Kmart Dismisses Threat of Online Retailers

Although Australian consumers do not trust store discount sales which drives them to online retailers, Kmart Managing Director Guy Russo insisted on Wednesday that online stores does not pose a threat to the company.

"When customers see one price one day and that price slashed by 50 per cent the next day, it increases their distrust in retailers and their pricing," Mr Russo told news.com.au.

In contrast, online retailers offer visible and transparent prices. Mr Russo, however, said shops that offer customers choices in terms of prices or convenience are not threats to traditional retail stores.

"I think Internet shopping fits under the 'convenience strategy' and compared to Kmart it fits under 'price strategy' (and) our prices are considerably lower than what people are offering on the Internet," Mr Russo told BusinessDay.

Although a report from the Australian Statistics Bureau released Wednesday showed that retail sales in the country rose 0.6 per cent for the second straight month, survey results indicated retailers would have to work double time to boost Christmas sales.

Mr Russo cited survey findings that 85.9 per cent of Australian mothers worry about the cost of Yuletide gifts and 43.9 per cent are concerned where to find money for yearend holiday spending.

The poll, which had 1,000 respondents, said more than one-third of shoppers plan to spend from $501 to $1,000 for Christmas gifts, while 17.6 per cent would reduce their holiday spending.

Mr Russo disclosed that Kmart, which earned in the last financial year pre-tax earnings of $204 million, had a constant foot traffic. However, he observed that many shoppers were holding on to their purses tightly.

"It is an unusual economy. You turn on the news and you hear about the Greeks defaulting, the average Australian may not understand what that means but it gives them another reason to say, 'I am losing confidence with the economy.'" Mr Russo said.

To keep the cash registers ringing despite the hard times, he suggested that retails offer consumers the lowest prices possible every day of the year, not just during peak retail season such as Christmas. Mr Russo disclosed that Kmart decreased prices across the board by an average of 30 per cent in the past two years.