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How private label helped Kmart's Australian reinvention

Illustration of a hopping kangaroo holding a shopping basket.

Illustration: Gabriella Turrisi/Axios

Kmart's U.S. presence may have dwindled to two stores, but in Australia, it has emerged as the second-largest non-food retailer.

Why it matters: It's a case study for struggling U.S. retailers searching for channels to stay relevant.

  • Kmart Australia head Ian Bailey spoke with Axios at the World Retail Conference in Paris.

Catch up quick: In 2007, Wesfarmers acquired Coles, the parent company that operated Kmart in Australasia.

  • The struggling banner was about to go out of business, facing competition from price-chopping rivals like Woolworths' Big W.
  • Wesfarmers faced a choice of shutting it down, which would have been expensive given the chain's lease obligations, Bailey says.
  • So the new owner gave the management team one last chance to turn it around, he says (and reportedly invested AU $300 million into the project).

What they did: Offering quality products for low prices while still being profitable meant embracing private labels, which Kmart did via its brand Anko, Bailey says.

  • The retailer zeroed in on categories it thought it could win in: home, clothing and toys. Kmart now does product development and manufacturing for toy giant Mattel, particularly wood toys for its Fischer Price brand.
  • Meanwhile, Kmart exited other categories like televisions, DIY and gardening, he says.
  • It also streamlined its product lines, focusing on offering a handful of brands and various price points, Bailey says.

By the numbers: Wesfarmers revealed in early February that its Kmart division had record first-half earnings driven by apparel, with sales overall increasing 4.8% to nearly $6 billion, per Reuters.

The latest: Wesfarmers merged Kmart's operations with those of Target's, which it also operates in Australia.

What's next: While Kmart itself won't be returning to the U.S., the brand that revived its fortunes in Australia is.

  • Anko is already being sold by retail partners such as HBC, the parent of Hudson's Bay, and Carrefour.

😔 1 sad thing: Kmart no longer offers the Blue Light Special — where a flashing blue light is turned on to indicate a short-term discount.

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