Identity Crisis

It’s code blue time for the Blue Light.

Despite Kmart’s initial declarations of solvency, for months Chapter 11 bankruptcy loomed for the nation’s seventh-largest retailer. In medical terms, a “code blue” means a patient has gone into cardiopulmonary arrest and needs immediate resuscitation to survive. If the analysts are right, it’s going to take a miracle to bring the discount giant back to its feet, because the Blue Light is indeed flickering.

The retailer’s problems are many—inconsistent management, shabby stores, poor customer service, etc.—but it’s easy to see what the retailer’s worst ailment is: It has no niche.

In an era of too many stores and not enough time, a retailer needs more than a famous name. It also needs a defined, consistent image and a dependable shopping experience that fills a particular niche. Kmart and the Blue Light special may have instant name recognition, but the name no longer stands for anything special—while its chief rivals glommed on to the fact that today’s discount market is polarized between shoppers who want cheap prices

and shoppers who want cheap chic. Wal-Mart has the No. 1 position among low-price retailers, while Target’s cheeky ads and sharply styled merchandise have clearly cornered the mass market on affordable style.

Where does this leave Kmart? A man without a country, a merchant without a customer.

Let this serve as another reminder that a good retailer can’t be all things to all people, and one who tries risks having nothing of value to anybody.

A surer bet is to pick a segment and serve it well—and say “no” to temptation. There’s nothing wrong with changing your image: If you want to morph from a store that sells primarily basic merchandise to a store that sells upscale design-focused jewelry, it can be done. But in so doing, you have to be committed to your new market, even if it means possibly losing some of your existing customers—and you have to be willing to let them go. You can certainly offer affordable designer jewelry in the price points to which they’re accustomed, but if their taste leans toward a bread-and-butter look, you may not be able to convert them to designer style even if it is the same price. You may, however, bring in a whole new group of shoppers to replace them. But if you advertise a promotionally priced diamond bracelet one week, it’ll be tough the next week to convince an affluent customer to come and buy a strand of black Tahitians from you.

The same holds true in reverse. If your town doesn’t have enough customers to sustain a high-end store, your survival may mean targeting a lower demographic—and letting the few well-heeled customers go out of town to buy Tahitian pearls. Neither is better or worse, it’s simply a case of finding what works.

But you have to remain vigilant. What works today won’t necessarily work forever. While not in the dire predicament Kmart is, Gap Inc. has had some well-documented struggles getting its Gap division stores back on track. When corporate America went casual in the early 1990s, Gap was the baby-boom stalwart for khakis and polo shirts. But as the boomers got older, Gap didn’t. It failed to grow with—and remain relevant to—its primary audience and also got cannibalized by its own Old Navy division, which had similar styles and lower prices and attracted younger shoppers. Like a teenager on his fifth major, Gap is still trying to find itself.

Teenagers can afford to have identity crises, but retailers can’t. Lost teens end up in therapy, but lost retailers only end up in bankruptcy.