Does Kmart’s Hilarious New Ad Acknowledge That Kmart Stores Are Hopeless?

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In just over a week, Kmart’s 30-second “Ship My Pants” spot — go ahead, say it quickly — has received close to 13 million views online. The viral hit should give the struggling retailer some much-needed buzz. It might also call attention to why some shoppers stopped going to Kmart.

Let’s be honest: Kmart isn’t cool. In the pantheon of big-box general merchandise retailers, Walmart is the 600-pound gorilla, inexorable in its pursuit of efficiency and cheap prices. Target is sort of the hip one. And Kmart, well, it’s just kind of there, right? If you associate the Kmart brand with anything these days, it’s a kind of Martha Stewart-flavored aspirational respectability, or perhaps layaway, or bankruptcy court.

That’s why the retailer’s irreverent “Ship My Pants” ad, released last week, is so surprising. Not because of the faux-scatological content per se — though that did raise a few eyebrows — but because this somewhat edgy and definitely funny ad came from such a tired snooze of a retail brand.

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The commercial highlights the store’s Ship to Home service, which Kmart launched a year ago, offering customers free delivery on any item they can’t find in stores. Andrew Stein, Kmart’s vice president and chief marketing officer, says the company wasn’t trying to make a viral ad. The goal was to just create a funny, compelling commercial that promoted the service. About a month ago, the “Ship My Pants” ad ran in a town hall meeting of Kmart employees. Stein says everyone loved it.

“The outpouring of affection, the goodwill and the laughter that we got internally told us we really had something here,” he says. The video had been uploaded to Stein’s personal YouTube page, and the only way to view it was through the specific url, which was getting passed around from employee to employee following the town hall. The next morning, Stein discovered the video had been viewed 2,500 times on his page.

Since then, it’s had about 13 million views on YouTube and has already become the 37th most shared ad of all-time, according to Unruly Media, a firm that tracks viral ads.

But while the ad brings Kmart a bit of much-needed attention, it also seems to point out that shoppers have been frustrated with the in-store shopping experience. The numbers reflect Kmart shoppers’ frustration, or perhaps apathy. Same-store sales declined 3.7% in 2012, and over the last seven years, there has been only one year of positive growth. The number of Kmart locations has shrunk from 1,305 at the start of 2012 to 1,221 today.

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The stores also look awful. As both Target and Walmart remodeled their brick and mortar locations to become a one-stop shop for customers, largely by adding expansive grocery departments, many Kmart stores languish, clearly in need of renovation. They’re unlikely to get it from CEO (and billionaire investor) Eddie Lampert, however. Former executives quoted in a recent Yahoo! Finance story describe Lampert as someone who hates to spend money even “to clean up dirty stores and repair potholed parking lots.”

Retail analyst Brian Sozzi says that sprucing up the stores is just not a priority for Kmart executives. “They have massively underinvested in their stores,” he says. “They invest the lowest percentage of their total revenue into their stores of any retailer. Their focus is not on modernizing the stores. The new CEO views them almost as a lost cause.”

Instead of putting money into stores, the focus has shifted online, where sales for Kmart and sister retailer Sears grew 17% and 25%, respectively, in the fourth quarter. “When you go to the stores, they look the same as when I was a kid,” says Sozzi. “But the website gives you a really good experience.”

Viewed in this context, the new “Ship My Pants” ad isn’t just a cheeky commercial. It’s a campaign to steer shoppers away from Kmart’s hopeless, poorly stocked physical stores, toward the one area the where the company thinks it can grow: web sales. Viewers are tuning in for a quick laugh, but the implicit message they’re getting is almost an admission from Kmart that customers aren’t going to find what they want inside stores. But they can get any of the retailer’s 65 million products online!

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According to Stein, Kmart remains committed to its brick and mortar stores. “Our stores are really, really important,” he says. “We do a lot of business in our stores. But they need to work together with all of our online channels. People don’t just shop one channel. They shop across multiple channels.”

“Having bricks and mortar stores is really important,” Stein adds. “But having a robust and having robust mobile channels are really important, too.”

Besides Ship to Home, Kmart offers a number of services and products designed to integrate physical stores with online and mobile platforms: free in-store pick up for online orders, e-receipts, downloadable coupons, online layaway.

At the same time, Kmart’s competitors are picking up their online game, to battle it out with each other and with the world’s largest e-retailer, Amazon. In early 2013, Target announced it would match prices with Amazon and the websites of competitors such as Walmart, Best Buy, and Toys R Us. Walmart has been testing services such as same-day shipping and shipping online orders out of physical stores rather than regional warehouses. The retailer is even supposedly looking into getting customers to deliver packages for them.

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For Kmart to become truly competitive again, it’s going to take more than an ad centered around a poop joke, no matter how funny the poop joke is. Despite the unusual presence of Internet buzz around Kmart, analysts such as Sozzi are unconvinced the company has much of a future.

“I don’t know if it’s around in 10 years,” Sozzi says. “It’s the Baby Boomers that are keeping them alive, and they won’t be around much longer.”