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Attention Contenders, Kmart Pitch is 'Painful'

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There's a mess at Kmart, but it's not in the aisles. A week after the client and the incumbent settled a lawsuit, agencies pitching the $270 million account will travel to Aspen to participate in what one source described as an "onerous and painful" process.

Potential contenders received a hefty 36-page briefing document that asks for a full-blown brand repositioning presentation, with strategy and creative, in just 11 days. And some agencies question who holds the ultimate authority at the client, saying it is unclear which executives are calling the shots.

The incumbent, Omnicom Group's TBWA\ Chiat\Day in New York, and the client severed their ties on Friday. Last week, Kmart sued the agency, the agency sued back, and then they settled out of court [see sidebar].

And that's just the beginning. For the shop that ultimately prevails, helping to make Kmart competitive again is no blue-light special.

Last Thursday, before TBWA\C\D said it resigned the business over "financial issues," Kmart rep Lori McTavish said the invitations were for a branding project but acknowledged the client's objective was "all very nebulous. It's just a request for submission of ideas. ... This is a new company coming out of bankruptcy, and you're probably going to see us do a lot of things different." On Friday, McTavish said Kmart would move forward with the agency presentations as scheduled, with no changes in the assignment or the players. "We will see where that leads," she said.

After initial conversations with a junior- level client staffer in recent weeks, some agencies declined the briefing document because they said the client's objective was unclear. And some who did receive the tome last Friday blanched at the scope of what Kmart wanted by Tuesday, the first day of presentations.

McTavish says the speed is deliberate. "A part of the process is to identify thinkers who are able to do quality work quickly," she said. Contenders must show how they would help the company reinvent itself with a new overall positioning that distinguishes Kmart as a "compelling place to shop," according to the briefing document, obtained by Adweek.

Agencies that are participating include independent Doner in Southfield, Mich.; Interpublic Group shop Campbell-Ewald in Warren, Mich.; and the New York office of WPP Group's J. Walter Thompson, sources said. Among those who received the brief but passed are IPG's Foote, Cone & Belding and Deutsch, according to sources. None of the agencies was available for comment.

Kmart wants to see strategy and spec creative campaigns that portray it as a "store of choice" because of "key proprietary brands" such as Martha Stewart Everyday, Sesame Street, Joe Boxer, Disney, Jaclyn Smith, Kathy Ireland and Route 66, the brief says. Another brand cited is Thalia Sodi, the Latina singer married to music mogul Tommy Mottola, whose "edgy, club-styled clothing and accessories," targeting Hispanics, launch in August.

Kmart's Karen Austin, chief information officer, and Julie Younglove-Webb, vp of corporate systems, both IT specialists, issued the briefing document. But sources said the decision makers will be CEO Julian Day, Kmart board chairman Ed Lampert and board member William Crowley, among others.

There's plenty of precedent for taking on the ad account of a troubled company. In 2001, Deutsch in New York landed MCI's branded-products business without a review even as parent WorldCom was in a financial morass. Ditto Qwest, which held a review last year while under SEC scrutiny (DDB initially won, then new management appointed FCB in New York). And two months ago, Tyco International hired Omnicom's Interbrand for a "brand architecture" assignment following a review.

The client certainly could use help. Candace Corlett, principal of New York-based retail consultancy WSL Strategic Retail, said, "Kmart had an image issue before it filed for Chapter 11. Stores are unkempt. In-store help is surly. ... There's no reason to go there when Target makes you feel hip and peppy, and Wal-Mart has everything. Shoppers don't care if you're in bankruptcy if you're still giving them great stuff and making them feel welcome."

With $30 billion in 2002 sales, Kmart is the third largest discount retailer in the U.S. behind Target ($45 billion) and No. 1 Wal-Mart ($245 billion), per Hoover's Online.

Arnell Group in New York handles brand imaging for Kmart and its Martha Stewart brand. Arnell executives could not be reached.

McTavish said Kmart's relationships with its diversity agencies are unaffected.

A Lawsuit, a Restraining Order and It's Over

The Joe Boxer spot that broke last weekend is the first of two that serve as the swan song for TBWA\Chiat\Day and Kmart. After three years together, the split came quickly—and played out in court.

Kmart filed suit against the agency last Tuesday in Oakland County Circuit Court, alleging in a five-page complaint that "TBWA has placed Kmart's entire advertising campaign in jeopardy" by refusing to release produced work. The retailer also claimed in its filing that in a letter dated July 21, "TBWA specifically threatened that unless Kmart pays the sum of $2.4 million to TBWA by Wednesday, July 23, that they would refuse to release advertising."

One source said the state court granted a temporary restraining order that would have forced the shop to release the work. TBWA\C\D countered by getting a federal judge to overturn the restraining order. After that, the two sides reached an undisclosed settlement out of court.

A TBWA\C\D rep declined comment. A client rep said, "Kmart has resolved all of its issues with TBWA\Chiat\Day."

During the New York agency's tenure, Kmart had three CEOs and a half-dozen marketing directors and filed for bankruptcy. Sources said the agency had even sold through a new corporate positioning before the newly installed management reached out to other shops last week.