Kmart tries new merchandise, departments, displays


TROY, Mich. -- They're playing around more than ever at some Kmart stores -- and it's serious business.

Kmart's store managers and senior executives are playing around with new concepts, new departments, new merchandise and new ways of displaying and selling it -- all aimed at making Kmart more appealing to current and potential customers.

The experimentation indicates that Kmart's culture may be changing, to accept and even encourage more risk-taking and innovation.

Until recently, Kmart had not changed its concepts much, and the renewed tests bode well for the Michigan-based retailer, analysts say.

"They're really trying a lot of different things," said Michael Crosson, executive vice president of Jon Greenberg & Associates, which designs store layouts and interiors.

With all the new executives brought in over the last eight months, Kmart top brass are trying new approaches to sell more merchandise, more profitably -- to make every square foot of its ++ stores profitable, said Ron Petrie, retail analyst with Roney & Co. in Detroit.

Among those hired are executive vice presidents for merchandising and for marketing and new products.

"The ultimate goal is to give customers as many reasons as possible to shop there," said Mr. Petrie.

One of the most intriguing tests involves "convenience centers" that sell a variety of food, film and cigarettes from a store-within-a-store. So far they're in about 15 or 20 stores, and Kmart plans to add them as it builds or remodels stores, a spokeswoman said.

At one Michigan store, the convenience center sits in front so customers must pass by as they exit through the cash register stands. It stocks milk, juices, bread and a variety of nonperishable foods from crackers and cereal to peanut butter and hamburger casserole mix. Most of the merchandise is generic or off brands.

"We're playing with it . . . seeing what we can do," said store manager John Killmar. "It's doing real well."

By putting in a convenience food department, Kmart may leverage its growing expertise in groceries from its Super Kmart division, analysts say. A quick-stop convenience department also could generate traffic in stores as someone who stops in to buy milk and bread also buys higher-profit shoes or a CD. Most food provides very tiny profit margins.

Kmart's annual report, out this month, indicates that the company is experimenting with many changes in its stores. "Tests of some of our merchandising ideas will soon be under way at selected sites around the nation," the report says.

Among the approaches being tested or contemplated:

* Some stores will get expanded furniture departments. These departments will offer bar stools, entertainment centers, computer stands and more, a spokeswoman said.

* Moving more "impulse items" to the front of the store or along main aisles. In one store that means moving more snack foods along the main midway walkway and putting trading cards and children's videos near the checkout stands.

* A greater emphasis on baby and children's merchandise. A sign in the entrance to a store proclaims: "Kmart loves kids (and parents, too)." That means larger selections of such things as diaper bags, bicycles and shorts sets.

* Creating smaller Super Kmart centers, for communities that aren't big enough for the giant 185,000-square-foot grocery and general merchandise stores.

* Security departments are being pulled together to offer everything from locks and baby-proofing products to smoke detectors in one place. Most of the items already were in Kmart stores, said Dan Rockman, manager of a Tel-12 store.

* Handing off in-store restaurants, which lost $14 million last year, to an outside operator. Kmart also may sell its 900 auto repair shops to a nationwide chain, says a research report by Gruntal Investment Research in New York.

* Stocking more popular national brands in many departments, moving away from private labels and generics.

"There's a lot going on" inside Kmart, said L. Wayne Hood, retail analyst with Prudential Securities. But all the moves are in the very early stages and much of it will unfold in this year's second half.

Mr. Crosson of JGA said he believes Kmart may decide to roll out the best concepts to newer stores with the most growth prospects and not put them in all 2,100 Kmarts.

Some of the new approaches are borrowed from Wal-Mart, some patterned after Target and some come from Kmart itself, Mr. Crosson said. The key is for Kmart to develop its own identity and approach.

"It should feel like it's an easy, bright, fresh place to shop," he said.

"The goal needs to be: We need to be the store of first choice for customers in specific [merchandise] areas."

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