Waking up in Geelong

Kids playing with toys, low prices highlighted in a red bubble, and a bouncy pop soundtrack to back it all up. Can you tell which discount department store these TV commercials are for?

Can’t tell the difference?

The first advert is for Kmart.

The second is Target.

Go it?

Can’t tell the difference

Turns out even parent company Wesfarmers has trouble, as this 2016 article by Gary Mortimer, senior lecturer at the QUT Business School, explains:

Cannibalisation happens when a company offers a brand, product or service that competes with another within that same company. When this level of internal competition is directly head-to-head, only the strongest will survive. Shoppers and retail commentators have been seeing this play out across the Australian retail landscape with Kmart and Target. Yet, a limited degree of overlap can be a successful strategy if well implemented and where markets are clearly defined.

With increasing disposable incomes and an apparent insatiable desire for superior quality and “luxury for the masses”, mid-tier shoppers originally turned to Target for a range of popular brands at reasonable prices. But times have changed. Economic strains are now causing consumers to trade down, and many mid-tier and premium brands are losing share to low-price rivals.

Today, Kmart is where Target was seven years ago, with Kmart’s first-half earnings in 2016 at $319 million, while Target has slumped to $74 million. Quite simply, Target lost its way and confused its core customer.

When Target is selling $7 kettles and $10 children’s clothing, it is starting to look a lot like Kmart. One of the ways to successfully ensure a good cannibalisation strategy is to ensure a strong brand loyalty to the original business. However, as Target moved further into increasing their range of private label products, brand equity reduced and shoppers migrated to the lower priced alternative, Kmart. Simply shoppers didn’t see the difference between a Kmart t-shirt versus a Target t-shirt.

And in the blue corner

And here is another similar TV commercial from the other side of the fence – Big W.

Target and Kmart both use red in their branding, while Woolworths-owned discount department store Big W uses blue.

Rebranding Target as Kmart

Back his 2016 article Gary Mortimer predicted the two brands would soon merge:

Where you have two very similar businesses, serving the same market, with essentially the same offer; close one. The Kmart model works. Rather than merge, I’d expect Westfarmers department stores CEO Guy Russo to rebrand Target to Kmart.

But instead he decided to convert underperforming Target stores to the Kmart brand. The first such conversion in Victoria was completed at The Pines Shopping Centre in north-eastern Melbourne in December 2016, with Broadmeadows Shopping Centre completed soon after.

And Kmart and Big W cross over

This is from the Sydney Morning Herald in 2015:

Kmart boss Guy Russo has his eyes on at least 50 stores of struggling rival Big W as he hunts for ways to double the size of his department store business and drive revenue to $10 billion.

While Woolworths is considering what to do with its underperforming Big W chain, Wesfarmers-owned Kmart has no designs on the struggling business itself — it’s the leases Mr Russo wants and the Big W employees.

Kmart has reached out to every Big W landlord across the 152 store network and Mr Russo said there were about 50 shops he’d like to convert to Kmart stores.

The cross overs continue.

Liked it? Take a second to support Marcus Wong on Patreon!