Kmart to expand electronic shopping program

Discount Store News, June 8, 1998 by Laura Liebeck

TROY, MICH. - Kmart feels it has the shopping solution for the future: Kmart Solutions, Electronic Shopping.

Announced on May 21 during one of the discounter's most upbeat annual meetings in recent years, Kmart believes its new electronic shopping program will hit a chord with consumers nationwide because it delivers a merchandise assortment beyond the retailer's historical boundaries.

Kmart Solutions is a store-based electronic shopping program offering goods and services that are entirely new to Kmart and its customers. It consists of two touch-screen computer terminals, and Kmart plans to add a third terminal in the consumer electronics department.

The program should help the retailer broaden its appeal by opening up merchandise opportunities beyond its current mix. For example, more upscale shoppers who traditionally use Kmart for such basics as underwear, film and garden supplies will be able to purchase more on-trend goods and services in a quick solution-selling environment and have the goods delivered directly to their homes. Such goods also offer Kmart the opportunity to beef up profit margins.

The program, which has been in test in 10 stores for the last year, will soon be expanded by 50 stores in the greater Detroit area and will grow to 100 locations across the country by the end of the year, according to Kmart chairman, president and ceo Floyd Hall, who called the program "a new and really big idea."

"This is uncharted ground," he declared, adding that the cost of the operation is low- about $40,000 per store-and low-risk because vendors pay Kmart a fee to participate in the program.

Positioned at the customer service counter at the front of the store, the Kmart Solutions terminal allows shoppers to choose from seven categories of merchandise: flowers & gifts; for your home; electronics & cameras; sports & fitness; toys & activities; home services; and Western Union.

Product offerings include big-screen televisions, telescopes, backyard swing sets, flower arrangements and money transfers.

On the touch screen, customers get a full description as well as pricing information on all items offered in the program. So far, not all vendor names are identified with their products, something that Dave Schuvie, operations vp, electronic retailing sales and service, said will be adjusted.

The actual transaction is assisted by a customer service associate who accepts the shopper's check or processes her credit card. Delivery is handled by UPS, usually within four days. Faster delivery is available for an added fee, which varies according to the bulk of the order.

So far, 20 vendors are participating in the program, including Black & Decker, Little Tikes and Hedstrom, and Kmart is in negotiation with 100 other vendors, including music and book companies, which would increase the number of available items into the hundreds of thousands.

Kmart Solutions is designed for the technologically fearful customer as well as the time-pressed shopper who has a variety of shopping needs that involve in-store Kmart merchandise as well as products not commonly found in a Kmart store.

The program will be linked with Kmart.com, which will begin live transactions this summer.

Kmart announced Kmart Solutions during its annual meeting held at the Detroit Music Hall. Hall declared at the opening of the meeting that Kmart has "reversed the trend" of declining profits.

"In many ways, 1997 was a year of big and exciting changes throughout Kmart as we gained momentum month after month with powerful initiatives that are going strong in 1998," he said. "This year, we are more disciplined and balanced in every aspect of the business that is important to the consumer."

The challenge ahead is to continue that momentum, he said. He made note of the chain's financial accomplishments as well as its merchandising and operational advancements.

On the financial side, Hall noted that Kmart's stock price, which at presstime closed at $19 3/8 per share, is up from a low of 53/4 in January 1996 and that first quarter earnings jumped 236% to $47 million, up from $14 million for the same period in 1997. Sales increased 3.5% in the first quarter of 1998 to $7.5 billion, up from $7.2 billion in 1997.

In merchandising, Hall noted that the apparel department is in a state of revival and that the Martha Stewart Everyday program, launched in March 1997, is poised to post $1 billion in sales by the end of this fiscal year-double its 1997 results.

Hall officially announced that Kmart will offer a MSE lawn and garden program next year. The line will include patio furniture and possibly some gardening tools and a limited assortment of seeds and plantables.

Hall also noted that Big Kmart has a capital budget of $350 million this year to roll out 511 more stores for a yearend total of 1,181 units, or 55.6% of the chain. The new Big K cities include: Seattle; Portland, Ore.; San Francisco; Indianapolis; Cleveland; Columbus, Ohio; and Atlanta, among others. The next Big K wave includes 133 units in June, 141 in August and 120 in October.