Managing Director of Kmart Group Australia, Ian Bailey was joined on stage by Michelle Evans, Global Lead of Retail and Digital Consumer Insights, Euromonitor International.
Ian explained how Kmart Australia had “doubled down” on their clarity of purpose and innovation, to develop a strategic blueprint and operational architecture to transform its business model – essentially moving it from a traditional discount chain to an innovative, modern, hybrid retailer.
This session offered takeaways on how to overcome barriers, challenge the status quo, perspectives on leadership and adopt technology solutions to empower organisations.
Ian spoke about Kmart’s trajectory – a discount retailer that started in 1969 – which in many ways emulated Kmart US back then. However, today, Kmart Australia has become a very different business.
Ian described Kmart as a “loved discounter”, underpinned by the commitment to delivering the lowest price without skimping on quality.
“We wanted to create value and a space where shoppers didn’t have to compromise on quality”.
Kmart has been able to do this through ‘price consistency’. Simply, no high or low pricing strategies, constant discounting or ‘percentage off’ sales.
When customers shop, they often ask themselves, ‘Will the prices be better tomorrow or next week’, or ‘Did I miss the special price yesterday’.
“We recognised that we needed our customers to trust us. When they shop with us, we wanted to ensure prices would move from one week to the next. Keep pricing simple. Make everyday living brighter.”
“We now understand that our customer base comes from all income levels.”
Australian consumers are smart, and they are savvy. Kmart’s buying teams find the latest ‘on-trend’ products, then work with their manufacturing partners to re-design and produce these ‘in demand’ products at about a third of the price.
“We have developed an emotional connection through product ‘affordability’.”
Customers see a new trend, and new product, a new colour – i.e., new dinner plates. Our customers will search specialty retail, and see the latest trends – then they will see the ANKO version. Comparison leads to understanding the value proposition.
Ian spoke about the considerable shift in their business model.
“We started with the basics. Think kettles and toasters. We extended these ideas from homewares to toys, to manchester and across the whole store. Today, about 85% of the products we sell are our own.”
“However, we soon realised that one of the challenges we created for ourselves was that as we sold larger volumes of ‘lower-priced’ products, naturally this produced higher volumes of returns. So, we designed in quality”.
“We have developed a mindset within Kmart to ‘extract the waste’ throughout the value chain – from the design stage, all the way until the product is purchased by the shopper. Designing out the waste has saved costs and this enables us to reduce prices further. It also has a positive impact on the environment.”
Kmart today is regularly in either first or second place on the Fashion Transparency Index and in the Top 10 retailers on the Corporate Human Rights Benchmark.
But Ian admits Kmart has made mistakes.
“We took away BBQ Grills – and simply spread out our other categories. All we did was drop sales. What we learnt is that if we take something away from your customers, you must give them something in return.”
Simplification was also attained by having one single brand across the entire store, and all departments. It enabled easier coordination across all categories, creating a coordinated brand experience, and driving volume through long-term, manufacturing relationships.
“Our stores only really hold about one month of stock – we turn 12 times a year.”
Costs were further cut by the implementation of the inventory robot, ‘TORY’ that scans store inventory. One of the challenges of a large discount department store is team members often can’t find products for customers. The product could be left in the changing room, the stockroom, or in the wrong department.
The TORY robot, made by MetraLabs, roams the store during quiet times – mostly overnight – triangulating exactly where apparel and homeware items are and how much stock is left. It does this by scanning for radiofrequency identification (RFID) tags that are attached to the labels on products.
“The result is a quantum improvement in inventory accuracy for apparel from 60% accuracy at an SKU level today to 95%, and the 95% is by location within the store.”
“This is the first of our digital store improvements which will always be focused on improved customer experience and lower operating costs.”
Ian suggested that unlike other retailers, who look to justify higher prices, at Kmart we look to design out waste, cut costs and work with our partners to manufacture more efficiently, so we can offer lower prices.
Ian proffered that physical retail for Kmart is still relevant. It enables us to showcase our products. While 60-70% of customers will view our products online, they come into the store to buy.
Our Australian business is now maturing, so it is now time to look for international growth.
Growth outside of Australia will be realised by going direct to consumers through online marketplaces, in India and South East Asia.
Ian explained that Kmart today has become a three-model business – retail, product manufacturing for other brands, and a direct-to-consumer retailer in emerging economies, through online marketplaces.
Ian ended his discussion with several key points:
- The importance of keeping their people connected as they continue to grow across international borders.
- Developing a passion to make processes more effective, more productive, less costly and less wasteful.
- Ensuring you and your teams are tackling the biggest and most important questions first.
- Creating a culture where ‘dissatisfaction’ drives the motivation to improve. Don’t rest and be satisfied with what your business is doing today – ask, how can you do better.
- Finally, drive a culture of accountability.
* This content was generated from the NRF Big Show 2024.
HEAR MORE FROM IAN BAILEY AT ARA LEADERS FORUM 2024
Exclusive keynote: Customer centricity and the role it has played in Kmart Group’s success with Ian Bailey, Managing Director, Kmart Group
