The closure of a Kmart store in Bridgehampton, New York, in October marked the end of an era for the iconic chain.
Once a go-to discount retailer with over 2,000 branches nationwide, Kmart was renowned for its low prices and “Blue Light Specials.”
However, the chain saw years of declining sales as it struggled to compete with rivals like Walmart and Target and the rise of e-commerce giants like Amazon.
Now, just one Kmart store remains in the mainland US, tucked away inside an At Home store in southwest Miami.
On the other side of the world, however, things couldn’t be more different — Kmart’s Australian namesake is booming.
The Australian company — which previously had a common shareholder with the US version but is no longer connected to it — first opened in Melbourne in 1969.
The Wesfarmers-owned chain now operates over 300 stores across Australia and New Zealand and employs about 40,000 people.
Kmart Group, which comprises both Kmart and Target Australia, saw revenue climb almost 5% last financial year, from about $10.6 billion to $11.1 billion, despite tricky market conditions brought on by a cost-of-living crisis and supply chain issues.
Gary Mortimer, a professor at the Queensland University of Technology who specializes in food retailing, retail marketing, and consumer behavior, told Business Insider that a key factor in Kmart’s success down under has been its home brand, Anko.
Anko, which began as a series of kitchen appliances before expanding to include products like stationary, home decor, and clothing, often replicates more expensive brands at cheaper prices.
Anko now accounts for 85% of Kmart’s sales in Australia, and it has become one of the country’s most popular brands — which Mortimer said was “no mean feat.”
“They’ve had to maintain low price, but also maintain reasonably good quality because I don’t think consumers would accept low price if the product is going to break down in three to six months,” Mortimer said.
Speaking at the NRF (National Retail Federation) 2024: Retail’s BIG Show, Ian Bailey, the managing director of Kmart Group, echoed that point.
“We very much wanted to create an environment where customers felt that they didn’t have to compromise. And we found it’s been a very powerful driver for our business,” he said.
The brand has also helped Kmart Australia extract better data about its products and consumer tendencies, helping improve its demand forecasting, Bailey said at the NRF 2024.
“The data quality we get from one brand is exceptional,” he said.
“Because we run one product, and then we’re running pretty much at everyday pricing model, the net result is we get incredibly clean data,” he continued. “And that enables us then to get very good at demand forecasting, which then means we can have great availability with relatively low stock levels. That gives us the ability to then start testing new products, to drop them in because we’ve got the inventory capacity to do so.”
Anko’s success has been such that it has helped Kmart Australia reinvent itself from a traditional retailer into a contract manufacturer and supplier, and the company has gone on to roll out the brand in other international markets, including Canada, Singapore, and the Philippines.
Anastasia Lloyd-Wallis, the COO of Retail Doctor Group, a Sydney-based consultancy, told BI that Kmart also focused on creating positive in-store experiences to boost growth, targeting the resurgence of in-store shopping post-pandemic.
Kmart has been able to achieve this through its bargain prices and consistent new product delivery, Lloyd-Wallis said, adding that the experiential aspect helped differentiate Kmart from online competitors.
Social media has helped drive home such experiences and new products to shoppers, with the company tapping into the content creator craze.
“We see this in things such as Kmart hacks,” where creators showcase how they use Kmart products in novel ways to help in their everyday lives, Lloyd-Wallis said.
You can now find Instagram accounts dedicated to sharing such tips.
The company has also quickly seized on viral products, producing its own versions at heavily discounted prices.
In one instance, Kmart began selling a version of a popular “sunset lamp” that had been going for 1,500 Australian dollars (around $990) online for $27 Australian dollars (about $18), news.com.au reported.
A race to the bottom
So far, Kmart Australia has weathered the e-commerce storm, in part thanks to the geographical challenges companies like Amazon face in Australia.
Australia is the sixth largest country in the world by area, but its population remains relatively small — 27.1 million people as of March 2024 — many of whom live in remote areas.
Kmart’s advantage here is that it’s “decentralized,” with stores across the country, Mortimer said.
It also uses “K hub” micro-stores, which offer locals in regional locations access to some of Kmart’s best-selling products, as well as a place to pick up online orders from both Kmart and Target Australia’s full range.
Kmart still faces challenges, however.
For starters, Amazon is not out of the game down under.
Amazon Australia gained 1.1 million new customers in the 12 months to June, with 7.9 million Australians aged 14 or over shopping on the site at least once a year, according to market research firm Roy Morgan.
Kmart will also be wary of Chinese fast-fashion retailers like Temu and Shein as budget-conscious customers seek ever-cheaper prices.
Data from Roy Morgan in August put the number of Australians aged 14 or over who shopped on Temu and Shein at least once in the previous 12 months at 3.8 million and 2 million, respectively.
It seems, then, that Kmart Australia could find itself in a price race to the bottom.
“These numbers confirm that the ‘trading down’ phenomenon is real,” Laura Demasi, Roy Morgan’s head of retail research and social & consumer trends, said. “Every month more and more Australians — both young and old — are trading down to these platforms to stretch their dollars further, redirecting billions of dollars away from Australian retailers.”
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