While 2013 has seen several significant media accounts go up for grabs --Walgreens, Chanel, Bacardi-- agencies have been waiting for a sizable creative pitch. Now they've got one: Retailer Kmart has just thrown its account into review.
The pitch is in the very early stages, with a request-for-proposal going out in the past week. A list of creative agencies expected to participate in the review has not been finalized.
"From time to time, we review all suppliers and will be initiating a review process for Kmart's lead advertising agency," said a Kmart spokeswoman. "To respect the process and those participating, we will not be disclosing any other information during the review." Incumbent DraftFCB is expected to participate in the process, but declined to comment.
Kmart may be known as a discount retailer, but it's a significant ad spender. According to Kantar, at least $170 million in domestic measured media is devoted to the brand. The Ad Age DataCenter places its parent, Sears Holdings, among the top 20 ad spenders in the U.S. The company spent $1.69 billion on U.S. advertising in 2011, the last full year for which figures are available.
According to industry executives, there's no consultant managing the search process; it's being led by Kmart's procurement department. Kmart has been operating with an interim chief marketer since Mark Snyder departed.
Because the retailer's business spans various sectors -- including clothing, electronics, pharmacy, furniture and home goods -- much of adland will have conflicts that could keep many shops out of contention.
One thing that could give interested shops an edge: A Chicago office that is close to Kmart's Hoffman Estates, Ill., headquarters, executives familiar with the matter said.
Sears Holding Corp.'s Kmart tapped Chicago-based DraftFCB as its lead agency in 2007, in the wake of the merger of Draft and Foote Cone & Belding. Before that the account had been handled by WPP's Grey. Around the time DraftFCB picked up the account, there were a number of significant wins the agency pulled in such as the U.S. Census Bureau, Qwest and Sharpie. The reason Kmart was such a plum win was that it helped fill a hole left by a big client that exited, when Walmart yanked its then-$580 million account (amid a well-known industry scandal).
That Kmart is conducting a procurement-led review -- during which cost will likely be a major consideration -- is fitting because parent Sears Holdings has been struggling for years, posting consistent declines since 2007.
In November, the company posted a third-quarter loss of $498 million, with sales falling $548 million to $8.9 billion. Kmart had fared somewhat better than its sibling brand during the recession, but those tailwinds have subsided. In the third quarter, Kmart posted a 4.8% decline in same-store sales, while Sears posted a 1.6% decline.
Eddie Lampert, the billionaire investor who is the struggling retailer's largest stakeholder and Chairman of the Board of Directors, was recently appointed the company's next CEO. He will become the company's fifth CEO in seven years.
In May 2011, Minneapolis-based Peterson Milla Hooks, Ad Age's Comeback Agency of the Year, snagged Kmart's apparel and home business, which had been handled by DraftFCB in a review. That portion of the business is not affected by this review.