business news in context, analysis with attitude

In a piece yesterday about Kmart naming a new CEO, we agreed that Kmart has to do everything possible to separate itself from the previous management...but this only helps with the stock market. The bigger question, we suggested, was what the company would do for consumers, who ultimately don’t give a damn who the CEO is.

“I agree wholeheartedly. I shopped at a Kmart over the weekend, for the first time in over 10 years. I went in because a friend said they were running really good prices on air purifying fans. I was also very curious to see a Kmart "from the inside" after all the stories I've been reading in the last year.

“Turns out they had the fans completely mis-priced. There was no price tag on the product or the shelf. When we asked a cashier to scan it, it came up as $5 (which is actually the price of the filter replacements that sit next to them on the shelves). Well, it's their mistake, so we decided to purchase anyway. Especially since this is $15 cheaper than any other place has them. The cashier didn't even think twice about this price being rather low, even when prompted to ask us if we wanted to add a 1-year warranty for $2.99.

“But the true reflection of the shopping experience is shown in two places (I'm certainly not going to complain about a price mistake in my favor, but it does show the lack of commitment by their customer service staff). The first is the store appearance. I have never been in such a dirty, unorganized store in my life. It looked as though the floors had not been washed in at least a week. And products were located in the strangest places. In the automotive department, where I was trying to find a windshield ice-scraper, there were ceiling lamps. I finally found the ice-scraper in the craft section, completely by accident and no where near a correct price tag.

“The second is the store employee's attitudes. As we walked up to the check out lanes, there were apparently two registers open. But no one was at one of them, even though the light was on. So, we got in line behind one other person at the other register. Both cashiers were there, but not really "helping" people. They were very engrossed in their own conversation, while slowly waiting on the customer. They never even looked at the customer, just kept talking and ringing up the purchases. At this point, 2 other groups are now in line behind us. The second cashier, who was just standing there talking, finally got the clue and went back to her lane to help people. But this didn't stop their conversation. They now proceeded to talk to each other, over the heads of customers (they were in lanes right next to each other). I wouldn't have minded so much, except for their choice of topics. They were discussing, very loudly, how a friend of theirs had just drank Nyquil out of a straw because she had read it would make her miscarry. I just stared at them in awe.

“I don't think it ever even occurred to them that they might insult or offend someone, and even if they did, I don't think they would have cared. I looked around, but there wasn't a manager in sight. So we just got our purchases and left as quickly as we could. And as we walked out into the parking lot, my boyfriend said to me, "No wonder they're going out of business. That's got to be the worst store I've ever been in. I don't think we'll be shopping there again."

“So, I have to agree with you again, Kevin. They may change upper management, they may talk pretty to investors and stock holders, but that's not going to make a bit of difference with their customers. If they really want to turn the company around, they need to start at the store level. Until they can make Kmart a worthwhile shopping experience, they're never really going to recover.”

Two thoughts here. One is that this is a perfect example of how and why Kmart probably is doomed, no matter how it reorganizes.

The second is how many retailers would recognize this in-store environment as being uncomfortably close to their own.

MNB user Steve Grossman had a less cynical view of the Kmart moves:

“I agree that the stores need a lot of work. But the new CEO has to have the confidence of the lending community too if they are going to survive.”

We wrote yesterday about how German retailers Aldi and Lidl have been criticized by the German ministry of Agriculture and Consumer Protection because their price cuts allegedly threaten small retailers.

One member of the MNB community, who happens to live in Germany, provided some additional perspective:
“It is true that the idea to fight low prices through legislation was floated by the secretary of consumer protection and agriculture. The interesting part is that this idea was not proposed to ensure small retailers’ survival, but the secretary claimed hat the quality of groceries must surely be declining at these low price levels (most notably farm products). So the solution is: to protect consumers, low prices need to be countered by legislation. It is obviously one of the most idiotic ideas ever to have emerged out of the red / green coalition in Berlin. The real reason for this seems to bet hat we have upcoming regional elections in two states, with a relatively high concentration of farms. At least I hope there is some explanation for such an idea to be aired publicly by a cabinet member The chancellor soon noticed how dim-witted the whole idea was and flat out put an end to the debate. “The fact that Wal-Mart has a hard time to make their low price strategy stick, is that the price strategies by Aldi and Lidl have ensured the lowest retail margins in Europe for many years, which make it very difficult for Wal-Mart to differentiate themselves. Also, Wal-Mart has acquired existing stores with some significant strategic and cost disadvantages. “
KC's View: