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- The last full-fledged Kmart in the US closed in October after years of decline.
- In Australia, however, the store’s namesake is doing well.
- With its own private label and vibrant social media, the chain has reinvented itself down under.
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The closing of a Kmart store in Bridgehampton, New York, in October marked the end of an era for the iconic chain.
Once a go-to discount retailer with more than 2,000 locations nationwide, Kmart was known for its low prices and “Blue Light Specials.”
However, the chain experienced years of declining sales as it struggled to compete with rivals like Walmart and Target and the rise of e-commerce giants like Amazon.
Now there’s only one Kmart store left in the continental US, tucked away in an At Home store in southwest Miami.
On the other side of the world, however, things couldn’t be more different: Kmart’s Australian namesake is booming.
The Australian company – which previously had a common shareholder with the US version, but is no longer associated with it – first opened in Melbourne in 1969.
The Wesfarmers-owned chain now operates more than 300 stores in Australia and New Zealand and employs around 40,000 people.
The Kmart Group, which includes both Kmart and Target Australia, saw sales increase by almost 5% last financial year, from about $10.6 billion to $11.1 billion, despite difficult market conditions caused by a cost of living crisis And supply chain problems.
Gary Mortimer, a professor at Queensland University of Technology who specializes in food retailing, retail marketing and consumer behavior, told Business Insider that a key factor in Kmart down under’s success has been its private label Anko.
Anko, which started as a line of kitchen appliances before expanding into products such as stationery, home accessories and clothing, often replicates higher-end brands at lower prices.
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Anko now accounts for 85% of Kmart’s sales in Australia, and it has become one of the country’s most popular brands – which Mortimer said was “no mean feat”.
“They had to maintain a low price, but also maintain a reasonably good quality, because I don’t think consumers would accept a low price if the product broke in three to six months,” Mortimer said.
Speaking at the NRF (National Retail Federation) 2024: The BIG Show of RetailIan Bailey, the director of Kmart Group, echoed that point.
“We really wanted to create an environment where customers felt like they didn’t have to compromise. And we found that has been a very powerful driver for our business,” he said.
The brand has also helped Kmart Australia collect better data about its products and consumer trends, helping to improve demand forecasting, Bailey said at NRF 2024.
“The data quality we get from one brand is exceptional,” he said.
“Because we take one product and then use pretty much the daily pricing model, the net result is that we get incredibly clean data,” he continued. “And that allows us to become very good at predicting demand, which means we can have high availability with relatively low inventory levels. That gives us the opportunity to then start testing new products, getting them in because we have the inventory capacity to do so.”
Such is the success of Anko that it helped Kmart Australia reinvent itself from a traditional retailer to a contract manufacturer and supplier, and the company has gone on to roll out the brand in other international markets including Canada, Singapore and the Philippines .
There is only one Kmart store left in the continental US.
Getty Images
Anastasia Lloyd-Wallis, the COO of Retail Doctor Group, a Sydney-based consultancy, told BI that Kmart was also focusing on creating positive shopping experiences to drive growth, targeting the revival of in-store shopping after the pandemic.
Kmart has been able to achieve this through its bargain prices and consistent delivery of new products, Lloyd-Wallis said, adding that the experience aspect helped differentiate Kmart from online competitors.
Social media has helped bring such experiences and new products to shoppers, with the company capitalizing on the craze from content creators.
“We see this in things like Kmart hacks,” where makers show how they do it use Kmart products in new ways to assist in their daily lives, Lloyd-Wallis said.
You can find now Instagram accounts dedicated to sharing such tips.
The company has also quickly mastered viral products, producing its own versions at heavily discounted prices.
In one case, Kmart started selling a version of a popular “sunset lamp” online that retailed for 1,500 Australian dollars (about $990) for $27 Australian dollars (about $18), news.com.au reported.
A race to the bottom
So far, Kmart Australia has weathered the e-commerce storm, thanks in part to the geographic challenges faced by companies like Amazon in Australia.
Australia is the sixth largest country in the world by area, but its population remains relatively small – 27.1 million people as of March 2024 – many of whom live in remote areas.
Kmart’s advantage here is that it is “decentralized,” with stores across the country, Mortimer said.
It also uses “K hub” microstores, which provide locals in regional locations with access to some of Kmart’s best-selling products, as well as a place to collect online orders from the full range of both Kmart and Target Australia .
However, Kmart still faces challenges.
For starters, Amazon isn’t out of the game down under.
Amazon Australia added 1.1 million new customers in the 12 months to June, with 7.9 million Australians aged 14 or over shopping on the site at least once a year, according to a market research firm. Roy Morgan.
Kmart will also be wary of Chinese fast-fashion retailers such as Temu And Shein because price-conscious customers are increasingly looking for cheaper prices.
Data from Roy Morgan in August puts the number of Australians aged 14 or over who have shopped at Temu and Shein at least once in the past 12 months at 3.8 million and 2 million respectively.
So it looks like Kmart Australia could find itself in a price race to the bottom.
“These figures confirm that the trading down phenomenon is real,” said Laura Demasi, head of retail research and social and consumer trends at Roy Morgan. said. “Every month, more and more Australians – both young and old – are switching to these platforms to stretch their dollars further, diverting billions of dollars to Australian retailers.”
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