Kmart - Big Changes for the Bluelight

Having enjoyed a golden decade from the mid-sixties through the mid-seventies, from that point on things would become complicated for Kmart. Part of this was due to external factors such as competition and general economic ups and downs, but a series of management decisions made along the way certainly played a major factor as well.

While Kmart was an early pioneer in automated distribution, they were slow to adopt computer technology for inventory control and ordering, ostensibly to maintain a high level of independence for store managers, but it proved very costly in terms of efficiency. A much larger factor, from the public’s point of view, was the appearance of the stores. While looking at these photos tends to make me (and many of you, as I’ve learned) very nostalgic for those days, one would have to admit that by the time the 1980’s rolled around, the look had become extremely dated. Over time, the public perception of the company unfortunately (and in many respects undeservedly) shifted from a source of “value-priced” goods to one of cheap goods.

As the eighties rolled on, the company found itself fighting a two-front war, on one side against Wal-Mart, which by that time had grown well beyond the Mid-South region, becoming a true national competitor. Wal-Mart, with highly sophisticated information systems and very aggressive supplier policies became extremely formidable in price competition. On the other flank, Dayton-Hudson’s Target stores had expanded far outside of their original Midwestern footprint, in part through the acquisition of such regional chains as Richway, its sister nameplate Gold Circle and a large number of Gemco units from Lucky Stores. Pursuing a strategy that emphasized affordable style, Target signed up designer Michael Graves, among others, to develop chic housewares for those on a budget. Kmart was now in the unenviable position of having to compete with Target on style and Wal-Mart on price.

In 1987, Kmart took a final step in cutting ties to its origins by selling all but 11 of the remaining Kresge and Jupiter stores to Rapid-American Corporation’s McCrory Stores division. By the 1980’s Rapid-American was a key caretaker of America’s 5-and-10 store heritage, owning McCrory, H.L. Green, J.J. Newberry, T G & Y, and McLellan’s. Their only competitors in that fading segment were Woolworth’s and Ben Franklin. Ironically, S.S. Kresge had gotten his start in the business in 1897 as joint owner of a dime store in Memphis, Tennessee with J.G. McCrory. The pair would later open a Detroit store (where Kresge would establish his namesake company) and a handful of others before going their separate ways, starting variety store dynasties under their own names.

In a mid-eighties bid to shore up their fortunes, Kmart embarked on a spree of diversified retail acquisitions that would last into the next decade. The list was extensive. During this period, Kmart bought out, among others, Waldenbooks (and later on Borders Books), the predecessor of what would become Builders Square, The Sports Authority, Pay Less Northwest (a Wilsonville, Oregon-based operator of 164 drug stores in the western states), and OfficeMax, a big-box office supply firm that Kmart acquired a stake in when it sold them a handful of “Office Square” stores (a short lived office supply concept that traded on the Builders Square nameplate). Within a few years, Kmart would buy a controlling interest in OfficeMax. There was also a chain of membership stores called Pace Membership Warehouse. Eventually, Kmart would combine many of these into an entity called the Specialty Store Division. Over the long haul, these acquisitions proved to be little help to the company, and in the mid-90’s Kmart began to sell off or spin off these divisions in a succession nearly as rapid as when it bought them in the first place. A large number of the Pace stores were sold to arch-competitor Wal-Mart for conversion to Sam’s Clubs. In 1998, Kmart would sell off its flagging 112-store Canadian division to Toronto-based Hudson’s Bay Company, who would combine it with its 298-store Zellers division, the leading discount chain in Canada.

In 1990, Kmart took the first step towards changing its image, adopting a new logo for the first time. That year, the company replaced its familiar “Kmart” logo with a red block letter “K” with the word “mart” written in script in the upper leg of the K. In my opinion, the single letter looked a bit lonely up there on the expansive horizontal facades of most Kmart stores. The company must have taken pride in their new logo, as I learned when my wife and I stopped into a Kmart shorted after it was introduced. She had worked at this Kmart one Christmas season before we were married to supplement her teaching income, and we decided to pop in to say hi to the manager, her old boss. He asked our opinion of the new logo, and my wife commented on how it reminded her of the old “Big K” signs. Big K was a chain of mid-south discount stores that Wal-Mart bought out in the early eighties.

He didn’t appreciate the comparison. (Hey, at least we didn’t try to claim credit when years later they added the word “Big” to many of their signs starting in 1996!) Recently, Kmart has adopted a new logo, restoring “mart” to its rightful place.

A more positive effect came about when in 1997 Kmart persuaded domestic diva Martha Stewart to create a comprehensive line of household goods to be exclusively sold at Kmart. Called “Martha Stewart Everyday” this very broad product line included everything from dishes to cookware to linens, towels and bath décor, and has in many ways been a lifeline for Kmart. There has been rampant speculation as to whether Ms. Stewart will renew her agreement with Kmart when it expires in 2009.

Despite Martha’s best efforts, Kmart skidded inexorably toward bankruptcy as the nineties drew to a close. Incurring a staggering $2.46 billion dollar loss for 2001, Kmart filed for bankruptcy protection on January 22, 2002. Operating 2,114 stores at the time of the filing, massive closings would follow, and a great many people who grew up shopping at Kmart would suddenly find that there was no longer one in or near their communities. The first wave of closings shuttered 284 stores, and sadly more waves were to follow.

A year later, the future of Kmart would be revealed when it was announced that a group of investors, led by 38–year old billionaire Edward S. Lampert, had submitted a plan to usher Kmart out of bankruptcy. Many changes, a degree of stability and a runup in Kmart’s value would follow, and Kmart has lived to fight to this day, although the road remains challenging, to put it mildly. In November 2004, Kmart announced its intentions to buy Sears, Roebuck and Co., a most ironic twist of fate considering the companies’ arch rivalry for America’s retail crown in the 70’s and 80’s. The combined entity was named Sears Holdings Company, and eventually many Kmart executives would relocate from Kmart’s massive 70’s modern headquarters in Troy, Michigan (which is now finally being torn down -many thanks to the reader who sent this link discussing the complex's fate) to Sears (also massive and much newer) HQ in the Chicago suburb of Hoffman Estates. From a consumer’s standpoint, a significant change has been the availability of core Sears brands in Kmart stores, including Die Hard, Kenmore and Craftsman.

The photos above are circa 1976, and show the sign and an interior from the Ionia, Michigan store, a “Group 9” store which was previously operated under another name. The third photo shows the checkouts from a new store in Oxford, Ohio. The fourth is a snack bar shot, location unknown, and the last store pictured is another Group 9 unit from Dyersburg, Tennessee. Thanks to John Flack, who has a great page on the opening of the Marlton, NJ Two Guys store, for photos 2 through 5.