PGDM MAKRETING (2018-2020)

Marketing Management-I

(Walmart Vs. Kmart)

(Section-F)

Assignment by:

Nikhil Lunia (201832072)

Sahil Pugalia (201832086)
Prakhar Doshi (201832078)
Prateek Kabra (201832080)
Ruchika Dadhich (201832085)
Radhika Agrawal (201832082)
Sanmesh Waghmare (201832087)

Course Instructor
Prof. Subodh Tagare
 INTRODUCTION

Fortune of KMART:
 Kmart Corporation is an American big box department store chain headquartered in
Illinois, United States, incorporated in 1888 as S. S. Kresge Corporation with an
investment of $6700 saved from his job.
 He jointly owned the first store with his former tin-ware customer, John McCrory. Kresge
and McCrory added a second store in downtown Detroit the following year. In 1912,
Kresge incorporated the S.S. Kresge Company in Delaware with 85 stores. By 1924,
Kresge was worth approximately $375 million and owned real estate of the approximate
value of $100 million.
 On March 1, 1962, under the leadership of executive Harry Cunningham, S.S. Kresge
Company opened the first Kmart named store, in Garden City, Michigan, just four months
before the first Walmart opened.
 In 1981, the 2,000th Kmart store opened. By the end of 1981, there were 2,055 Kmart
stores across the United States, Canada, and Puerto Rico.
 During the 1980s, the company's fortunes began to change; many of Kmart's stores were
considered to be outdated and in decaying condition. In 1987, the Kmart Corporation sold
its remaining 76 Kresge and Jupiter stores in the United States to McCrory Stores, and the
brands were almost entirely discontinued.
 On July 25, 1991, to revive the growth, Kmart came up with Super Kmart Center opened
an all-new location in Medina, Ohio, featuring a full-service grocery and general
merchandise. However, this location was downsized in 2011 and was one of a number of
Kmarts closed in early 2012 due to dismal Christmas 2011 sales.
 On April 23, 1997, Big Kmart opened in Chicago, Illinois. The format focuses on home
fashions, children's apparel, and consumables. Initially, the Big Kmart stores had proven
to be very successful, and by the end of 1999, Kmart had seen their sales numbers grow
by 16.5% due to success of their Big Kmart stores. By the end of 1998, 62% of Kmart's
stores were Big Kmart stores.
 In 2001, Kmart had opened several new Kmart Super Center stores as part of Kmart's
plan to expand their Kmart Super Center store portfolio. However, due to Kmart filing for
bankruptcy in January 2002, Kmart was unable to open any more new Kmart Super
Center stores.
 On January 13, 2003, Kmart closed 326 stores due to a lack of profitability and poor sales.
 On May 6, 2003 Kmart emerged from bankruptcy protection as a subsidiary of the new
Kmart Holding Corporation.
 On November 17, 2004, Kmart’s management announced its intention to purchase Sears
for $11 billion. As a part of the merger, the Kmart Holding Corporation (the company that
owns Kmart) was transferred to the new Sears Holdings Corporation and Sears was
purchased by the new Sears Holdings Corporation. The new corporation announced that
it would continue to operate stores under both the Sears and Kmart brands.
Fortune of WALMART:
 Walmart, an American discount department store chain, began in 1950 when
businessman Sam Walton purchased a store and opened Walton's 5 & 10. The Walmart
chain was founded in 1962 with a single store in Rogers, expanding outside Arkansas by
1968 and throughout the rest of the Southern United States by the 1980s, ultimately
operating a store in every state of the United States.
 Walton opened the second store in Harrison, Arkansas that year. By 1967, the company
grew to 24 stores across the state of Arkansas, and had reached $12.6 million in sales, and
by 1968, the company opened its first stores outside of Arkansas in Sikeston, Missouri
and Claremore, Oklahoma.
 By 1977, Walmart expanded into Illinois and made its first corporate acquisition. This
was followed by the acquisition of the Hutcheson Shoe Company in 1978. In the same
year Walmart also branched out into several new markets, launching its pharmacy, auto
service center, and jewellery divisions.
 In 1985, with 882 stores with sales of $8.4 billion and 104,000 associates, the company
expanded further. On April 7, 1992, Walmart had a presence in 45 states
 By 1995, Walmart had 1,995 discount stores, 239 supercentres, 433 sam’s clubs and 276
international stores with sales at $93.6 billion and 675,000 associates. Walmart expanded
into its final state (Vermont), and also expanded into South America, with three new units
in Argentina and five in Brazil.
 In 1995, Walmart was ranked 5th by the Fortune magazine on its Global Most Admired
All-Stars list.
 In 2005, Walmart had $312.4 billion in sales, more than 6,200 facilities around the world,
including 3,800 stores in the United States and 3,800 international units, and more than
1.6 million associates employed worldwide.
 DAVID VS. GOLIATH
Overview:

It is a popular story of the giant Goliath, a nine-foot soldier from Gath, who boasted he
could beat any individual soldier in the Israelite army. Nobody in the army dared to take
him on - except David, a shepherd boy who believed strongly in god. King Saul wanted to
arm David with a sword and armor, but David refused, saying his strength came from god,
not from weapons. All he brought to the battlefield was a sling and a stone.David's
expertly flung stone nailed Goliath in the head and killed him.
This situation is often accredited to a scenario where two parties clash, with one party
having an overwhelming advantage over the other, typically in veterancy or size. In
general, the party not having any overwhelming advantage typically wins in a ‘David vs.
Goliath’ situation.
By using the analogy of David vs Golaith, we learn how Walmart expanded without any
funding from investors using the only its personal capital and overtook Kmart which was
started 62 years ago and reached the great milestone by the time Walmart opened their
first store.
The battle between Kmart and Wal-Mart began the year they both were founded, 1962. In
the ensuing thirty years until his death, Sam Walton built Walmart into the nation’s
largest retail chain by breaking many of the rules of retailing. He popularized discount
pricing, avoiding the periodic sales on which other retailers relied and used instead ‘low
prices always’ on many brand-name goods. He also built stores concentrating on small
Southern and Midwestern towns that other retailers avoided.
A significant milestone in the battle between Kmart and Walmart was 1987. At this time
Kmart was still way ahead. It had nearly twice as many discount stores, 2,223 compared
with Walmart’s 1,198. Also, it had sales of $25.63 billion compared with Walmart’s sales
of $15.96 billion. Walmart sat in open fields outside small towns and picked off the
customers of aging mom-and-pop stores. That enabled more efficient supply. 

Key Success Factor Kmart Walmart

Location 25% of customers find 49 % of Walmart
Kmart inconvenient. customers drive past
their Kmart to go to
Walmart.
Market share 23% 42 %
(1995 estimate)
Sales/sq.feet (1995) $195 $333
Core customer Over 55 (Age), Under 44 (Age),
$20K + (Income), $40K + (Income),
No kids at home. Kids at home.
 WALMART VS. KMART

 Location:

When Sam Walton was running Walmart, he carefully selected locations within
easy drives of many cities but on cheap real estate of interstate highways.  This
made large bulk purchases easy.  By contrast, Kmart occupied expensive real
estate that was harder to access by car.

 Logistics:

In the 1990's, Walmart revolutionized several great cost-cutting moves.  It

integrated its computer knowledge with that of major vendors.  That enabled
more efficient supply.  For decades, Walmart offered the most efficient supply
chain in the world, which helped in keeping costs down.

 Ruthless cost-cutting:

While Sam Walton was running the company, executives minimized luxury and
overhead particularly at headquarters.  Walmart also ruthlessly negotiated with
its suppliers.  These kept costs and therefore, prices low.

 Efflux of time & Store design:

Kmart was kind of old-hat when Walmart started hitting big. Their stores looked
dated, they no longer did the Blue Plate Specials, they seemed to have no theme,
just a hodgepodge of everything.

 Use of Information Technology:

Wal-Mart’s next logical step was into the world of Electronic Data Interchange,
using virtual documents to place orders and receive shipping notices. In the late
1980s, it began supplementing those EDI connections with a system called
Retail Link that allowed suppliers to access sales data and projections, and help
Walmart plot ways to drive up sales. Today, this electronic networking with
business partners would be called an ‘extranet’. Retail Link started as a
proprietary dial-up service, but smoothly evolved into a browser-based system.
In contrast, according to one former Kmart IT executive from the mid-1990s,
Kmart’s first experiments in collaboration with supply chain partners came
about at the prompting of suppliers who had been involved in similar projects
with Walmart, and not because anyone at Kmart took the initiative.
 STRATEGIES
 Strategy 1:

Most of the top discount stores that existed during the time of Walmart disappeared.
Many of these started with more capital and visibility than Walmart and in larger cities
with much greater opportunities. According to Sam Walton, what really brought them
down was not taking care of their customers, not minding their stores, not having folks
in their stores with good attitude and that was because they never really tried to take
care of their own people. If you want people in the stores to take care of the
customers, you have to make sure you are taking care of the people in the stores.
That's the most important single ingredient of Walmart's success.

 Strategy 2:

Kmart wasn't going to towns below 50,000 people. Walmart knew that their formula
was working even in towns smaller than 50,000 people and there were plenty of those
towns out there for Walmart to expand into. Kmart were growing by sticking stores all
over the country. Walmart couldn't support anything like that. So while these big guys
were leapfrogging from large city to large city, they became so spread out and so
involved in real estate and zoning laws that it left huge pockets of business out for
Walmart. So, their growth strategy was born out of necessity. But at least they
recognized this as a strategy pretty early on. They figured that they had to build stores
so that their distribution centres or warehouses could take care of the stores and that
the stores could be controlled.
Each store had to be within a day's drive of a distribution centre. So, they could go as
far as they could from a warehouse and put in a store. This way they would fill in a map
of that territory, state by state, county seat by county seat until they had saturated that
market area. This way they saturated North-West Arkansas, Oklahoma, Missouri, and
so on. So what they effectively did was build stores in a ring around a city and wait for
the growth to come to them. This strategy worked practically everywhere for them. By
doing it this way, they got away by distributing just one advertising circular a month
instead of running a whole newspaper advertisement. When Kmart finally came to
their towns, they had a rough time going up against Walmart's strength.

 Strategy 3:

Walmart's employee, ran what became one of the most famous item promotions in their
history. Phil, Walmart's employee was sent to open store number 52 in hot springs,
Arkansas- the first store Walmart ever opened in a town that already had a Kmart. Phil got
there and decided Kmart had been getting away with some pretty high prices in the absence
of any discounting competition. So, he worked up a detergent promotion that turned out into
the world's largest display ever of Tide. He worked out a deal to get about $1 off a case of
the giant sized box. Then, he ran it as an ad promotion for, say, $1.99 a box, off from the
usual $3.97. This was an unbelievable amount of soap. It made up a pyramid of detergent
boxes that ran 75 or 100 ft. long and it was about 12 feet wide so you could hardly past it.
Later the store turned out to be a succes
  Strategy 4:

Walmart was always open to change whereas Kmart was developing its own problems
because they seemed to have a management philosophy of avoiding all change, something
that never works in the retail business. Towards the end of 1976, Kmart purchased more than
200 store locations left over from the defunct Grant's chain and they got busy trying to make
those stores work.
It was around the same time that many of the high flying promoters in the discounting
business began to struggle for their lives. The national economy weakened in the mid-70’s,
the intense competition among the merchants began to drive small retailers out of business.
The percentage of gross margin in the industry dropped steadily from around 35% in the
early 60s to only 22%. So, the retailers who weren't running efficient operations, who had
taken on lots of debt and were living high and not taking care of their business got into
trouble. When Kmart headed right after Walmart in 1976 and 1977, Walmart picked up some
speed in their expansion efforts by acquiring some struggling discounters. Bud Walton and
David Glass, then CEO of Walmart, negotiated a deal to buy a small chain called Mohr
Value discount stores in Illinois. This helped them make a geographic leap that was very
important to their expansion. By 1979, they had 230 stores on the street and hit a billion
dollar in sales for the first time.

WALMART VS KMART - NUMBER OF STORES YEAR WISE

14000

12000 11528
10942

10000
8500
NUMBER OF STORES

8000
WALMART
6200 Column1
6000

4000 3500

2050 2100
2000 1388 1368
1200 1152
735
1 85
0
1962 1980 2002 2005 2010 2014 2016

YEAR