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LESSONS DRAWN FROM A NYC KMART

For several years now, there have been two Kmart locations in New York City's Manhattan. These stores are of interest because they are fish out of water, in a sense, given that instead of occupying sprawling suburban fields with endless parking lots, they are shoehorned into tight spaces, with no parking at all.One of the stores is in downtown Manhattan, the other in midtown. The latter is of the

For several years now, there have been two Kmart locations in New York City's Manhattan. These stores are of interest because they are fish out of water, in a sense, given that instead of occupying sprawling suburban fields with endless parking lots, they are shoehorned into tight spaces, with no parking at all.

One of the stores is in downtown Manhattan, the other in midtown. The latter is of the most interest since it is perhaps the most unusual of all Kmart stores anywhere. It is in a three-story building, which can be entered from the top and exited from the bottom. The bottom level lets into corridors leading to Penn Station. More important, the store also holds some lessons for the supermarket trade on how to adapt to a strange environment, or, more precisely, how not to adapt.

The midtown store features a fairly broad selection of grocery product, and, as might be expected, a large markdown area aimed at disposing the remaining stockkeeping units of the American Fare private label. Among items being marked down in recent days were huge bags of dog food. That offers the first lesson: Virtually all the store's shoppers arrive on foot and few will have the wherewithal to transport outsized bags. Product should be chosen with store location in mind.

Incidentally, the American Fare label is being ushered out because in July, Fleming started to supply grocery product to Kmart, so the American Fare label is to be replaced. American Fare was a label developed by Kmart about a decade ago when Kmart and Bruno's Supermarkets, Birmingham, Ala., were in a brief joint venture. The supermarket operator ran the food side, called American Fare.

But back to the lessons, and here's another one: At the front entrance of the store is a display under the banner "Dare to Compare." The display consists of a small gondola, on which is exhibited about 20 stockkeeping units -- mostly health and beauty care products. The purpose is to show, by means of shelf-talkers for each item, that Kmart undersells Wal-Mart by several cents in each instance. This same promotion is used by Kmart nationwide to show how Kmart's prices are below those of like competitors nearby. It also has drawn a lawsuit from Target Corp., which claimed that the program has a high error rate and so is unfair.

Be that as it may, bemused Manhattan shoppers wonder about a smaller issue, namely what Wal-Mart?

There is no Wal-Mart anywhere in New York City. But the midtown Kmart is surrounded by scores of stores -- department, drug, grocery, specialty and closeout -- all of which offer merchandise similar to Kmart's. There is no suggestion of how Kmart's prices stack up against those very real competitors, all a few steps away.

To be fair, it should be noted that Long Island commuters come and go from Penn Station, and that there is a Wal-Mart in Uniondale, N.Y., about 25 miles away. And there are four other Wal-Mart locations less than 35 miles from the city, one well north and three in New Jersey. But to midtown shoppers, dependent on public transportation, those Wal-Marts might well be on the moon.

This shows how easy it is to formulate merchandising and promotional practices on a regional basis, forgetting that within a region there may be significant differences in shopper demographics and competitive conditions. Finally, it should be recognized that a store's competition may not be the most similar type of store, but any store that sells like goods.

TAGS: Walmart