Kmart rolls out latest rehab - discount chain spending more than $1 billion to reconfigure stores, add grocery items

Discount Store News, Sept 16, 1996 by Laura Liebeck

GAITHERSBURG, MD. -- The pressure is on at Kmart.

Now that the long-awaited high-frequency store format--which includes the much-heralded Pantry program--was officially unveiled here Aug. 28, Kmart must now start producing sales and earnings to warrant the cost of its latest store retrofit program and help repay loans due in 1998.

Kmart will take three years to rehab its 2,143 stores to the high-frequency format. The cost: more than $1 billion, about $500,000 per unit. The 95 Super Ks are excluded from the program as are the chain's small stores, generally those under 60,000 sq. ft.

Currently, Kmart has completed 67 retrofits, with 180 expected by the end of the year. The process takes about eight weeks, and the store remains open during that time. So far, Kmart has reported sales gains of 10%, and traffic counts are up 20% in the newly configured stores. No word yet on how profitability has been affected, the true measure of the prototype's success.

In addition to the Pantry program, the new layout features a completely reconfigured store that offers customers more logical shopping adjacencies that Kmart executives hope will enhance convenience, thus driving shoppers into the store more often for frequently purchased goods.

The store also features wider aisles, improved sight lines with straighter aisles, 2-ft. shoulder-to-shoulder width between fixtures and bright lighting. These changes help alleviate the cluttered feeling in the store.

"We tried to make the store more sensible to shop," vice president of special projects Bill Gryson told DSN.

For example, the store merchandises its apparel together as in previous prototypes. But this time, men's fashions are grouped together at the rear of the rear of the store adjacent to luggage, sporting goods, DIY products and automotives in a men's shopping area, improving the odds that male shoppers will find the layout easier to navigate. Home fashions is located at the center of the store; consumables and commodities, including The Pantry, are located next to Home; and entertainment-type categories such as seasonal, toys and CE are positioned on the right side of the Gaithersburg store.

The re-opening of the Gaithersburg store also featured a few new flourishes in Kmart's store design. The electronics department is no longer a bullpen format but an open layout; one-hour photo finishing and tobacco products are located in one area next to checkout; greeting cards and party goods have been moved to the front wall of the store across from home fashions and The Pantry, and located next to H&BC/pharmacy; and infants/toddlers has been given an expanded space at the rear of the store in the apparel area. This department features juvenile products and baby H&BC products like diapers, formulas and wipes. The store's portrait studio is located in the children's apparel area next to the fitting rooms.

The high-frequency store is divided into three destination businesses:

* Kidsworld, which includes children's apparel and toys, is usually located near men's and ladies' apparel. In Gaithersburg, toys is located on the opposite side of the store, away from apparel. In the center of the store next to apparel is the shoe department "so it can feed off all of the apparel business," Gryson said. He noted that sales have been "up in double digits" since the change was made, the result of customer comments from the Charlotte, N.C., test stores.

* Home Fashions, located in the center of the store, features hard home products at the rear of the department close to the DIY department. Soft home--bed and bath products--are located at the front of the department, which also is at the front of the store. Soft home is divided in two, with bath products up front and bed in back. This arrangement is new to Kmart, the byproduct of consultant input and customer comments at the Charlotte, N.C., stores, said Gryson. Since the change was made, he said sales in the department are "well up in the double digits."

* Commodities/Consumables is the most visible and widely discussed component of The Pantry program. This section of the store encompasses 7,000 sq. ft. for pet products, paper goods, household cleaners and food, including refrigerated and frozen food cases, new to Kmart department stores.

Basically, the high-frequency store offers the same Kmart assortments as non-refurbished stores, with the addition of 2,500 new skus in the food department. These skus include milk, eggs, cheese, bologna and frozen pizza, which are merchandised on seven 64-ft. runs on both sides of the aisle. The Gaithersburg store offered 32 ft. of refrigerated food in aisle--milk, eggs, cheese, bologna, juice--plus two more 5-ft. cases as endcaps: one for milk at the front of the department and the other for Tombstone frozen pizza at the back of the department. In the main power aisle at the entrance of The Pantry are stack-out displays of bread and rolls, snack cakes and specially priced merchandise.

The Kmart food program is supplied by SuperValu for non-refrigerated product and United Wholesalers of Washington D.C., for refrigerated goods. Direct store delivery product like Nabisco and Coca-Cola are handled by those suppliers, said Gryson. Each store has a Pantry department manager to guide the program.