There’s been a lot of talk about the demise of Kmart, and how this once mighty giant is
heading towards oblivion.
Back in the day Kmart was the king of retail, but those time are long gone and very few
people remember them.
That’s why, today we’ll be exploring the fascinating origin and tragic downturn of
Kmart.
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The story of Kmart starts all the way back in the 1890s with this guy, Sebastian Kresge.
Born and raised on a farm in Pennsylvania, Kresge made his big break by travelling across
the state as tinware salesman.
He did that for about 5 years until 1899, when he had saved enough money to settle down
and start his own store.
Kresge’s idea was simple: to sell everyday goods for either nickel or a dime.
In his store you could find anything, from fishing bobbers and playing cards to tea kettles
and perfume.
This simple concept was so successful that Kresge started opening stores left and right.
By 1912 he had built 85 stores and his newly incorporated company was worth $7 million.
He breezed through World War 1 like it was no big deal and even took his company public.
By the time the Great Depression came around, Kresge owned 600 stores, 20 of which were
in Canada.
While his competitors went bankrupt, Kresge took advantage of the drop in share price
and bought a lot of his shares back from the public.
During the 1940s when the Allies were busy fighting in Europe, Kresge was raking in $20
million dollars in sales annually.
Even in his old age, he remained a brilliant businessman.
He successfully predicted the rise of suburban shopping, and by 1953 he had already built
40 stores in suburban areas.
Towards the end of the 1950s, however, the concept of the variety store with fixed prices
was giving way to a new idea: the discount store, where prices were still cheap but were
not fixed to specific levels.
Kresge opened his first discount store, called Kmart, in 1962 and he made it much bigger
than his usual ones, with its own plaza and a lot of parking space.
His aim was to fit as many products as possible, and the store attracted so much traffic that
he would turn his inventory over 8 times per year.
Suffice to say, the Kmart brand was an instant success and Kresge poured millions into it.
Just one year later he had opened 63 Kmarts, and his company was approaching $1 billion
in annual sales.
Now, depending on how old you are, you may have heard the phrase “Attention Kmart shoppers”
a couple of hundred times.
Those words were part of the now infamous Blue Light Special, where a certain item would
have its price drastically reduced at random moments.
Since nobody knew when or what would be discounted, people would sometimes spend hours strolling
around their local Kmart waiting for a sale.
The Blue Light Special became a key part of Kmart and was used constantly up until 1991,
after which it’s only been seen intermittently.
Sadly, Sebastian Kresge passed away soon after starting Kmart.
He died in 1966 with a net worth well into the billions, leaving behind a charitable
foundation that’s still around today.
Not long after his death, the new management replaced the Kresge name with Kmart, officially
killing off the last remnant of its variety store days.
Without Kresge’s leadership, however, the company began to struggle.
Their sales did keep on climbing until the early 1990s, but this was simply the result
of them opening new stores with borrowed money.
In reality, Kmart was losing market share: Walmart could readily offer lower prices on
the same level of goods, while Target sold a slightly higher class of products.
Kmart responded by buying barely-related businesses, like Sports Authority and OfficeMax, all the
while refusing to upgrade or redesign their old, declining stores.
Walmart surpassed it in sales in 1990, and Kmart’s answer was to open even more stores
despite rising levels of debt.
At their peak in 1993, Kmart had over 370,000 employees and annual sales of $37 billion,
and yet despite that their financial situation was horrible.
Just one year later they reported a loss of almost a billion dollars, and that’s when
everyone started to panic.
By 1995 almost all of the unrelated businesses they had purchased were sold off, and more
than 200 stores were closed.
Kmart made a short-lived comeback with their Big Kmart format, which essentially just widened
the shopping aisles.
They also partnered with Yahoo to get their own website, but if you try visiting it now
you’ll see just how well that went.
In 1997 Martha Stewart partnered with Kmart to sell her brand of bedsheets and shampoo,
and that fooled investors initially, but it soon became clear that Kmart really was going
down.
They sold all of their Canadian stores in 1998, which briefly made them profitable again,
but then Kmart made the colossally stupid decision of trying to undercut Walmart.
The brief price war quickly devoured what little margins Kmart had left, and on January
22, 2002 Kmart filed for bankruptcy.
Although not unexpected, it was still the largest retailer bankruptcy in history and
the sheer scale of it left few buyers on the table.
One of them was Eddie Lampert, the chairman of Kmart who also had a large stake in Sears.
Like Kmart, Sears was a struggling department store and Eddie thought if he merged the two
together, two wrongs would magically make a right.
After lumping the two chains together in 2005, Eddie saved Kmart from downright oblivion,
but his solution was only temporary.
Every year more and more Kmarts close and the ones that remain open report ever declining
sales.
While Target and Walmart renovated and improved, Kmart remained drastically underfunded, with
crumbling buildings and untrained staff that made the shopping experience exceedingly unpleasant.
The brand has totally lost its identity, and yet its demise has been surprisingly silent.
Eddie Lampert has made so few attempts at saving Kmart that it’s fair to wonder whether
he even wants to do that at all.
His other chain, Sears, has also been doing terribly, and just this July his company narrowly
avoided bankruptcy by promising to close even more stores.
Employees have been extremely critical of him, calling him “out of touch with reality”
and judging by his performance, he seems like a captain that is determined to go down with
his ship.
When Kmart inevitably finds itself in another round of bankruptcy proceedings, who knows
whether it’ll just get auctioned off and forgotten or whether someone will be brave
enough to attempt reviving this fallen giant.
Just looking at Kmart’s website should be enough to discourage anyone from ever visiting
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