Kmart: Market Intelligence Report

Updated on October 17, 2019
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Hanh has a Master's Degree in Economics. She enjoys researching and writing about economic and business issues.

Introduction

Established in 1969, Kmart Australia has been in business for more than half a century. From one store, it has developed into a department store chain with over 200 stores across Australia and New Zealand, employing more than 30,000 people (Kmart, 2019). The company is regarded as a success story for other companies in Australia and elsewhere in the world to emulate. Despite the past success, Kmart faces various difficulties from changing external environment and more competition.

The market intelligence report uses several techniques including PESTEL analysis to investigate and summarize Kmart’s external environment, mean end chain theory and 4P technique to examine Kmart’s marketing mix and its consumers, and competitor analysis to describe Kmart’s industrial landscape. Finally, SWOT analysis, TOWS analysis, and and Ansoff table are presented to display some key insights of the report findings.

While Kmart benefits greatly from the stability of the retail market, growth of online shopping, and globalization, it needs to address problems of ethical business practice and impacts of trade wars. To enter new markets, Kmart can develop new in-house products to ensure low prices and launch the products in new foreign markets.

External analysis

To analyse a company’s external environment, scanning for possible factors that can impact the company’s performance, PESTEL analysis is usually performed (Robbins & Coulter, 2012). The PESTEL analysis investigates six main categories of the external environment including political, economic, social-cultural, technological, environmental, and legal aspects, providing an overview of the outside environment and potential opportunities and threats.

Political Factors

Australia’s political climate has been quite stable. The country has strong rule of law, which forms the foundation for its justice system and individual liberty (Wangmo, 2018).

Moreover, the country positions itself as a close partner of the United States, especially in terms of economic cooperation and defense (Chen, 2013). Although the relationship with the United States gives Australia a strong ally and military protection, it also makes the country the target of recent terrorist attacks. In addition, the current escalating tensions among major world powers also significantly impact Australia’s political and economic landscape. To illustrate, Australia has suffered considerably from the United States and China trade war, since the former is its strategic ally while the latter is its biggest trading partner, leaving Australia in an ambivalent position to manoeuvre between the two superpowers (Lieto, 2018).

According to the Transparency International Organization, for Corruption Perceptions Index, in 2018, Australia had a score of 77/ 100, ranking 13 out of 180 countries, meaning that its government was among the highly clean governments in the world.

Global Economic Outlook
Global Economic Outlook | Source

Economic Factors

Regarding economic aspects., globally, economic growth in 2019 has been stagnated, estimated at 2.6 percent, and it is forecast to reach 2.8 percent in 2021 (World Bank, 2019). Nonetheless, global retail sales show a consistent increasing trend, with growth rate rising from 2.2% in 2012 to 3.4% in 2018 (Statista, 2019). The total value of global retail sales was predicted to reach USD 4 trillion by 2019. Strong job growth and increasing disposable income are believed to improve the retailing sectors. Among the top 250 biggest retailers in the world—retailers with minimum revenue of USD 3.7 billion per year—more than 65% of them have operations in the international market (Deloitte, 2019).

Recent economic development in other countries also affects Australian economy. For example, in the past, massive investment in infrastructure from Chinese investors made the Australian Consumer Price Index soar; however, as China’s economy slumped, Australian dollar depreciated tremendously, lowering the purchasing power of Australian consumers (Wu & Yu, 2017).

For Australia, in 2018, Australian job market has a positive outlook, as the unemployment rate decreased from 5.4% in 2018 to 5.1% in 2019. The country created 271,000 jobs in 2018 (KPMG, 2019). For consumption, household expenditure in Australia increased modestly, with some sectors experiencing slowdown, such as utilities, cigarettes, and alcoholic beverages, and some sectors showing significant growth, such as food, clothing, and entertainment products (KPMG, 2019).

Australia population pyramid
Australia population pyramid

Social and Cultural Factors

According to World Bank data, Australia had a population growth rate of 1.6% in 2018. People aged under 15 years old accounted for 18.8% of the population; people of working age made up for more than 65% of population; people aging over 65 years old accounted for 15.7%. As Baby Boomers retired, Millennial and Generation X, who are more technology savvy and tend to spend more freely on personal leisure, currently become the main customers of businesses.

In terms of consumption behaviour, according to the “Because it matters” research by Havas PR, Australians pay more attention to the ethical aspect of the businesses, and they are more willing to pay extra to buy from and recommend brands with ethical reputation (Havas PR, 2014).

Australian customers are also doing more shopping online. They also have higher expectation for timely delivery services and easy and free return. Many companies also offer more online sales events to attract customers (Australia Post, 2019).

Technological Factors

In 2019, according to the Global Retail Trends 2019 report conducted by KPMG International, retailers are moving towards providing highly personalized services for their customers. New technologies such as voice recognition and chat bots are also applied to automate the shopping experience, and these practices have become standard and been accepted by users (KPMG, 2019).

Furthermore, thanks to technological advances, e-commerce has been on the rise both around the world and in Australia. Accordingly, global ecommerce was expected to rise at a considerable rate of 20.7% in 2019, achieving a total value of more than USD 25 trillion (Lipsman, 2019). Additionally, many people use social media to learn information about new brands, products, and reviews. Retailing businesses also turned to social media to advertise their brands, engage with customers, and drive customers to their shopping sites (Liu & Ying, 2012). Among many different social media platforms, Facebook still has the most number of users, followed by YouTube, WhatsApp, Instagram and Twitter (Chaffrey, 2017). Nonetheless, since social media facilitates online shopping, retailers also face more competition from small and medium companies entering the market.

Environmental Factors

In recent years, consumers have placed more emphasis on green consumerism, trying to cut down on their carbon footprint and environmental impacts. There is higher pressure on retailers to reduce the use of plastic in packaging and transportation; therefore, many retailers start experimenting with cotton, paper and other environmentally-friendly materials (Foley Retail Consulting, 2017).

From a legislation perspective, Australia and other countries are further strengthening their environmental laws and standards.

Legal Factors

Australia has long participated in many free trade agreements. It became a member of the World Trade Organization in 1995, one of the earliest members of the organization, and it has committed to all requirements of membership. The country has entered into 11 Free Trade Agreements other countries or group of countries.

With the rise of concerns over cyber-attacks such as identity theft, online scams, and credit card fraud, Australia’s law on cybersecurity in 2019 has become more stringent. Privacy has also been a topic of interests as consumers are worried about the use of their personal data. Besides, Australia has very strict labour laws, with the Fair Works Act, promulgated in 2009, outlining the minimum entitlements for Australian employees including minimum salary, leaves, and other working conditions (Goodwin & Maconachie, 2011). As Kmart tries to cut costs to bring its prices down, these requirements might pose challenges.

Consumer Analysis

To understand Kmart’s offering and thus its customers, the 4P marketing classification technique can be used to examine the company’s price (both uniform and differentiated pricing schemes), product (main products, seasonal products, and location-specific products), promotion (sales, marketing and branding strategies) and place (store locations and geographical distance to customers) (Singh, 2012). According to Singh (2012), all four elements of the marketing mix are closely interrelated and need constant modification to adapt to the fast-changing external environment to give a company an advantage over its competitors.

Source

Price

Since the beginning, Kmart has already positioned itself as a discount brand, aiming to provide customers with everyday products at the most affordable prices. It even promises to match the prices of the same or similar products sold by other competitors. In order to further lower the price for consumers, Kmart also develops and sells its own in-house brands (Reynolds, 2017).

Product

Currently, Kmart offers a wide selection of consumer products including home and living products, electronic appliances, clothing and beauty accessories, and recreational items for sports and party. Some product categories are seasonal such as holiday items, gifts and party products. Since the majority of its products are household items, the main customers of Kmart are people in low- and middle-income groups, women, and married couples.

Promotion

Kmart employs both online and offline promotional channels. The company has a very popular Facebook fan page with more than 100,000 followers, and it has done a good job managing its online interaction and customer engagement. It also reinforces its presence on other platforms such as YouTube with approximately 9,000 subscribers, Twitter with nearly 200,000 followers, and so on. Kmart keeps up with trends in online marketing such as using hashtags, influencers, viral videos and online discount/ sales programs (Powell, 2017).

For traditional promotional methods, the company still invests heavily in commercial adverts on television and newspaper. The company also runs loyalty programs to reward points for loyal customers, allowing them to have early access to information regarding new products and sales and enjoy further discount.

Moreover, to brand itself as a responsible corporation, Kmart has launched several corporate social responsibility programs. At the present, it operates the “Better together” program, committing to use more environmentally-friendly energies and resources, reduce waste, support economically-disadvantaged families, and uphold cultural diversity (Kmart, 2019).

Place

Kmart has more than 200 stores in Australia and New Zealand. For the international market, it operates under the brand name of Anko in several countries such as the United States, Thailand, and Indonesia (Kmart, 2019). The company also has online shopping services which have delivery service domestically and globally.

Mean End Chain Theory

To completely understand the minds of customers, researchers often use mean end chain theory to pinpoint the product attributes that are highly valued by consumers and lead to a more profound sense of satisfaction (Costaa, et al., 2004). Specifically, the theory assumes that consumers often have various motives for their consumption, and the link among their motives are based on the tangible and intangible values associated with a certain product or services. For example, a research by Leão conducted among readers of an online Brazilian newspaper revealed that people read online newspapers not only to gain information, knowledge and understanding but also to obtain a sense of belonging and security, to have fun and thus to achieve a feeling of fulfilment (Leão, 2007).

For Kmart, customers shop at its stores firstly to purchase necessary items for their everyday life. The products can serve their physical and emotional needs, keeping them healthy and comfortable in their daily activities. However, Kmart has been able to do more than that. The retailer calls itself a brand for everyone. In this sense, it makes the consumers feel that they are important and that the company is actively listening to their desires and opinions (Reynolds, 2017).

In addition, Kmart creates a consumer culture of its own, to the extent that it is called a “cult” (Powell, 2017). The company has attracted thousands of hardcore fans who are obsessed with the company’s new products and offers, and race to buy its latest products. Many “Kmart mums” constantly share their reviews and feedback over Kmart’s products, providing advice and suggestions for one another. They form their own community, and using Kmart products has unified the community, giving them a sense of belonging and attachment to one another.

Internal and External Synthesis

To synthesize the analysis of a company’s internal and external environments, the SWOT analysis is conducted to identify the organization’s strength and weakness, and spot upcoming threats and opportunities (Sammut-Bonnici & Galea, 2015). Kmart’s SWOT analysis can be summarized as below:

Strengths

  • More than 50 years of tradition and know-how accrual, high reputation
  • Extensive logistics network including stores, suppliers, distributors, and other supporting services
  • Diverse and effective marketing and communication channels both online and offline
  • Early adoption of social corporate responsibility program
  • Clear value proposition, focusing on middle- and low-income families and individual
  • Own some of its own product brands
  • Solid customer base with their own community and culture

Weaknesses

  • Low cost strategy leading to low salary rate for employees and inadequate working conditions
  • Troubled financial conditions in the past
  • Problems competing in price with other companies

Opportunities

  • Positive labour market outlook leading to higher disposable income
  • Stable growth in the retail sector
  • Free trade agreements with other countries, especially the CPTPP
  • Increase in online shopping and online customer engagement
  • Movement towards more environmentally friendly and healthy products
  • International market penetration

Threats

  • Economic downturns in China and other trading partners of Australia
  • Trade war and political tension between the United States and China
  • The rise of terrorism globally
  • High competition in the industry
  • Concerns of consumers regarding privacy and ethical business practices

To match internal and external factors to solidify business strategies for the company, TOWS analysis is employed based on the above-mentioned SWOT analysis, and several strategies are proposed as followed:

TOWS Table for Kmart
TOWS Table for Kmart

If Kmart wishes to expand its customer base and explore new markets, the company’s Ansoff matrix is proposed as followed:

Kmart's Ansoff table
Kmart's Ansoff table

References

Australia Post, 2019. Inside Australian Online Shopping , s.l.: Australia Post .

Chaffrey, D., 2017. Smart Insights. [Online]
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[Accessed 2017].

Chen, P., 2013. Australian Politics in a Digital Age. Canberra: ANU Press.

Costaa, A., Dekker, M. & Jongen, W., 2004. An overview of means-end theory: potential application in consumer-oriented food product design. Trends in Food Science & Technology, Volume 15, p. 403–415.

Deloitte, 2019. Global Powers of Retailing 2019, s.l.: Deloitte Touche Tohmatsu Limited.

Foley Retail Consulting, 2017. Plastic packaging in retail – the fight has only just begun. [Online]
Available at: https://www.foleyretailconsulting.com/plastic-packaging-in-retail-the-fight-has-only-just-begun/
[Accessed September 2019].

Goodwin, M. & Maconachie, G., 2011. Minimum labour standards enforcement in Australia : caught in the crossfire?. The Economic and Labour Relations Review, 22(2), pp. 55-80.

Gupta, A., 2013. Environmental and pest analysis: An approach to external business environment. Merit Research Journal of Art, Social Science and Humanities , 1(2), pp. 13-17.

Havas PR, 2014. The Conscientious Behavior of Consumers in Australia. Brisbane, s.n.

Kmart, 2019. About us. [Online]
Available at: https://www.kmart.com.au/about-kmart
[Accessed September 2019].

Kmart, 2019. Better together. [Online]
Available at: https://www.kmart.com.au/bettertogether
[Accessed September 2019].

Kotler, P., 2003. Marketing Management. 11th ed. Upper Saddle River: Prentice Hall.

KPMG, 2019. Quarterly Economic Outlook: Global and Australian Forecasts, Melbourne: KPMG Economics and Tax Centre.

Leão, A., 2007. The Means-End Approach to Understanding Customer Values of a On-Line Newspaper. Brazilian Administration Review, 4(1), pp. 1-20.

Lieto, G., 2018. Trade with China or security with the US? Australia will have to choose. [Online]
Available at: https://government.unimelb.edu.au/__data/assets/pdf_file/0006/2881284/Australia-and-China.pdf
[Accessed September 2019].

Lipsman, A., 2019. Global Ecommerce 2019, New York: eMarketer.

Liu, Y. & Ying, X., 2012. A Review of Social Network Sites: Definition, Experience and Applications. Shanghai, Scientific Research.

Powell, D., 2017. Kmart opens its 200th store: Three reasons the much-loved retailer has seen success. [Online]
Available at: https://www.smartcompany.com.au/industries/retail/kmart-opens-200th-store-three-reasons-much-loved-retailer-seen-success/
[Accessed September 2019].

Reynolds, E., 2017. How Kmart went from bargain basement to global success story. [Online]
Available at: https://www.news.com.au/finance/business/retail/how-kmart-went-from-bargain-basement-to-global-success-story/news-story/d2587d00f5e6a468ac4e7157dc8bac28
[Accessed September 2019].

Robbins, S. & Coulter, M., 2012. Management. 11th ed. s.l.:Pearson Education, Inc..

Sammut-Bonnici, T. & Galea, D., 2015. SWOT Analysis. Strategic Management, Volume 12.

Singh, M., 2012. Marketing Mix of 4P’S for Competitive Advantage. IOSR Journal of Business and Management , 3(6), pp. 40-45.

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[Accessed September 2019].

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Questions & Answers

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      • Eurofile profile image

        Liz Westwood 

        3 weeks ago from UK

        This is an extremely thorough analysis of the Kmart brand. I appreciate the way you look at this company's performance from such a wide variety of angles.

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