Kmart shops around as retailers brace for difficult Christmas'

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Department store and discount retailers are taking steps to prepare for what may not be a very merry Christmas shopping season.

Last week, Kmart Corp. initiated a review for its $100 million account. Under new Chairman-CEO Charles C. Conaway, formerly president of CVS Corp., the retailer wants its advertising to convey how it meets customer expectations--such as convenience, price and quality, a company executive said.

Previously, Kmart advertising focused on branding messages intended to back its new merchandise lines and store format. For example, a spot with a cameo appearance by Bob Hope backed the launch of Big Kmart stores; and Martha Stewart promoted her line of linens and garden supplies, a key element of Kmart's merchandise repositioning.

One executive familiar with the retail environment noted that the ads may, in fact, have raised customers' expectations while Kmart grappled with distribution challenges, lines at the cash register and other customer service issues.

RED LIGHT BLUE LIGHT

Advertising for Kmart's BlueLight.com online store will not be a part of the agency assignment.

"We will probably not have our own agency," said Fran Maier, BlueLight VP-marketing, instead moving "to build the BlueLight brand without having to spend millions of our own dollars."

Kmart's five-year incumbent shop Campbell Mithun, Minneapolis, will participate in the review. CVS agency Bates USA, New York, along with BBDO Worldwide and FCB Worldwide, are also weighing whether to pitch. A decision is expected by September so the new agency can begin fall and holiday campaigns.

"Kmart has a lot going on, but it's not enough," said Howard Davidowitz, chairman of retail consultant Davidowitz & Associates. "Retail is a mature business, and in any mature business there is a natural slowdown," which, he said, will result in consolidation and might bring on some bankruptcies.

Other chains feeling the industry's growing pains are Sears, Roebuck & Co. and J.C. Penney Co., both of which are involved in searches for new chief executives.

'DIFFICULT' SALES PERIOD

Penney's earlier this year hired DDB Worldwide, Chicago and Dallas, as agency for its consolidated $200 million advertising account. Sears has been moving to improve sales for almost a year with promotional efforts tagged "The good life at a great price. Guaranteed."

Still, after years of happy holidays, with sales up 6% in 1998 and 9% in 1999, Carl E. Steidtmann, director and chief economist at PricewaterhouseCoopers, is anticipating a "difficult Christmas" with retailers lucky if sales gain 4% overall.

Previous years were buoyed by "a most remarkable run of sales growth," he said, with falling apparel prices, low inflation, high employment, rising home prices allowing for refinancing and, in 1999, millennium euphoria.

"The competitive pressure in retail has, if anything, grown," he said, adding he has concerns about the future of chains "having this much trouble now."

Copyright June 2000, Crain Communications Inc.

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