By Sutton D., Kleln T.
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Kmart established itself as the place to shop for discount merchandise—a branding that it accomplished a little too well, as it was unable to ever break from its cut-rate origins. Wal-Mart, also founded in 1962, experienced an initially slower growth curve but realized greater operational efficiencies along the way. In 1990, Wal-Mart surpassed Kmart as the largest discount retailer in the nation via a pervasive “We Sell for Less” slogan. Ousted from its price leader position, Kmart plunged into an identity crisis from which it has yet to recover.
In other words, they wouldn’t be caught dead shopping there. The lesson has been brutal for Kmart, but instructive: You can’t have a productive, profitable relationship with your customers unless you bring clarity to what you stand for. This applies to both your target customers and every other player in your competitive set. Your brand is the focal point, the repository for both the intrinsic and the extrinsic benefits associated with your offerings. If it’s not clear in the minds of your customers, you’re going to start taking on water quickly and may never recover.
Kmart’s management also did a little too much shopping of its own. Between 1984 and 1991, Kmart aggressively dove into specialty retailing, adding several lines to its business, including Waldenbooks, Builders Square, Payless Drugstores Northwest, Pace Membership Warehouse, the Sports Authority, OfficeMax, and Borders bookstores. Not surprisingly, a generalist like Kmart did a poor job of running these specialty retailers. The company still pays $250 million a year in rent to guarantee 350 store leases for such spun-off chains as Builders Square, Borders, Sports Authority, and the defunct Pace Membership Warehouse Club.