Kmart spearheads super push

Discount Store News, Nov 16, 1992 by Laura Liebeck

MONTROSE, Ohio - With the opening of its new supercenter here last month, Kmart has thrust itself into the forefront of combo food/general merchandise retailing.

The Montrose Super Kmart Center is without question Kmart's best effort so far at incorporating the latest merchandising and technology programs in food and general merchandise retailing.

A jubilant Kmart chairman Joseph Antonini announced at the opening that the discounter will open 15 more supercenters in 1993, the first of which is slated for Lorraine, Ohio, followed by an additional 70 to 80 supercenters in 1994, some of which will likely be expanded Kmart stores or replacements for smaller Kmarts. He predicted that as many as 400 Super Kmart Centers will be in operation within four years.

If Kmart's plans come to fruition, there could be well over 1,000 supercenter outlets, operated by a host of retailers (including Wal-Mart and Meijer), in the United States by the end of 1996. With average sales of between $40 million and $65 million per supercenter, this new industry will a higher sales level in a scant few years than the hot warehouse club sector was able to in more than 15 years.

Like other Kmart subsidiaries, the supercenters are being run as a separate division with its own staff, headed by Dave Marsico, newly promoted to divisional vice president from director of combination stores. This division is fur of newly hired executives from outside Kmart, including veteran grocery industry executives, including Gene Hoffman, the former Kroger and Super Valu chief executive who as a consultant has helped spearhead Kmart's drive into the supercenter business.

Operating 24 hours a day - unlike local food retailers - the 166,000-sq.-ft. store with 108,000 sq.ft. of selling space is divided almost evenly among grocery, hard lines and soft lines. Sales are projected to eventually be 60% general merchandise and 40% food. Sales at the year-old Medina store are about 52% food, said Antonini.

General merchandise, totaling over 100,000 skus, is located on the left side of the store, with its own outside entrance. Food, a department of 30,000 skus typical of the number of food items carried in a grocery store, has its own entrance on the right side of the building.

In addition to the traditional grocery store fare, the Montrose Super Kmart Center offers items in new, Eurodesigned glass coolers, state-of-the-art cooling and water spray systems for produce, extensive on-site bakery and deli departments, gourmet coffees and pastries, standard grocery selections, plus bulk club-sized packages of foods.

The store 18 staffed with 755 people, 350 at a time, said store manager George Orozco, who was promoted from a 114-person store in San Antonio, Texas. Montrose offers 30 checkout stations located in the front of the store.

Montrose is the result of two years of planning and research, including direct contact with consumers about what they are looking for in a retail outlet, said Marsico.

The Montrose supercenter departs dramatically from Kmart's earlier attempts at combining food and general merchandise under one roof. This month, Kmart remodeled its Jackson, Miss., and Charlotte, N.C., American Fare hypermarkets to the Super Kmart Center concept. The division is also resetting its Medina, Ohio, unit - the first Super Kmart Center, located just 14.4 miles away - to the Montrose prototype.

Super Kmart Center relies on an Everyday Low Price policy, in contrast to the promotional sales orientation at the core Kmart discount store division. The food side, particularly, benefits with prices set at 15% below local competitors. Opportunistic buys are sought out by the buying staff to enhance the store's image of discount retailing.

Products purchased opportunistically are tagged with a handwritten sign - a widespread occurrence in the Super Center - as "TPR" or "Temporary Price Reduction" so customers know that special pricing is applied to that item for a finite period of time.

Cross-merchandising is widespread in the Montrose store.

For example, toasters are positioned above the bread display; kitchen gadgets, a segue area between housewares and food, is positioned across the aisle from produce. (Ekco is the sole vendor of kitchen gadgets, also a departure from Kmart's normal wider selection, but in keeping with the chain's emphasis on vendor consolidation.)

In addition, a new department for Kmart, the baby center, is a transitional area between toys and furniture, featuring everything from baby food, diapers, health and beauty care, to assorted juvenile products and furniture.

Coming to Montrose is an optical department, now being tested in Medina.

Other special features of the Montrose store include: * Video rental, a licensed operation by Video Express, a local company. New releases rent for $1.87 and other videos are priced at three for $1.50; * Electronics received a new sign and was renamed Music & Video. The department features Kmart's new video/music preview kiosk from Pics; * Both Nintendo and Sega video game systems are offered in Music & Video; * The automotives department features a four-sided freestanding Exide battery display to better present Kmart's private label battery program to shoppers; * A new private label food program specifically for the supercenters debuted under the name Super Kmart. The first items in the line are potato chips in 15-ounce bags for $1.47. Other private label food products include bread, buns and milk, and it will spread to other commodity foodstuffs; * A new Chinese food concession in the snack bar area. It is not a licensed operation but run by the supercenter. * Beer and wine are available from both refrigerated and non-refrigerated areas and hard liquor is offered in regular and diluted versions;