FlyingFoxes.co.uk

Lessons from a discount store… (in 2 mins)

We spend a huge amount of our time as marketeers understanding the rules of our markets. But historically, big change happens in a market when an outsider comes in and changes the rules of the game or, even worse, rips up the total playbook.

Kmart was the undisputed leader in full-line discounted consumer goods across the USA.

But then the young pretender Walmart came to town, quite literally.  Walmart, came to smaller towns, ones that the market leader had been ignoring. They’d been ignored, because of a rule of the game, a store needed at least 100,000 customers in close proximity, to be a going concern.

And, because Walmart was doing something silly in the eyes of Kmart they were ignored; well for a while.  But then Kmart started to get worried, Walmart weren’t going away, they weren’t failing. So they asked questions ‘like what can we learn from them’, and at that point they realised they were in trouble.

To the external eye, the rule Walmart had changed was operating stores in smaller towns but what they’d actually done was far cleverer. They’d structured things to give themselves an unfair advantage over Kmart.  

Whilst Kmart ran their units as independent stores, Walmart ran their business as a network.  A network of stores, around a regional supply hub that integrated technology and stock management to keep overheads and administration low.  That was what they had changed and that’s what enabled them to expand into smaller, ignored, towns.  

The big issues for Kmart was that Walmart had several complementary elements that delivered the network solution, elements that Kmart couldn’t adapt to.  And as a result, by 1986, Sam Walton was the richest person in the United States and Kmart filed for Chapter 11 bankruptcy protection.

SO WHAT?

We all learn the rules of our game.  Some are marketing based, like tv ads are sold on units of 30seconds, these can be changed but there are usually cost implications.  And some rules are industry or sector based, most of these are designed around what the first to market or the market leader has designed for their business.  Spending time challenging the ‘perceived wisdom’ behind these rules is a huge source of opportunity. It enables you to reframe you market challenge to one where you are best placed to win; WHERE YOU AND NOT THE MARKET LEADER HAVE THE UNFAIR ADVANTAGE.