Republic of the Philippines

City of Taguig i
Taguig City University
Gen. Santos Avenue, Central Bicutan, Taguig City

KMART
Case Study # 12

ARMIE F. SALCEDO
BS INDUSTRIAL ENGINNERING
 Republic of the Philippines
City of Taguig ii
Taguig City University
Gen. Santos Avenue, Central Bicutan, Taguig City

Introduction

The giant retailer has changed its online business model several times, but has also
learned valuable lessons along the way.
It’s tough to imagine how Kmart, the third largest retailer in the U.S., a granddaddy of
mass-retailing with more than 2,100 super-center outlets serving all 50 states, the
Caribbean Islands, and Asia Pacific, could fail with its first foray into the online world.
After all, roughly 85 percent of this country’s population lives within 15 minutes of a
Kmart store, and the company mails roughly 70 million advertising circulars each
week. If you can’t drive traffic with these kinds of numbers, how can any traditional
company expect to successfully bring offline customers online?

Problems

Kmart.com failed because it was a clunky website that failed to generate enough buzz
to bring the company’s huge-yet-technology-shy audience to the Internet. And
although the website may have been a great way to grow the catalogue to a new
channel, the experience only served to remind the online world that Kmart was still an
old-school retailer in a young man’s game.
But Kmart execs persisted in directing the same will that brought the company worldly
success to the creation of a separate, interactive division to secure venture funding,
and the opportunity to bring on seasoned Internet experts to launch a full e-commerce
site. After shopping around, they partnered with Softbank to develop and maintain a
new e-commerce site, dubbed BlueLight.com, which debuted in 1999 and reflected
the good old days when the BlueLight Special in-store announcements alerted Kmart
shoppers to limited-time discounted items.
It was a far, far better cyber-strategy that translated the company’s core values online,
company execs announced. But was it enough to succeed at building offline-online
customer relationships? The redesigned website featured a new, contemporary look
and feel, with a front page concept of synchronized animated headers, sidebars, and
“blue” real estate, and a focus on the same attributes that characterized Kmart’s
BlueLight brand in stores: a shopping cart and familiar brands.
Kmart launched BlueLight.com with the largest marketing push in company history. It
included national broadcast, print, in-store, and outdoor campaigns, supported with a
comprehensive online campaign at BlueLight.com and other web properties. And
according to MediaMetrix, more than 9 million unique visitors shopped at
BlueLight.com during the holiday season, an increase of 823.5 percent over the same
period the previous year.

ARMIE F. SALCEDO
BS INDUSTRIAL ENGINNERING
 Republic of the Philippines
City of Taguig iii
Taguig City University
Gen. Santos Avenue, Central Bicutan, Taguig City

“We took the heritage of value that the BlueLight Special represented for consumers
across the country and repurposed it for a new mindset,” says Brendan Foley, director
of online marketing for BlueLight.com. “BlueLight.com also brought the best of what
Kmart had to offer to online customers.”
The company also built some strong partnerships with the likes of Martha Stewart,
Black & Decker, Philips, and Panasonic. (Martha Stewart, for example, occupied a big
chunk of real estate on the home page.) BlueLight.com shoppers had more than twice
as many products to choose from as they did in a typical Kmart store. Still, this would
have been just another e-commerce site were it not for the company’s next move—to
become the first major offline retailer to offer free Internet service supported by
advertising banners. CDs were handed out to customers at the company’s 2,100
super-center outlets, and Kmart quickly registered a whopping 7 million subscribers.
“It was an incredibly successful acquisition campaign,” says Foley. And to the extent
that those customers have become loyal Kmart shoppers, the cyber-strategy worked.
Why then did the free Internet service end in August? Why were customers offered
the same unlimited nationwide access, only now for a fee? And what’s become of
BlueLight.com? Did the company meet the ultimate clicks-and-mortar challenge—
succeed in creating a robust online business?
Solutions
The move to end the free Internet service was necessitated by diminishing ad
revenue. The company had originally used banners in the menu bar touting weekly
promotions “but the ad revenue just dried up, and we couldn’t support the original
business model,” explains Foley.
So customers were offered unlimited nationwide access for a monthly fee, and the
task bar was minimized, the ad bar suppressed. Only Kmart activity remained on the
home page of Internet service. To date, 153,000 customers have signed on, some of
whom were converted from the free service. The company also announced earlier this
year that it had agreed to buy back the 40 percent of BlueLight it did not already own,
and assume tighter control over the division at its Troy, Michigan, headquarters.
“It’s easier this way,” says Foley. “We’re a big company, and it’s just easier to sit down
with the person in charge of the weekly advertising circular, for example, and talk
about how we can expose the brand more effectively. We’re not having to deal with
transcontinental communication to grow the business.”
Whatever it takes to grow the business makes sense, especially while electronic
revenues continue their precipitous decline. Few companies have successfully
negotiated the rocky series of financial quarters.
What lessons did Kmart learn along the way? For openers, the BlueLight campaign
demonstrated that success isn’t always just about click-throughs. In fact, branding
took precedence over any response-driven objectives. “We can only think of a couple
of ideas that can get you immediate gratification,” says Foley. “BlueLight continues to

ARMIE F. SALCEDO
BS INDUSTRIAL ENGINNERING
 Republic of the Philippines
City of Taguig iv
Taguig City University
Gen. Santos Avenue, Central Bicutan, Taguig City

bring to the web all those things that Kmart shoppers want and need. In Internet time,
we’re only one year into this. We’re still learning about the relationships between the
offline world and online world.”
BlueLight.com also continues to bring some old-school marketing tactics to the online
world. The website continues to expose products and brands, allowing customers to
have more interaction with Kmart than just a shopping cart in a store aisle. The
website also serves to educate users to the company’s resources and the locations of
Kmart stores.
And although some analysts and industry pundits may argue that this is just another
example of a traditional company that failed to successfully bring offline customers
online, Foley says the campaign and the free Internet service doubtless served as an
effective marketing tool to acquire customers, and as “another distribution vehicle” for
Kmart shoppers.

Reference:
https://www.mediapost.com/publications/article/2267/case-study-kmart-online-a-good-
thing.html

ARMIE F. SALCEDO
BS INDUSTRIAL ENGINNERING