlington Coat, T.J. Maxx, Tuesday Morning ,etc. have been operating for decades selling excess or last season’s merchandise. I think if they try this approach, though, Kmart absolutely should change its name to something spunkier and newer with no reference to Kmart at all even as they use the old Kmart facilities. The Kmart brand name is just death and carries too much baggage for many shoppers who just never consider shopping there anymore.
In a Christmas grab bag gift exchange, I got a fun, casual winter scarf that had its Kmart hang-tag on. It’s quite nice and I’ve been wearing it for the last six weeks. I never would have thought to go shopping at Kmart for a winter scarf, and that sort of benign rejection of Kmart by consumers is sooo at the root of their problems.
First, Kmart was never great. Will Kmart deliver on its promise? No. Will liquidation merchandise turn Kmart around? No. Goodwill beat them to it.
Yes. Close-out and liquidation deals are available on a daily basis. All of the dollar stores are a testimony to this model when it is utilized correctly. Whether this will turn Kmart’s business around can only be determined in due time.
Let’s have a show of hands: how many saw “Kmart” and “liquidated” in the headline and thought…?
Will it work? Of course not; the only liquidation that offers hope is Eddie’s ownership in it. And then they would need a miracle, for the ages.
This is much tougher than it sounds to pull off.
First you need VERY capable buyers. Not sure Kmart can attract those.
Second, you need a great merchandise planning and allocation team (not all those dogs can hunt in 900+ stores). Not sure Kmart has or can build that team either.
It’s all about the execution on this play and, unfortunately, Kmart has shown little ability to execute well.
Kmart has not invested in their stores enough to keep them pretty and updated, so this new strategy of appealing to a more “discount seeking” customers could be their last chance to rebound. Their stores already look like they are stocked with distress merchandise….
With Ollies and Big Lots in the game already along with TJX, and others with liquidating niches (electronics, etc.) on the internet, Kmart will have to go for special purchases that they can easily sell quickly. They have the stores, they definitely have sales space within the stores, the only hold back is the type of liquidation merchandise they go after and how they price it.
I believe the merchandising group can deliver, but whether marketing/advertising can get the word and value of “liquidated” merchandise across to not only Kmart regulars, but to a broader customer base is in question.