Kmart's battle mirrored in NZ

By SIMON HENDERY

There may be no connection between the two businesses, but in the battle for the shopper's dollar, local retail chain Kmart has found itself grappling with a number of the same issues faced by its troubled US namesake.

The 11-store New Zealand Kmart chain has also been losing money, but its owner, Australian retail giant Coles Myer, said last year that it planned to expand the business.

Both Kmarts have an arch-rival: Wal-Mart in the US and The Warehouse in New Zealand.

After Kmart Corp chairman and chief executive Chuck Conaway took up the top job in June 2000, he promised to match Wal-Mart prices, cut checkout waiting time by 20 per cent, and spend $US2 billion upgrading computer and distribution systems.

But although Kmart has added more food items to its stock range, American shoppers have continued to spurn the chain in favour of Wal-Mart's lower prices.

Last week, Mr Conaway stepped down from his chairman's role, although he remains chief executive.

In New Zealand, after ongoing speculation that it would eventually sell Kmart to The Warehouse, Coles said in November that, rather than selling out, "a preferable outcome for shareholders ... could be achieved by refocusing the business competitively, reducing costs and opening some additional stores".

As Australia's largest retailer, Coles has the experience to make a decent fist of Kmart NZ - it has more than 2000 retail stores in Australia, including the 73-store Myer Grace Bros department chain, 410 Coles supermarkets, the 127-store Target discount chain, and 150 Kmarts.

In drawing up a plan to battle The Warehouse here, Coles executives are likely to have identified similar issues to those Mr Conaway listed as Wal-Mart's strengths.

Strong buying power (and the resulting ability to cut retail prices), a focus on improving checkout efficiency and investing in a sophisticated stock inventory and dispatch system are three hallmarks of the 75-store Warehouse's continued success.

The first Australasian Kmart opened in Melbourne in 1969 a joint venture between Coles and Kmart Corporation.

In 1978 Coles acquired full ownership of the operation and in 1995 Coles bought back shares Kmart Corp held in Coles.

The only remaining link between the two companies is a licence to use the brand name.