It's a Wal-Mart World Out There

Two of the many notable developments of the 1980’s were first, the ascent of Wal-Mart to the top of the American retailing world (the peak itself would be reached in 1991) and secondly, the establishment of Sam Walton as a modern-day American folk hero.

As mentioned, the company closed out the seventies with $1 billion in sales and 278 stores. Ten years later, in 1989, their profits were $1.6 billion (surpassing Kmart’s profits for the first time) on a sales total of nearly $26 billion, with a store count of 1,402 Wal-Mart Stores and 123 Sam’s Wholesale Clubs. Their market area, far too big to fit in a circle, magic or otherwise, comprised 29 states.

In many ways the catalyst for Wal-Mart’s explosive growth was their acquisition of the Big K stores. Overnight, the company’s store base grew by 20 percent, adding Georgia and South Carolina as new states, more than doubling their presence in Tennessee and Kentucky, and picking up some nice new locations in Mississippi and Alabama. Within a year, sixty percent of the Big K stores had been converted to the Wal-Mart format, not a simple process. Most importantly, the episode built the confidence of the Wal-Mart management team, convincing them that the company’s growth rate could be stepped up big time with relatively few problems.

Year by year, more states were added – Nebraska and Florida in 1983, North Carolina, Indiana and Florida in ’84, Virginia in ’85, Wisconsin in ’86, Minnesota in ’87, Colorado in ’88, Ohio and Arizona in ’89, and Michigan and Wyoming in 1990. The following year, Wal-Mart, that good old “southern chain”, became a coast-to-coast operation with stores in California, Nevada and Utah. Of course, Wal-Mart has been a 50-state (and international, for that matter) operation for many years now. Here is an amazing animated graphic illustrating Wal-Mart’s growth from 1962 up to now. Watch as the slow progression gives way to a frenetic pace. Kinda gives you pause, eh?

In 1987, Wal-Mart launched a new concept that quickly came to be regarded as a failed experiment - Hypermart USA. The peripatetic Sam Walton’s travels had by this time led him around the world – to South America, Australia, South Africa and all over Europe in search of retailing ideas. Walton was most impressed with the French-owned Carrefours (pronounced car-four) Hypermarket stores in Brazil, and got the itch to try out the concept in the United States. Carrefours’ Hypermarkets were huge 200,000-plus square foot stores offering general merchandise and a huge selection of food under one roof. While other American companies had tried or at least dallied with the hypermarket idea, Chicago’s Jewel Food Stores among them, no one had been able to make it fly.

Garland (suburban Dallas), Texas was the site of the first Hypermart USA opening in 1987. A second Dallas-Fort Worth store would follow, along with Hypermarts in Topeka and Kansas City. The stores – gaudy monstrosities with excessively high ceilings and massive entrance archways overwhelmed both the company and their customers. Although traffic was good, profits, due to the huge scale and overhead of the Hypermarts were not. Only four of them were ever opened. Author Robert Slater quotes Rob Walton as saying the Hypermart program failed “because of a lack of commitment and focus” – unusual attributes indeed for a Wal-Mart initiative.

Failure or not, the Hypermart experience paved a reliable highway for what would become Wal-Mart’s bread-and-butter, the Wal-Mart Supercenters. Scaled down and toned down, the Supercenters nonetheless were good-sized (150,000 plus square feet) and featured a similar merchandising mix to the Hypermarts. The first Supercenter opened on March 8, 1988 in Washington, Missouri. Wal-Mart was a bit more cautious at the outset, with only 100 Supercenters in operation over the first six years, but would step up the pace from there – 250 Supercenters were in existence by 1996 and an astounding 1,060 Supercenters by 2002. A by-product of the Supercenters’ success was Wal-Mart’s eventual dominance of the grocery industry. In 2001, Wal-Mart became America’s number one grocer, surpassing longtime industry leaders Kroger and Safeway, companies whose history goes much further back. Since we live smack in the middle of the Supercenter era (and goodness knows I try to stay away from the present on this site), I guess not a lot more needs to be said about them.

Sam Walton was not averse to publicity for Wal-Mart’s sake. In 1984, he splashed onto America’s front pages when he did his famous “Hula on Wall Street”, fulfilling a promise he made to Wal-Mart employees if the company met a certain earnings-per-share goal. Standing there on a summer day, with a crowd gathered around, a large contingent of TV cameras present, and outfitted in a suit, tie and grass skirt, the 66-year old Walton danced what he termed “a fair hula” to the music. A star was born.

What Walton was totally unprepared for was the media feeding frenzy that came his way a year later, when Forbes magazine featured him on its cover with the tagline “The Richest Man in America”. Shocked and a bit resentful of the publicity and encroachment on his privacy that ensued, Sam made a point of being seen driving his truck, wearing a casual denim shirt and jeans (Walton customarily wore suits to the office and on store visits) and hauling his hunting dogs around everywhere he went, in hopes that the media would be bored silly by his modest lifestyle and leave in short order. If anything, the opposite proved to be true, and it only fed the mystique. Eventually, he learned to live with the newfound attention, all the while trying to shift the focus to Wal-Mart’s amazing growth instead of his own story. It was never to happen during his lifetime. The story of Sam Walton - a true rags-to-riches, All-American saga was far too hard to resist.

In April 1992, after a long illness, Sam Walton passed away, followed three years later by his brother Bud. Control of Wal-Mart remained in the family hands of Sam’s wife, Helen, and their four children. Eldest son Rob Walton became chairman. The management of the company remained in the hands of trusted veterans David Glass and Don Soderquist, among others, who had highly developed skills in merchandising and distribution and were well-suited to take the company to new heights. Wisely, none of these men even attempted the impossible task of filling Sam’s shoes as the “Face of Wal-Mart”.

Here in the 21st century, Wal-Mart is the largest company in the world, a spot that was for many years the domain of General Motors. Reviled by many, defended by many - but ignored by few.

The first photo above shows the 1980's standard triple-soffitted Wal-Mart facade in a 1984 photo. The second photo, from 1982, shows the somewhat more economical alternate facade that appeared on a good many stores, including most of the renovated Big K units. Photos 3 through 10 are from 1981 to 1984 and show the checkout area, the service desk (with ironclad guarantee on the wall in back), the mens' and girls' clothing departments, the record department featuring a poster of Billy Joel from his "Glass Houses" era along with signs for Blue Oyster Cult, Cheap Trick (I saw them in concert back then!) and the late great Dan Fogelberg. Not a compact disc in sight. Next is the TV department with an Atari display and some outdoor antennas looming above (now there's a tribute to outdated technology), and Sam and Bud Walton cheering on the troops. The last photo, from 1988, shows the 80's glitz monster (by Wal-Mart standards, at least) that was Hypermart USA.

The Original Big K

Well, Big K, we hardly knew ye, and now you’re leaving us again. That’s right, the many Kmart stores which for some not well-explained reason took on the “Big K Mart” identity in the mid-90’s are being restored (thankfully) back to just “Kmart”, with a logo closer to their original 1960’s look, albeit with a single color, red. And a familiar sight to many Kroger shoppers is their age-old “Big K” private label brand, probably best recognized in recent decades on their soft drinks, but we’ll talk about that later.

Aside from these, however, was a Mid-South based chain by the name of Big K, which enjoyed a good deal of success as a regional discount store operation in the late 60’s and early 70’s. Big K was a division of Nashville-based Kuhn Brothers Company, Inc., which was founded as a variety store chain in the teens. The information I’ve been able to find about the Kuhn stores, which unfortunately is minimal, indicates that that they were very much cast in the standard Woolworth/Kresge variety store mold. As such they faced similar problems as those firms did in the fifties –footprints too small to accommodate a growing range of popular consumer goods, rising operating costs of counter service as opposed to self service, and most importantly the decline of downtown business districts with the advent of shopping centers with their vast availability of free parking.

In 1962, that historic year for the discount industry, Kuhn’s launched the first of their Big K discount department stores. Kuhn’s employed a strategy similar to Wal-Mart, opening the Big K stores in small-to-medium sized towns within a four-state market area – in their case Alabama, Kentucky, Tennessee and Georgia. Like Wal-Mart, they avoided the larger markets which were likely to be heavily populated with Kmart stores, as Atlanta most certainly was. Kuhn’s-Big K , as the company was renamed, would eventually adjoin the Wal-Mart market area, but there was very little overlap. The Kuhn family and Sam Walton, who were acquaintances, had chosen (for a time at least) to honor an old unwritten code between regional retailers to stay of each others’ territories. Of course another unwritten code, every bit as popular as the first, was to scrap the previous code and build right in your fellow retailer’s backyard. When Wal-Mart opened a store in Jackson, Tennessee, the heart of Big K-land, The Kuhns retaliated by opening stores in West Helena and Blytheville, Arkansas.

By the end of 1973, the company operated 57 Big K’s and 27 Kuhn’s Variety Stores, and had pushed into eastern Arkansas and Missouri, Wal-Mart’s operating area. The Big K stores carried the standard discount store mix of apparel, sporting goods, hardware, toys, etc., and averaged 45,000 square feet. There were three larger stores (65,000-75,000 square feet) ringing the Nashville area, the company’s home turf. In 1977, Kuhn’s-Big K moved into the South Carolina region with its acquisition of Edwards, Inc., a Charleston-based chain of 33 stores in South Carolina.

Soon after the Edwards purchase, the Kuhn’s - Big K operation spun into decline, losing money and experiencing management turmoil. In 1981, Chain Store Age characterized the company as “a broken chain”, citing increasingly intense competition, the strain from the Edwards acquisition and cost overruns on the company’s fancy new Nashville headquarters complex. The magazine was also critical of the Kuhn family’s management approach. Predictions of Big K’s demise were aflight.

Discussions regarding a possible acquisition by Wal-Mart had begun some months before the Chain Store Age article appeared. Wal-Mart, traditionally committed to internal growth, had only one major acquisition under its belt at the time, having purchased the 21-store Mohr Value chain, an Illinois operation, in 1977. When it became evident that Big K would be forced to sell out, the ideal store sizes (directly in line with Wal-Mart’s at the time), respectable customer base, and most of all the chain’s prime locations in new, adjoining territory made the proposition too powerful to resist. Even so, Wal-Mart’s board of directors was split down the middle over the idea. Sam cast the deciding vote in favor of the buyout, and the deal was done. Incidentally, Wal-Mart’s indecision over the buyout paid another dividend – as they hemmed and hawed over the prospect, the value of Big K’s stock continued to fall. The initial purchase price, according to the Wall Street Journal was $17 million in December 1980. By the following June it was $12.9 million, and by the time of the actual buyout in December 1981, it was $7 million - $2 million less than Kuhn’s -Big K had paid for the Edwards chain four years earlier. Sort of gives a new, unwanted meaning to the word “discount”.

The first photo, location unknown, is from 1973. The second and third photos are from the Dickson, Tennessee store and were taken the following year.

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.