What your business can learn from Kmart’s turnaround strategy

Former McDonald’s Australia boss Guy Russo has unveiled a three-phase plan to fix the troubled department store chain Kmart, now part of the Wesfarmers Group.

Russo outlined his plans in an interview with The Australian Financial Review. The strategy – and the problems he has indentified within K-Mart – provides some great insights for any manager looking to revitalise and grow their company during the downturn. 

• Problem: Too much inventory.
• Solution: Clean out time.

Every retailer knows that managing inventory is crucial to business success – cash tied up in stock is cash you cannot use as working capital. Russo has already cleared out $200 million of excess inventory and is set to close 70 off-site warehouses.

• Problem: Time poor customers.
• Solution: Smaller stores.

Russo found that 65% of Kmart’s customers are women, many with small children. He argues they don’t have the time to scour a big Kmart store and so he will start talking to landlords about handing back up to 1000 square metres of space where possible.

• Problem: Overly complex product range.
• Solution: Narrow the focus.

When Russo arrived, Kmart was selling 24 different irons; now it has just 14 on the shelf. Russo also wants to make sure departments are focusing on Kmart’s stock-in-trade of good value products for the average shopper, not expensive and specialist products that other retailers do better.

• Problem: Customers waiting for discounts.
• Solution: New pricing strategy.

Every consumer knows that Kmart is famous for its big discount sales. So instead of shopping at Kmart regularly, customers wait for the sales and duck in to buy one item. Russo says that while Kmart services two million customers a week, 1.5 million come in and don’t buy anything. Expect to see Kmart wean itself off the repeated big sales strategy in favour of more consistent low prices – a lot like Bunnings does. 

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