Niche marketing targets hottest-selling items

DSN Retailing Today, Jan 24, 2005 by Mike Duff

Peter Whitsett, Kmart's co-chief merchant, has ridden with Kmart down some rough roads. Now, he is helping establish the merchandising direction of a chain that may be on the verge of revitalization.

Of course, much of the attention lavished on Kmart recently has regarded its coupling with Sears, but a lot more is happening. Kmart has established a new prototype to deal with both selling and operational issues. It continues to recover from its stay in Chapter 11 bankruptcy protection and it faces consumer and vendor uncertainly about its future.

Whitsett shares chief merchant responsibilities with softlines/electronics executive John Goodman. Both men report to ceo Alwyn Lewis. Whitsett also holds the titles vp and gmm for food, drug, pharmacy and hardlines. In six years with Kmart, Whitsett has seen how things work from a number of perspectives. "At Kmart, I have had a number of different positions. I came in through the inventory-management side in both drug store and food. I spent a few years down in Dallas, came back [to the Troy, Mich., headquarters] as the senior vp of merchandising for food, and have picked up drug store hardlines and pharmacy."

While in Dallas, he worked closely with Fleming during its ill-fated tenure as Kmart's food supplier. While those days had their tougher side, the experience certainly tempered Whitsett and gave him an opportunity to fully understand Kmart's distribution issues regarding food and consumables. Indeed, Whitsett sums up his resume in terms of attributes that combine a service orientation with a deliberate view of how to pursue expansion.

"What I bring to my position is a strong operational background, a keen focus on the customer and a very disciplined approach to how we grow our business," Whitsett said.

In combining major food categories with traditional hard goods, Kmart has adopted a structure used by other discounters as they have accommodated edibles operations.

Whitsett said, "Reporting to me, I have six divisional vice presidents: for pharmacy/drug store; food and consumables; toys and sporting goods; lawn and garden, auto and hardware; and one for seasonal."

Whitsett faces significant challenges in his position. An oft-amended merchandising strategy at Kmart has affected some departments more than others, and many of the most knocked-about operations are the ones Whitsett finds himself heading. Some, such as automotive and hardware, not only have experienced upheavals but may face still another shake up as the merger of Kmart and Sears evolves. Yet it is food that has seen more ups and downs at Kmart than any other department. Food was a centerpiece of Kmart's traffic-building strategy until the Chapter 11 period when Kmart sold off supercenters and urban discount stores where pantries were thought to be a particular draw.

Now, Whitsett is charged with pursuing a new strategy that requires detailed attention to the categories he supervises. In its new prototype units, Kmart is carrying less inventory and focusing on high-volume profitable items. To satisfy key customers, it is using data to adjust assortment on a store and cluster level. Thus management has become an even more critical issue for Kmart.

"We have stores with varying degrees of volume, and certainly, based on their location, very different demographics around the store both in urban markets and rural markets," Whitsett said. "That is certainly a key strategic merchandising point that John [Goodman] and I are addressing to really make sure we are bringing in an assortment that is appropriate for that neighborhood, for the customers that we serve."

Part of Whitsett's job will involve convincing skeptical observers of Kmart's viability. Many who speculate on Kmart's fate are anticipating a radically altered retailer. For example, Margaret Cannella of J.P. Morgan Securities speculated in a research note that Sears eventually would get the bulk of Kmart's best brands. "Any remaining Kmart stores may be run as 'value' retailers, like Value City or Odd Lot," she asserted.

Vendors worry about Kmart's direction, mainly over whether the company will remain an outlet for their goods. Whitsett said, for now at least, the new prototype stores in White Plains, N.Y., and Boca Raton, Fla., will be the guide to what Kmart will become. "There will be some minor tweaks to those stores going forward, but for the most part, they're performing very well," he said.