Innovation Challenge #1: Kmart Australia
The challenge: Analyse a company, their challenges, and develop ideas on how they could improve customer experience by anticipating and satisfying the customer needs using design thinking. One company per month, for the next 10 months.
Kmart and the tale of competition
Kmart Australia is a retail business that has successfully transformed itself within the last few years. Under the management of Guy Russo, Kmart had cleverly positioned itself as the everyday low-price discount department store and jumped on the emerging home decor market. In 2017, Kmart posted $553m in profit, an increase of 17.7%, and a healthy 87.6% in customer satisfaction, second only to Costco.
However, Kmart is facing a lot of competition in the market. In May 2018, Big W launched their beautiful home-ware range that rivals to that of Kmart. Last year, Amazon, the online-shopping giant, has started taking over Australia. There is plenty of work to do within the business, and things will slide backward without a constant strive for service improvement. The question is:
How could Kmart continue to generate more revenue through serving Australian families’ basic needs?
One obvious way would be to improve the Kmart shopping experience by making it easier to browse, search, and locate what a customer wants physically. For many reasons. Better way findings, in-store assistants for fashion and home-decor advice, or seamless integration between online and in-store shopping are some ideas.
But let’s be more ambitious! Let’s dive further into the life of Kmart customers for some meaty problems and the golden nuggets that could reshape the retail industry.
Step 1: Building Empathy. Kmart customers and their job-to-be-done
Here are 3 real-life stories of Kmart shoppers.
Story 1: Jo is a mother of two, Leo and Katie. Every week, the kids would spend a day with their aunties. On that day last week, they needed to get a present for their cousins. The aunties decided to take the two kids to the local Kmart. They got somethings for the cousins, albeit unsure if they would like it. Meanwhile, Leo and Katie ended up with their own presents as well. As they brought their new toys home, Jo grew frustrated because she was trying to teach the kids about spending sensibly and appreciating what they already had. More importantly! The house was ready overflown with toys, clothes, and everything else that was given to them over the years. Jo’s brother was trying to get rid of as much stuff as possible as it has been stressing him out every time he paid them a visit.
Story 2: Lauren and her boyfriend were going to the movie. They had some free time so they went into Kmart for a browse. Everything looks so cute and would be perfect for their new house. But her boyfriend stopped her from buying because, in ‘his’ opinion, they have had enough already.
Story 3: Kelly and a bunch of friends bought some great props from Kmart for their Christmas party — the animal masks were so cheap and so clever! However, after that 1 night, they have no space to store those masks— what should they do? They couldn’t find any places nearby that would recycle their short-live purchase. It ate Kelly up inside dumping the masks into the rubbish bin. “Here is another one for the landfill.”
These stories demonstrate a number of jobs-to-be-done when Kmart customers visit the store:
- To kill time and have some entertainment together (difficult to be replaced with online shopping)
- Get inspiration for purchase, e.g. gifts, costumes (can be done online, but getting the items can’t be done fast enough with the current shipping time in Australia.)
- Satisfy the basic needs (for my look / for the home / for the kids)
We could see that the purchasing journey includes not just the buyers but also others (e.g. the boyfriend, the mother). It also extends beyond the purchase itself and includes planning, storage, and disposal).
Among many is a clear pain-point in the disposal stage:
- When Kmart customers finish using their items or have unwanted items, they want to dispose of them but can’t because there is no efficient and responsible way to do so, causing more stuff being accumulated at home and making them feel bad about additional purchases. Our clothes and everyday items are more than trash, it’s OURS. Chucking them into the rubbish bins is mentally difficult—there is a lot of emotional attachment and we don’t want to be seen as wasteful. Psychological research studies have found that people assigned higher prices to the same ceramic cup when it was “their” or after they have chosen it.
At a macro level, Australia as a whole and Melbourne, in particular, are going crazy on the recycling and re-using issues. Minimalism is the new trend of millennials. This trend poses a threat to cheap department store like Kmart if their only goal is to get people to buy more.
Step 2: Ideations. Some how-might-Kmart and ideas to do so.
1. How might Kmart allow customers to purchase easier and faster while making the disposal of unwanted items easier, faster, and more responsible?
For Kmart’s buyers to continue buying, they need to get rid of the old stuff or find a way to make space for the new stuff. Helping their customers doing this will likely increase customer trust in Kmart and customer loyalty to the brand. It is also a great opportunity for Kmart to differentiate from their competitors. Kmart will become the place where you get things for everyday living, manage your home, and continuously grow your lifestyle! All while being nice to the environment.
Here are some ideas that Kmart can do to make both buying and downsizing happen spontaneously and at ease.
- An in-store recycle-reuse deposit centre. Kmart can either help recycle items correctly or donate them to a trusted source. This touch-point should be designed to make people feel good about their disposal rather than feeling wasteful, from the way the “bins” are designed, to how the “value” of the disposals are tracked and showed to the customers.
- A maker centre or an inspiration channels on how to organise home and makeover old stuff. A range of “make-over” products like what these STYLKEA ladies are doing. Maybe even enable those ladies to sell their own “reinvented” style at Kmart stores as specials.
- A place where people can learn how to re-style and decorate their house — just like how people learn gardening at Bunnings.
2. How might Kmart continue to inspire people with ideas for their everyday life?
Kmart is already doing a pretty good job to inspire Australian with their Kmart hack and Kmart home-makeover. But Big W could catch up with that. Let’s go beyond purchasing and inspire them with how they can give presents, how they can teach their kids about sustainability and responsibility, and how they can easily clear up their space and give it a make-over at a bargain.
End words: What we could all learn from Kmart
Kmart leaders and teams have achieved a phenomenal transformation. Here are a number of things Kmart has done right that could benefit us all.
- Having a clear vision and identity. Kmart’s vision is to provide families with everyday products at the lowest prices. That’s precisely what they are known for. When Australian things of where to buy cheap with reasonable quality stuff, they thought of Kmart.
- Exceeding expectations. interestingly, Kmart doesn’t included beautiful products in their vision statement, yet that was exactly what they have delivered. Throughout the year, consumers have been taught that we only could get beautifully designed products from expensive home-ware stores. Kmart’s ability to deliver value-for-money products is a hook that keeps people coming for more.
- Making the inevitable competition and the human’s perception of value work for them. Kmart’s products command such high value for money because consumers could compare them to products with similar appearance but more expensive. Now, imagine a world where you could get beautiful homeware products from any stores at similar prices, Kmart won’t be so attractive then. Companies could learn from Kmart by thinking about what value customers are perceiving from their products; what customers are comparing their products to; and is there a unique way to add value while making life a lot easier to customers?
- Creating new experience to engage fans. They are creating unique experiences for their fans by having influencers arranging exclusive reviews of new products at their own home. Kmart sets up its products in the influencers’ houses for people to come over, get inspired and even talk to the designer.
- Finally, focusing on real customer needs. Welcome to the Kmart Hack. where Kmart showed a real focus on what their customers want to do, rather than what their products are meant to do. If all I want is for my kid to sit down and eat their foods, do I choose a $50 high chair or a $15 stool from Kmart? If you choose the $50 high chair, it’s ok, it’s your mana ;).
