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Kmart Corp., its turnaround fueled by Martha Stewart and Sesame Street merchandise, will move some of its marketing emphasis into the direct and database arena, said Floyd Hall, chairman, president and CEO of the mass merchandiser.

In an interview with Advertising Age, Mr. Hall said the retailer will use the customer databases it has built to create sales, specifically via coupon offerings targeted to individual interests.

"We will be doing much more direct mail in the future as we target customers for specific lines of products," he said.


As Kmart's relationship databases determine that a customer has an interest in, for example, fishing, automotive or do-it-yourself projects, they will be targeted with mailings about those types of products.

Customers of Kmart's pharmacies will be sent new-product information.

Of special interest to Kmart and Mr. Hall are mothers.

"We know that mothers with children at home have a broad array of needs, and we intend to offer them [what they need] through direct-mail coupons on various items . . . they buy with great frequency," such as diapers, he said.

Last fall, Kmart distributed its first toy catalog and followed up with a second to 21 million households last spring.

Although Kmart will continue with its usual 72 million newspaper-distributed circulars per week, other media increasingly will be tapped.

"I would anticipate us using more radio and more television as we go out because of its effectiveness," said Mr. Hall.

Kmart has been using actress and TV talk-show host Rosie O'Donnell and director Penny Marshall as ad spokeswomen, most recently in a corporate branding role as the "Price Police," touting Kmart's low-price guarantee.


While some retailers spend as much as 2.5% of sales on advertising, Kmart will continue to stay under that, devoting about 1.4% to 1.5% of its sales to marketing efforts. Mr. Hall termed that "about right for us."

In 1997, Kmart spent $268.9 million on measured media advertising, up 21.6% over the previous year, according to Competitive Media Reporting.

Mr. Hall also wants Kmart to move more aggressively in the online arena.

Plans call for the addition of nine new categories of products for online sale to be phased in through the end of the year, adding to the current availability of books and CDs, he said.

In addition, Kmart has kicked off the "Kmart Solutions" program, through which customers via an in-store online computer terminal can get products not on display in stores.


The program is the latest from Kmart under Mr. Hall, who took over in 1995 amid rumors the company was about to file for bankruptcy. He began a renovation program that converted 1,200 of Kmart's 2,115 stores into Big Kmarts, with a convenience food pantry, wider aisles and improved lighting.

His merchandising efforts centered on the Martha Stewart line of linens and household products, expanding next year to include lawn and garden items, and the children's department, centered on Sesame Street licensed products.

Last month, Kmart kicked off its own Route 66 line of jeans and apparel with a campaign from agency Campbell Mithun Esty, Minneapolis (AA, July 27).


Just as its Martha Stewart line has shot to No. 2 behind Cannon Mills in market share in a little over two years, Kmart is counting on Route 66 to grab a large share of the jeans and apparel market.

"Predominantly, we want to be a national brand retailer," he said, selling Tide, Kodak and other established brands. But in categories where the retailer lacks access to major brands, such as apparel, Kmart will push its private labels.

Mr. Hall noted that Route 66, in a system based on good/better/best goods, is in the "better" range.

As for rating the chain's performance since his arrival: "Clearly, in my mind, we've turned the corner. On a scale of one to 10, I think we are somewhere about six or seven."

Customers are shopping Kmart more often, with visits up about 5% this year, and spending more when they shop, with average transactions up less than 5%, he said.


"They're starting to get people in stores," said retail consultant Maggie Gilliam of Gilliam & Co. "A little word-of-mouth is developing." She said Kmart's primary challenge is cutting costs and keeping product on the shelves.

Mr. Hall said the chain continues to work on better stocking of merchandise and developing a more service-oriented culture at the retailer.

Even with those problems solved, Ms. Gilliam said, "It's difficult when your primary competition is Wal-Mart."

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