Retail experts downbeat on Big W’s prospects of leapfrogging red-hot Kmart

Struggling Big W has little chance of overtaking arch rival Kmart, retail experts say, as the Woolworths-owned retailer continues to lag behind one of Australia’s most popular stores.

Worth about $17 billion, Australia’s discount department store sector is dominated by three behemoths — Kmart, Target and Big W.

Kmart continues to be the standout performer for its parent company Wesfarmers’ stable of businesses, recording a 25 per cent lift in profit in the 2024 financial year.

Kmart remained strong, and a huge jump in the number of customers — and how much and how frequently they were buying — proved it, Wesfarmers boss Rob Scott said last month.

Wesfarmers also owns Target.

Families are seeking greater value, and value’s not about buying something that’s cheap and not going to last.

In contrast, sales at Woolworths-owned Big W declined another 0.9 per cent in the three months to early October, continuing a series of declines over the past 18 months.

A recent overhaul of its clothing range to offer fewer styles, lower prices and better all-year ranges — with improvements to homewares expected — are yet to stem the tide.

Australia’s leading retail expert Professor Gary Mortimer said Kmart had been very successful in legitimising its house brand, Anko, which now makes up 85 per cent of the retailer’s sales.

“Kmart today connects with a very broad audience, particularly it’s responded well to families that (are) struggling with that cost-of-living crisis,” Professor Mortimer, from the Queensland University of Technology, said.

“(Families) are seeking greater value, and value’s not about buying something that’s cheap and not going to last.

“They’re looking for something that’s on trend, it looks good, it does the job . . . and I think Kmart has positioned its Anko range towards those consumer goals.”

Professor Mortimer says Big W is now where Kmart was a decade ago, selling a mix of home labels and branded merchandise.

“You can still buy a Dyson vacuum cleaner (at Big W) . . . and while you sell brands, you effectively put yourself into direct competition with online players like Kogan, Amazon, category killers like JB Hi-Fi and Harvey Norman, and the brand themselves that will have their own websites,” he said.

Brian Walker, founder and chief executive of Sydney-based consultancy The Retail Group, agreed, adding Big W had “struggled to take the ground that Kmart has taken”.

“(Big W) is a functionally good retailer but it hasn’t excelled in its product mix, range, merchandise, its offer, its point of difference,” he said.

When asked if Big W could close the gap, Mr Walker said: “Probably not. I’m not sure what will happen to Big W but time will tell.”

Some major investors have called on Woolworths to sell Big W.

Another major difference between the pair was Kmart’s store layout, Professor Mortimer said, which created a sense of “discovery and a surprise”.

“You’ll notice that when you walk into the front of a Kmart, you can’t see the back of it and you can’t see either side,” he said.

“As you wander around the store, you’re basically walking into new precincts . . . it could be homewares, or you might walk into stationery, or you walk into toys.”

Big W stores had a more traditional grid layout he said, where a middle aisle stretched to the rear, and the size of the store was easily understandable.