Late of September last year Sears Holdings announced its plans to possibly close 204 US Kmart stores. The same time last year Wesfarmers Kmart in Australia boosted earnings by 16.3 percent. So why are two similar stores facing two very different financial outcomes?
Both stores came from the same founder in the 60’s, deal directly with cheap value ranges, focus on quantity and easy accessibility items and even have similar logos. So how is one chain dominating the industry while the other one suffers a slow demise?
Both originated in America in 1961, the Australia branch was shortly created after in 1968. Owned by separate companies now the large retailers have both suffered through up’s and downs in the changing economy.
The table below shows the difference between the two companies previous years from 2014-2017.
Original graph showing the rise of Kmart revenue
Not only have Sears holdings been having trouble with their Kmart branch their Sears retail shops have also been struggling.
Wesfarmers Kmart’s image is a bit different to Sears Holdings. It hints that it is still youthful and cool, even though it’s good value. Their ads are often full of vibrant people aged 18-22, exceedingly lithe and probably unlikely to be found at an actual Kmart.
Inside Wesfarmers Kmart compared to Sears Holding Illinois Kmart
Sears Holdings and Wesfarmers have often been known for excessive stock within their store but with the appointment of Wesfarmers CEO Guy Russo he moved to slash product lines from 100,000 to 40,000, shifting focus to basic private label items sourced directly from factories.
“Our customers spend an average of 20 minutes in the store shopping,” Russo said.
“But when I was watching them they were spending most of their time trying to sort out the difference between the many products in the same range.”
Wesfarmers official NZ Kmart Facebook has almost 90,000 likes. On other closed Facebook groups with more than 100,000 members, obsessive fans swap advice and tips about their shared obsession.
Sears Holdings reportedly have had stockist drop out on them as their store close, a claim which was disputed by the store who say it was a mutual decision. The store has closed 204 stores this year alone and cut 130 jobs.
The marketing strategy between the two is obviously different with one targeting homeware obsessives to the other focusing on the older customers needing more for less. Sears Holdings CEO Alasdair James quit his position he had held since 2014.
As Wesfarmers continues to dominate the market through New Zealand and Australia some website analytics are expecting Sears Holdings to completely close by mid-2018.
Both Kmart’s were founded by Sebastian Spering Kresge as one company to start with. Kmart Australia limited was born out of a joint venture between G.J Coles & Coy Limited (Coles) and S.S. Kresge Company in the United States, with Kresge owning 51% of the common stock in the company.
In 1978 Kresge exchanged its 51% stake in Kmart Australia for a 20% stake in Coles.In 1994 Coles bought back all shares held by Kresge.
A long-term licensing agreement allows Wesfarmers to use the Kmart name in Australia and New Zealand. The ‘K’ in Kmart stands for his last name, Kresge.