Kmart eyes up to 50 K Home stores as Wesfarmers sharpens AI retail push

Kmart says it could grow its new K Home format to 50 stores across Australia and New Zealand, as the retailer looks to turn its Anko-led homewares strength into a bigger play for the furniture and interiors market.

The first K Home store will open in Victoria's Box Hill South next week, giving Kmart a dedicated home and living format built around furniture, décor, bedding, kitchen, bathroom and everyday living products.

The store will not sell clothing and accessories, instead focusing on Kmart’s home categories and the Anko brand, which has become one of the retailer’s strongest growth engines.

Kmart Group managing director Aleksandra Spaseska this week told investors the format could expand over time, paving the way for Kmart to chase a bigger slice of Australia’s $27.5 billion furniture and interiors market.

The move puts the discount retailer on a closer collision course with IKEA, Fantastic Furniture, Temple & Webster and other homewares and furniture players.

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“K Home is a new concept store we are trialling as a standalone home and furniture destination,” Spaseska said.

“Strategically, it is designed to test whether we can unlock a bigger home opportunity through a more immersive format that showcases the breadth of the Anko range in a way our full-line stores cannot.”

Spaseska said the store has been designed around curated displays, room-based inspiration and a more immersive home environment to help customers discover the range in a more engaging way.

“K Home allows us to physically showcase a broader furniture and home range, including products that today are online only because of space constraints,” she said.

“It gives us access to standalone locations that would not support a full-line Kmart, helping us reach more customers with our low-price home offer. We will use the trial to learn quickly, refine the model and assess the longer-term opportunity.”

The expansion push comes at a difficult time for Australian retailers, with cost-of-living pressure continuing to shape how consumers shop.

Spaseska said households remain focused on value, with Kmart seeing more cautious behaviour across its customer base.

“We can see from all our customer data that households are very much focused on cost of living. It is the number one issue on their mind,” she said.

“We are seeing customers become much more discerning when they're in store, and I've talked previously about a reduction in items per basket. That trend continues to grow.

“For us, the priority around low prices remains the really key strategic asset that we're focused on and maintaining in that environment."

AI, data and loyalty

The K Home trial comes as Wesfarmers sharpens a broader retail growth strategy across Kmart, Target, Bunnings and its wider portfolio, built around expanding addressable markets, improving omnichannel capability and using AI, data and loyalty to lift productivity and growth.

Rob Scott, chief executive officer of Wesfarmers, said the group’s retail businesses have room to move into broader categories where customers already trust its brands to deliver value.

“These businesses are entering into categories where customers are increasingly looking for our brands to add value, and we certainly have a right to play in broader categories,” Scott said.

“Our omnichannel assets and capabilities are a key source of competitive advantage, and with the growth of our marketplaces and our loyalty programs, our retail media businesses, and express delivery, these are all starting to deliver incremental growth.”

Scott said agentic and generative AI will accelerate that strategy across customers and teams.

“Agentic and generative AI allow us to accelerate our progress and deliver even better outcomes for our customers and our teams,” he said.

“We've invested a lot in our data assets, our digital and also digital processes to improve productivity and to ultimately set our businesses up for long-term growth.”

Scott said those investments are already producing commercial benefits, but are also foundational for the next phase of growth.

“A lot of our investment in data and digital platforms are actually foundational capabilities for the next phase of growth and productivity as we start to leverage new generative and agentic technology solutions,” he said.

“But those solutions are only as good as your data and your digital platforms.”

For Kmart, that means pushing further into strategic growth categories, expanding its marketplace, scaling personalisation and using AI to improve discovery and conversion.

Wesfarmers said Kmart has launched a third-party marketplace and is scaling agentic commerce across its digital platforms.

Kmart Group has more than 700 million web sessions annually and more than 1.6 million monthly active app users, with app users spending 2.4 times more than the average customer.

The group is using first-party data and AI to scale more personalised experiences, supported by Flybuys, OnePass and Kmart Group data.

It has also deployed AI-enabled search and a Shopping Agent to improve product discovery and engagement.

Leah Balter, executive general manager of OneDigital at Wesfarmers, said the group is responding to a shift in customer behaviour away from traditional search and toward longer, more conversational queries.

“In terms of agentic commerce, we're looking at how customer behaviour is shifting,” Balter said.

“It's shifting from traditional search, it's shifting to LLMs, and it's also changing in terms of how our customers are searching on our website.”

Balter said customers are increasingly using longer search terms, with Wesfarmers securing strategic partnerships to give its retail divisions access to agentic search technology.

“We’re seeing that customers who are using agentic search actually have a higher conversion,” she said.

The same strategy is playing out at Bunnings, where Wesfarmers is using AI, loyalty and retail media to lift conversion and open new growth channels.

Bunnings’ AI shopping agent, Buddy, is already driving higher basket sizes and conversion, while Kmart’s Joy shopping agent launched in May.

Bunnings is also enabling customers to search, discover and buy products directly through Google Search and AI Mode, using agentic shopping to help shoppers plan multi-step DIY projects, find the right products and complete transactions end-to-end.