Kmart seeks higher yield with new top secret test - will increase floor space for year around best sellers and offer seasonal merchandise on promotional tables

Discount Store News, Feb 21, 1994 by Mary Ellen Kelly

Kmart is developing a radical new prototype that greatly expands floor space to categories that are profitable year-round, substitutes numerous promotional tables for entire merchandise categories that have short selling seasons and slashes prices on high-demand commodities, DSN has learned.

The goals of the new store strategy are to increase sales of high margin goods, create greater flexibility to respond to changing consumer demands, and strengthen Kmart's image as a low price leader.

The American Fare store near Atlanta in Stone Mountain, Ga., is being considered as the site of the first of these test stores, slated to open by August or September. The 240,000-sq.-ft. American Fare unit was subdivided last year, eliminating its food business. Earlier this month a Cub Foods store opened in the vacant half of the building but American Fare--minus food offerings--continues to operate in the other half of the divided building.

More than a dozen Kmart stores of varying size are being considered for remodeling to the new experimental design by the year end.

Kmart executives denied that any such test was in the works. However, an array of sources speaking to DSN only on condition of anonymity offered details about the proposed prototype.

The test format, overall, will expand departments that offer year-round sales and profit opportunities such as ready-to-assemble furniture, apparel and home fashions.

The RTA and lifestyle furniture department, for instance, could be as much as doubled in size to nearly 2,500 sq. ft., giving Kmart the opportunity to go beyond basic RTA offerings such as entertainment centers and utility carts. Greater diversity in price points--which have typically not exceeded $199--is expected as is furniture for other areas of the house such as the bedroom.

Prices will be slashed on high traffic basics like small electrics, commodities such as health & beauty care, snacks and food and other consumables such as paper goods to build store traffic and strengthen Kmart's image as a leader for low prices.

In addition, an estimated 20% increase in the number of promotional tables will enable the store to get into and out of categories that sell well during brief windows of opportunities--such as back-to-school goods--or categories in which the chain has experienced regional differences in demand, such as crafts.

The intensified promotional program would, in fact, work hand-in-hand with Kmart's new advertising circular format which was due to be unveiled shortly after press time.

The new ads, according to Kmart, will focus more on specific sales events, presenting two-page spreads that deliver a single message about what is being promoted.

The ads appear to pave the way for an expanded use of promotional tables that would visually deliver the sales event message to the customer immediately upon entering the store.

Promotional tables could also simplify restocking of high-traffic ad goods. While promotional tables are certainly not new, substituting them for entire merchandise categories will enable Kmart to quickly add and eliminate goods that would produce lackluster sales on a year-round basis, but flourish when tied to advetising programs.

Categories being considered for reduced store space (when promotions are not in effect) are primarily in the hard lines area.

One vendor, unfamiliar with the proposed prototype, said she had noticed a dramatic change late last year in Kmart's interest in new products and displays.

"Instead of being very closed and interested only in perpetuating existing programs, they were much more proactive and were suddenly very enthusiastic about anything and everything new. The mood and tone of the meeting was unlike any other I'd had with them," the vendor explained. "For instance, they were very interested in new merchandisers we have for the checkout area and the potential for clip strips and other out-of-department display opportunities."

While this vendor does not know it, her category is among those being considered for exclusively promotional table and front-end displays in the new prototype due to the category's seasonality.

As far as where other test stores might be located, possibilities include markets in which Kmatt has already conducted in-depth research. A fresh base of research was gathered of evaluate the success of Kmart's renewal program in the following key markets: Atlanta, Chicago, Detroit, Houston, Los Angeles, Minneapolis, Philadelpjia, Pittsburgh, Riverside/San Bernadino, Calif., and the combined markets of Tampa, St. Petersburg and Clearwater, Fla.