October 31, 2008
Kmart Times Holiday Sales
Kmart won’t have to worry this year about those pesky websites that post Black Friday deals weeks in advance of the official start of the holiday season. The struggling chain has decided to move the holiday season up by nearly four weeks and kick off Black Friday, two days after Halloween. Technically, that would make the new kickoff to the holiday season Black Sunday, but why quibble. The chain is struggling and it’s trying to do something, much like the recent promotion of its layaway program.
The chain announced it would get the holiday started by offering special “Early Black Friday” deals on home appliances and consumer electronics.
According to MasterCard Advisors’ SpendingPulse survey, consumer electronics and home appliance sales across retail were off nearly 14 percent in September following a 5.5 percent drop in August.
“Home electronics are relevant items customers will be looking for,” Tom Aiello, divisional VP-public relations at Sears Holdings, told AdAge.com. “It’s those really super-deep discounted items that are really motivating that you would never see all year round.”
Mr. Aiello said Kmart’s move is based on consumers saying they are looking to get an early start on holiday shopping so they can spread out spending and reduce the amount of items they purchase on credit.
“It all comes back to what the consumer was asking for,” he said. “When we were doing planning earlier in the year, the economy was already showing signs of where we are at today.”
Discussion Questions: What are your thoughts on Kmart’s recent marketing initiatives including its layaway program and “Early Black Friday” promotion? What about the Kmart’s research showing that its customers are looking to start shopping earlier for the holiday this year than in the past?
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All retailers need to generate sales, but there are degrees of desperation that aren’t productive.
With all due respect to some of the commentary, there is simply too much evidence in support of a probable drop in consumer spending. The circumstances of the last recession are not even remotely comparable. Please…politicians are loose enough with partial “facts.” As analysts, let’s be very clear and complete.
Kmart’s relaunch of the layaway program is a perfect response to the current environment. The key factors are less weekly disposable income, less available credit on credit cards, and higher minimum payments on existing credit balances. These are not projections…they are facts for almost all consumer groups, and Kmart’s in particular. Given these facts, offering the consumer a chance to pay for something over time, in manageable increments, is a really good idea.
Are some of us missing the point? Of course this is just going to move purchases which might have taken place at a later date into November. It’s a market share game right now! Expanding consumer spending is simply out of the question.
However: the Kmart layaway program contains only one price adjustment point…and that takes place in the first 7 days. This HAS to be rethought. The consumer MUST be given the opportunity to have the price adjust to the lowest price offered during the layaway period.
Two days after Halloween is way too early for Black Friday. I agree that a lot of the public will be focused on the election and what a new President and administration will do for them.
Consumers may not yet be willing to spend their hard earned dollars on holiday items, if they don’t think they will have a job or know how they will continue to be affected by the economy. They will decide that closer to the holiday season and then figure out what they can really afford to purchase. Maybe we will find more consumers paying by cash than credit cards this season!
Mass merchants like Kmart have used loss leaders since forever. Kmart’s marketing department got good press from the early Black Friday publicity. Why not?
For those who claim the Kmart brand “irrelevant”: millions of people shop there. For those folks, Kmart sure is relevant.
Regardless of what Kmart does, I have a feeling that the parking lot in front of Kmart will continue to remain mostly empty. I seriously doubt they have conducted any meaningful research. Most likely their minds were already made up to start Christmas early and then skewed the research results to concur with their promotion. All Walmart has to do is lower its prices on the same products or match their ad like they normally do.
I like the early jump on sales and bringing back layaway is an excellent customer relations move. Kmart needs an edge and getting aggressive on Black Friday sales is a logical direction.
All retailers will need a unique hook to get customers to buy this season. I agree that customers will be shopping earlier, but not because they want to. If the economy gets worse in the next month, credit may be even harder to come by so getting customer to shop now is the safest bet. It’s up to retailers to give the customer reasons to walk in the door. Early sales and different credit options are just two tools that retailers have in their marketing toolbox. We will have to fire on all cylinders to get through this season in one piece!
Perhaps next year we will see Kmart presenting “Christmas in September”–why wait until Halloween?
Two days after Halloween the country (and much of the world) will be focused on the election. As much as consumers may be tired of the campaign rhetoric and vitriol, the prospect of change will be a precursor to consumers feeling more optimistic about the economy. That said, we expect customers to take a cautiously optimistic stance at best.
While the Kmart brand is, as suggested above, fairly irrelevant, the holidays and holiday shopping are not relevant yet either. Consumers are smart enough to wait for better deals closer to the holidays–it is no secret to anyone that this will be a tough season.
Layaway may have some traction as an idea in today’s economic climate but would work better if Kmart hadn’t managed its way into irrelevance over the past several years. It is a distant third in a two-person race between Walmart and Target, and “Black Friday” specials in early November sound like a gimmick. Are they any different from the other doorbusters, early bird specials, etc, that retailers use to drive early November traffic?
I’m also skeptical that consumers have much motivation to shop early this year, although stores have to give it their best shot given the short calendar between the holidays. If consumers are concerned about the economy and ratcheting down their credit-card purchases, they are more likely to wait until the last minute to buy.
Hmmm, maybe I am just having a difficult time jumping on any bandwagon sponsored by Kmart these days. I think the earlier version of Black Friday will simply dilute the second, and probably the third, fourth, fifth, and sixth versions of Black Friday, which probably will follow.
This may be a case of every little bit helps or a case of too little too late. We shall see. As for layaway, that may become an attractive proposition to credit starved consumers. We may see more of that again.
Last year, Walmart stopped its layaway program. This year credit is hard to come by anywhere. In an atmosphere in which consumers are wary of using credit cards and concerned about what they purchase for the holidays, the announcement of a layaway plan by Kmart may be some welcome relief and a sign of Kmart offering some assistance to them. I think it may have a positive impact on their sales.
I think Kmart has done a good thing for themselves with this Black Friday move. They’ve already bought, and likely shipped, their Christmas inventory. Everyone’s going to have a tough season. They need to get the traffic they do have converted to more purchases. I’m not sure if this plan is enough to garner any more traffic.
If Kmart’s (or in fact any retailer’s) reading of the tea leaves is that credit will be tighter, moods will be gloomier, and unemployment will be higher in December than they are now, then getting as much of their holiday inventory out the door as early as possible is a smart move.
The lead story in today’s New York Times is very telling. “ECONOMY SHRINKS WITH CONSUMERS LEADING THE WAY.” What is noteworthy is that this data is pre-crisis data. It is for July, August and September. Paul Krugman pointed out that no matter how bad the times, consumers almost never cut back on spending.
Consumer spending rose during the 2001 recession. Since 1980, only one quarter (in 1990) saw a drop. In the 80s, spending grew along with a 10% consumer savings rate. In the 90s, there was essentially no saving. In the last 10 years, increases in consumer spending were supported by a doubling of consumer debt. Today, the consumer has no place to go to generate cash for buying. Further, in the J-A-S period, durable goods (like appliances and TVs) fell 14%.
I strongly agree with a couple of previous comments by my colleagues. (1) Kmart is irrelevant and (2) the research was self serving. First the research; by every measure, the consumer is hunkering down. Their tendency to buy is not going to be changed next week. The only appliances that are going to be sold next week are ones that would have been sold anyway and likely for higher prices. Toys for the kids are going to have a much higher priority in the family budget than replacing a TV or dishwasher which can wait another six months or more. If I am a retailer, I hope that the economic news falls by the wayside as we approach Christmas and the consumer stars to feel a little bolder. Kmart’s promotion is only promoting the wish list and not the shopping list.
That brings me to Kmart is irrelevant. I believe Kmart will not be alive when the economy finally turns. Their problems are systemic. An extended sales period will only result in fewer sales at lower prices. If this promotion does anything, it reminds the consumer that someday they will buy that new TV. And, when they are ready, they will pass Kmart on their way to Walmart, Best Buy or Costco.
Kmart is desperate! Everyone knows that they are a sinking ship and rats on a sinking ship always do one thing–climb to higher ground, or in this case move their sale date forward. Kmart is an indicator of nothing. No competitor pays any attention to anything they do. The only people talking about Kmart are students in business school who study Kmart in hopes of avoiding duplicating Kmart’s mistakes. This is a two semester course.
It’s a smart move by Kmart. The consumer will attempt to lessen the impact of the economic downturn by relying less on credit this year…call it old fashioned, but that’s exactly what the consumer would do before credit was easily available. I expect other retailers that can manage the logistics of lay-away to follow suit.
The economic downturn has been felt a lot earlier by Kmart’s core consumer–one of the reasons for its poor performance. Kmart has had time to properly research and react to the consumers. I don’t know if it will be enough to stop the retailer’s problems, but it will be better than closing additional stores and laying off personnel during the holidays.
As noted during this panel’s recent discussion of layaway, I’m in the kudos for Kmart camp when it comes to layaway. Highly unlikely we’ll see an industry-wide resurrection of that buying method, but it makes sense for Kmart’s core consumer.
Regarding the chain’s Black Friday marketing, I recently saw a quote from the founder of DealNews.com noting that Black Friday is no longer a day, but a season. I couldn’t agree more–especially during this holiday shopping season when more consumers have adopted a frugal mindset, including shopping earlier. Focusing on the CE category is smart. And while the early deals alone are nice, complementing them with layaway will likely resonate with thrifty consumers. I’m unwilling to say this alone will make Kmart’s holiday sales festive, but retailers industry wide can’t sit on the sidelines and simply hope customers show up for holiday shopping. Like Kmart, they must craft initiatives that appeal to the store’s core consumer. I think Kmart’s initiative does just that.
Its like treating cancer with a band-aid. Kmart needs radical surgery to deal with the challenges they are facing. They need to find a completely new direction and perhaps even change their name.
The most likely effect this will have on consumers is that they will see that Kmart thinks it’s going to be a really bad season and give them more justification to hunker down on spending. The next impulse will probably be–I wonder how much lower the prices will go? And is Kmart the best place to buy? And will Kmart even be around if I have a problem with my purchase? Too little, too late.
My guess is that most of Kmart’s competitors were hoping to hold off breaking prices aggressively so early, but are fully prepared to respond to Kmart’s move. Kmart simply isn’t in a strong competitive position, so I wouldn’t think this will help Kmart much.
But they won’t come earlier for any economic reason of their own. They’ll come because that’s when the stores will be trying to get them to come. Sales, ads, coupons, etc. They’ll spend less though, and worst is yet to come.
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All retailers need to generate sales, but there are degrees of desperation that aren’t productive.
With all due respect to some of the commentary, there is simply too much evidence in support of a probable drop in consumer spending. The circumstances of the last recession are not even remotely comparable. Please…politicians are loose enough with partial “facts.” As analysts, let’s be very clear and complete.
Kmart’s relaunch of the layaway program is a perfect response to the current environment. The key factors are less weekly disposable income, less available credit on credit cards, and higher minimum payments on existing credit balances. These are not projections…they are facts for almost all consumer groups, and Kmart’s in particular. Given these facts, offering the consumer a chance to pay for something over time, in manageable increments, is a really good idea.
Are some of us missing the point? Of course this is just going to move purchases which might have taken place at a later date into November. It’s a market share game right now! Expanding consumer spending is simply out of the question.
However: the Kmart layaway program contains only one price adjustment point…and that takes place in the first 7 days. This HAS to be rethought. The consumer MUST be given the opportunity to have the price adjust to the lowest price offered during the layaway period.
Two days after Halloween is way too early for Black Friday. I agree that a lot of the public will be focused on the election and what a new President and administration will do for them.
Consumers may not yet be willing to spend their hard earned dollars on holiday items, if they don’t think they will have a job or know how they will continue to be affected by the economy. They will decide that closer to the holiday season and then figure out what they can really afford to purchase. Maybe we will find more consumers paying by cash than credit cards this season!
Mass merchants like Kmart have used loss leaders since forever. Kmart’s marketing department got good press from the early Black Friday publicity. Why not?
For those who claim the Kmart brand “irrelevant”: millions of people shop there. For those folks, Kmart sure is relevant.
Regardless of what Kmart does, I have a feeling that the parking lot in front of Kmart will continue to remain mostly empty. I seriously doubt they have conducted any meaningful research. Most likely their minds were already made up to start Christmas early and then skewed the research results to concur with their promotion. All Walmart has to do is lower its prices on the same products or match their ad like they normally do.
I like the early jump on sales and bringing back layaway is an excellent customer relations move. Kmart needs an edge and getting aggressive on Black Friday sales is a logical direction.
All retailers will need a unique hook to get customers to buy this season. I agree that customers will be shopping earlier, but not because they want to. If the economy gets worse in the next month, credit may be even harder to come by so getting customer to shop now is the safest bet. It’s up to retailers to give the customer reasons to walk in the door. Early sales and different credit options are just two tools that retailers have in their marketing toolbox. We will have to fire on all cylinders to get through this season in one piece!
Perhaps next year we will see Kmart presenting “Christmas in September”–why wait until Halloween?
Two days after Halloween the country (and much of the world) will be focused on the election. As much as consumers may be tired of the campaign rhetoric and vitriol, the prospect of change will be a precursor to consumers feeling more optimistic about the economy. That said, we expect customers to take a cautiously optimistic stance at best.
While the Kmart brand is, as suggested above, fairly irrelevant, the holidays and holiday shopping are not relevant yet either. Consumers are smart enough to wait for better deals closer to the holidays–it is no secret to anyone that this will be a tough season.
Layaway may have some traction as an idea in today’s economic climate but would work better if Kmart hadn’t managed its way into irrelevance over the past several years. It is a distant third in a two-person race between Walmart and Target, and “Black Friday” specials in early November sound like a gimmick. Are they any different from the other doorbusters, early bird specials, etc, that retailers use to drive early November traffic?
I’m also skeptical that consumers have much motivation to shop early this year, although stores have to give it their best shot given the short calendar between the holidays. If consumers are concerned about the economy and ratcheting down their credit-card purchases, they are more likely to wait until the last minute to buy.
Hmmm, maybe I am just having a difficult time jumping on any bandwagon sponsored by Kmart these days. I think the earlier version of Black Friday will simply dilute the second, and probably the third, fourth, fifth, and sixth versions of Black Friday, which probably will follow.
This may be a case of every little bit helps or a case of too little too late. We shall see. As for layaway, that may become an attractive proposition to credit starved consumers. We may see more of that again.
Last year, Walmart stopped its layaway program. This year credit is hard to come by anywhere. In an atmosphere in which consumers are wary of using credit cards and concerned about what they purchase for the holidays, the announcement of a layaway plan by Kmart may be some welcome relief and a sign of Kmart offering some assistance to them. I think it may have a positive impact on their sales.
I think Kmart has done a good thing for themselves with this Black Friday move. They’ve already bought, and likely shipped, their Christmas inventory. Everyone’s going to have a tough season. They need to get the traffic they do have converted to more purchases. I’m not sure if this plan is enough to garner any more traffic.
If Kmart’s (or in fact any retailer’s) reading of the tea leaves is that credit will be tighter, moods will be gloomier, and unemployment will be higher in December than they are now, then getting as much of their holiday inventory out the door as early as possible is a smart move.
The lead story in today’s New York Times is very telling. “ECONOMY SHRINKS WITH CONSUMERS LEADING THE WAY.” What is noteworthy is that this data is pre-crisis data. It is for July, August and September. Paul Krugman pointed out that no matter how bad the times, consumers almost never cut back on spending.
Consumer spending rose during the 2001 recession. Since 1980, only one quarter (in 1990) saw a drop. In the 80s, spending grew along with a 10% consumer savings rate. In the 90s, there was essentially no saving. In the last 10 years, increases in consumer spending were supported by a doubling of consumer debt. Today, the consumer has no place to go to generate cash for buying. Further, in the J-A-S period, durable goods (like appliances and TVs) fell 14%.
I strongly agree with a couple of previous comments by my colleagues. (1) Kmart is irrelevant and (2) the research was self serving. First the research; by every measure, the consumer is hunkering down. Their tendency to buy is not going to be changed next week. The only appliances that are going to be sold next week are ones that would have been sold anyway and likely for higher prices. Toys for the kids are going to have a much higher priority in the family budget than replacing a TV or dishwasher which can wait another six months or more. If I am a retailer, I hope that the economic news falls by the wayside as we approach Christmas and the consumer stars to feel a little bolder. Kmart’s promotion is only promoting the wish list and not the shopping list.
That brings me to Kmart is irrelevant. I believe Kmart will not be alive when the economy finally turns. Their problems are systemic. An extended sales period will only result in fewer sales at lower prices. If this promotion does anything, it reminds the consumer that someday they will buy that new TV. And, when they are ready, they will pass Kmart on their way to Walmart, Best Buy or Costco.
Kmart is desperate! Everyone knows that they are a sinking ship and rats on a sinking ship always do one thing–climb to higher ground, or in this case move their sale date forward. Kmart is an indicator of nothing. No competitor pays any attention to anything they do. The only people talking about Kmart are students in business school who study Kmart in hopes of avoiding duplicating Kmart’s mistakes. This is a two semester course.
It’s a smart move by Kmart. The consumer will attempt to lessen the impact of the economic downturn by relying less on credit this year…call it old fashioned, but that’s exactly what the consumer would do before credit was easily available. I expect other retailers that can manage the logistics of lay-away to follow suit.
The economic downturn has been felt a lot earlier by Kmart’s core consumer–one of the reasons for its poor performance. Kmart has had time to properly research and react to the consumers. I don’t know if it will be enough to stop the retailer’s problems, but it will be better than closing additional stores and laying off personnel during the holidays.
As noted during this panel’s recent discussion of layaway, I’m in the kudos for Kmart camp when it comes to layaway. Highly unlikely we’ll see an industry-wide resurrection of that buying method, but it makes sense for Kmart’s core consumer.
Regarding the chain’s Black Friday marketing, I recently saw a quote from the founder of DealNews.com noting that Black Friday is no longer a day, but a season. I couldn’t agree more–especially during this holiday shopping season when more consumers have adopted a frugal mindset, including shopping earlier. Focusing on the CE category is smart. And while the early deals alone are nice, complementing them with layaway will likely resonate with thrifty consumers. I’m unwilling to say this alone will make Kmart’s holiday sales festive, but retailers industry wide can’t sit on the sidelines and simply hope customers show up for holiday shopping. Like Kmart, they must craft initiatives that appeal to the store’s core consumer. I think Kmart’s initiative does just that.
Its like treating cancer with a band-aid. Kmart needs radical surgery to deal with the challenges they are facing. They need to find a completely new direction and perhaps even change their name.
The most likely effect this will have on consumers is that they will see that Kmart thinks it’s going to be a really bad season and give them more justification to hunker down on spending. The next impulse will probably be–I wonder how much lower the prices will go? And is Kmart the best place to buy? And will Kmart even be around if I have a problem with my purchase? Too little, too late.
My guess is that most of Kmart’s competitors were hoping to hold off breaking prices aggressively so early, but are fully prepared to respond to Kmart’s move. Kmart simply isn’t in a strong competitive position, so I wouldn’t think this will help Kmart much.
But they won’t come earlier for any economic reason of their own. They’ll come because that’s when the stores will be trying to get them to come. Sales, ads, coupons, etc. They’ll spend less though, and worst is yet to come.