- By 2008, Kmart’s performance was lagging in Australia.
- The former chief executive of McDonald’s Australia took over, and the brand had a resurgence.
- A huge online fanbase arose, and its viral content raises questions about digital labor’s value.
- See more stories on Insider’s business page.
The heavily abridged story of Kmart Australia goes like this: After opening its first store in Burwood, Victoria in 1969, Kmart expanded to become a mainstay of Australia’s department store scene.
Nestled between the upmarket Myer and David Jones, and cheaper two dollar store offerings, Kmart offered Australian households access to affordable essentials, selling microwaves, mugs, trackpants, and paperbacks by the pallet.
By 2008, Kmart was the black sheep in parent company Wesfarmer’s portfolio, generating earnings before interest and tax of $114 million (AUD) – well behind stablemate Target on $223 million (AUD).
With the brand reportedly slated for sale, Wesfarmers hired Guy Russo, former managing director and chief executive of McDonald’s Australia, to take the helm at Kmart.
One of his first tasks: Slashing the number of stock-keeping units (or ‘SKUs’), reversing Kmart’s “more is more” strategy and swapping periodic sales for a constant flow of discounts.
“When we removed the SKUs and dropped the price, we found our customer,” Russo told the “Scaling Up” podcast last year. “They were a customer that really wanted value.”
Removing brands was a ‘masterstroke’
Kmart also gutted its reliance on brand names, leaving its competitors to squabble over the big-name labels.
“Removing brands, I think that was the other masterstroke,” Russo said. “We used to sell some really significant brands, but when we dropped the price of underpants to a buck each, the brands weren’t selling at ten bucks each. All of the sudden, the brands took a natural death.”
Wesfarmers put faith in Russo’s vision, providing funds to renovate stores as the brand cut inventory costs. “Make them look like Disneyland,” Russo recalls telling colleagues.
Layouts changed, with traditional departments axed. Electronics aisles gave way to all-purpose “kitchen” sections, where customers seeking coffee machines could pick up new mugs and cutlery along the way.
“The last little masterstroke – although we got a lot of criticism for it – is [putting] the registers in the middle,” Russo said.
The move forced customers to spend a few more moments surrounded by product.
‘Affordable’, not ‘cheap’
It was expensive, time-consuming, and one of the most successful brand rehabilitations in Australian history. Kmart pulled off one of the hardest tricks in retail: convincing customers it was “affordable,” not “cheap.”
When Russo retired as chief executive of Wesfarmer’s department stores in 2018, the segment posted earnings before interest and tax of $660 million (AUD), led by “continued strong growth in Kmart.”
“The marketing got done by our customers, which was the best part,” Russo said.
The online Kmart fandom
One such customer is Helen James, who runs the Instagram account @i_heart_kmart for an audience of 121,000 followers. James is a star in a constellation of content creators, acolytes, and thrifty shoppers who form the Kmart fan community. It’s a massive, influential, and under-researched group, whose online ranks have grown with the company’s resurgence in the last decade.
“I would go in store and just see so many cool, on-trend pieces for ridiculously low prices, so I would take photos and then post them to my page,” James told Business Insider Australia. “Instagram was just starting to take off, Kmart was just starting to refresh their image and homewares range, and I basically bought the two together.”
Jasmine Pisasale’s Instagram account, which uses the tagline “Lawyer by day, Bargain Hunter by night,” started seven years ago as an escape from Pisasale’s “stressful” job.
“I found Kmart to be more than just a shopping experience,” she told Business Insider Australia. “I love to pass time walking through the stores… It brings me a sense of excitement – ‘what am I going to see in Kmart today?'”
Her lifestyle shots show artfully rumpled linens, throw blankets draped over low-slung armchairs and, more recently, Pisasale’s young son, exploring the beach for the first time while wearing a Kmart-branded bucket hat.
Around 32,000 fans have “watched me get married and have my first child along the way,” Pisasale said.
James and Pisasale have leveraged their followings for active partnerships with the brand. Both have participated in invite-only Kmart events, which influencers use to share sneak-peeks at unreleased products with their own fans.
The world of Kmart ‘hacks’
Over on Facebook, Kmart “hack” groups have become a dominant part of the Australian social media experience.
Content from the groups has been featured in Daily Mail Australia with the headline “Shopper transforms Kmart shelves into chic furniture.” News Corp’s parent-centric KidSpot has run the story “Kmart hack: How to turn $8 fruit bowl into mesh light shade,” and 7 News now dedicates several articles a week to ‘cult buys’ and other Kmart-related phenomena.
One of the larger groups, founded in 2015, now boasts 470,000 members. A group dedicated to recipes for Kmart’s cult-favourite pie maker has almost 65,000 members.
The Kmart look
For the most part, the Kmart look features textiles in muted colors: beige and burnt ochre, rosy salmon layered over blue-greys. Tables, drawers, and shelving units are typically a sunbleached woodgrain applied to cheap particle board while accent pieces are pearlescent silver, quartz, or chalky coral.
The general aesthetic is inoffensive – Scandinavian with a touch of beach house. But certain looks can still be tacky, according to the community. Many groups outright ban posts featuring Kmart’s infamous marble-effect book contact after users were condemned for covering entire countertops with it.
The virality of the groups has generated revenue for the brand and has transformed the “hack” community into one of the most powerful forces in the Australian influencer economy and a kind of focus group for Kmart.
“I recall some influencers at a past event asking about the possibility of expanding their plus size range, and the style team took it on board and made significant efforts to expand the styles available,” Pisasale said.
“They really do listen to community feedback, which I love,” James said. “Womenswear, the Curve Collection, the quality of materials, the introduction of more sustainable products … I think over the years all of these improvements have really been driven from a grass roots level.”
But Kmart does not pay any of the influencers associated with its brand for these insights.
“As a business we do not do paid or sponsored content,” a Kmart representative told Business Insider Australia. “Rather we have a ‘gifted for review’ program where media and social media influencers are sent product (where relevant to them or their family) to review, trial and are encouraged to share their feedback.”
James recently received a new sideboard through the program, which also invites key figures to seasonal events and product launches. But a question remains: in the modern influencer economy, should an online community, whose tastes help dictate the success of a billion-dollar company, ask for more than a free sideboard in return?
The uneasy relationship between marketing and ‘playbor’
Analysis of the influencer market suggests Kmart is getting a bargain.
A 2020 report by global social media analytics firm HypeAuditor found Australia’s professional Instagram creators can command four-figure fees per post.
For a brand like Kmart, the question then becomes one of scale: Why pay for access when everyday Instagrammers and a hivemind of 450,000 Facebook users will promote your product for free?
Catherine Archer, a senior lecturer in strategic communications at Perth’s Murdoch University, is one of several academics focused on digital “playbor,” the sticky middle ground between online fandom and paid service to a brand.
The benefit of these groups to Kmart is obvious, she said. But unlike traditional influencers, whose success is determined by click-through rates, it is harder to calculate their objective value to the brand. This under-researched commercial relationship makes compensation difficult to determine, if the conversation comes up at all.
“It’s all a bit blurred when you get to the ethics of interacting with people who are just like us, the everyday community,” Archer said. “Sometimes people don’t realize how absolutely amazing they are for that brand.”
Savvy operators can forge careers out of online fan accounts, but for the most part, there are “a lot of people who don’t make any money out of it.”
Certainly, nobody is forcing hundreds of thousands of bargain hunters to proselytize for Kmart. The influencers Business Insider Australia spoke to expressed their genuine devotion to the brand, and appreciation for the way staff took their messages onboard.
“Customer feedback through all of these channels are incredibly important to the entire Kmart team from design, buying, our quality technicians, stores and across to our distribution centers,” a Kmart spokesperson told Business Insider Australia.
“It allows us to listen to our customers, apply learnings where possible and continue to deliver great quality products at the lowest prices for everyone in the family.”
The brand does listen closely: At least one major “hack” page, which does not advertise any official relationship with the brand, appears to be quietly administered by Kmart employees. The company did not respond to questions about that group.