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.

S.S. Kresge's Pre-K Days

Before discount stores popped up all across America, there were the variety stores. For decades, Middle America shopped at these stores for their basic needs – housewares and kitchen items, linens, basic clothing, shoes, school supplies, toys and so on. Most of the larger variety chains had their origin in the decades immediately preceding or following the beginning of the 20th century. They were fittingly known as “5 and 10 cent stores” in the early days, for the simple reason that most products sold for one of those two price points. Even as late as the early sixties, when the chains had long since begun carrying higher priced items, they were still popularly referred to as “dime stores”. Until well into the 1940’s, they were almost exclusively found in downtown locations, with shopping center locations slowly becoming part of the mix from that point on. Many variety stores had snack bars or luncheonettes. The chains’ stores had a similar look, especially from the exterior, with the signage style for a number of them virtually the same (until the early 1950’s at least)– a narrow, red sign across the full width of the storefront, with gold or silver serif lettering. Even many of the store names followed a recognizable pattern – F.W. Woolworth, J.J. Newberry, W.T. Grant, S.H. Kress, G.C. Murphy and…. S.S. Kresge.

S.S. Kresge Company, based in Detroit and officially founded in 1911 by Sebastian Spering Kresge, was the number three variety chain in the US at the dawn of the sixties, behind F.W. Woolworth and W.T. Grant. At the end of 1960, Kresge had 759 variety stores, mostly located in the Midwest and Eastern states. The company’s first stores in California wouldn’t even open until 1961, and their presence in the growing Southern states at this point was minimal at best. By all appearances, Kresge was a staid, conservative, regional retailer, expanding at a relatively steady, deliberate pace.

Behind the scenes, however, an exciting development was taking place at Kresge. Faced with the same challenges that were affecting the variety store category as a whole – declining profitability, increased labor costs, stores that were becoming too old, too small and too urban, and impacted by the success of upstart discounters such as E.J. Korvette, Kresge embarked on a plan to scope out the discount industry for themselves.

In 1957, Harry B. Cunningham, the energetic 50-year old head of sales for Kresge embarked on a new mission, one that would take him all over the country over the next two years. Cunningham was placed in charge of a project to explore the discount industry up close, visiting stores, taking note of what worked and what didn’t with an eye toward Kresge’s own entrance into the discount store business. Cunningham liked the potential he saw, and the initial plans and strategies began to come together. In March 1961, with Cunningham now at the helm of the company, the decision was made to go full steam ahead with “Kmart”, Kresge’s discount store concept.

To coincide with this, the decision was made to accelerate closing of many of the older, outmoded Kresge stores. In a number of cases, Kresge was locked into long-term leases on these older, less than desirable locations, so a third store format was devised to make use of those stores. Those Kresge stores would be converted to “Jupiter” stores, a bare-bones discount operation specializing in a limited line of high-demand, basic goods at deep discount prices. Robert Drew-Bear, in his excellent book “Mass Merchandising” cites that the Jupiter format “made it possible to move items such as price-maintained men’s underwear with extreme speed, whereas the same line barely moved as a (Kresge) store item”.

On January 25, 1962, the first store under the Kmart name opened, one that was generally thought of as a “test” Kmart in California’s San Fernando Valley, a store of only 24,000 square feet. The first “official” Kmart, a 60,000 square foot store, opened in the Detroit suburb of Garden City, Michigan on March 1 of that year. By the end of 1962, 18 Kmarts would be in operation.

It was an impressive start for an initiative that would profoundly change the S.S. Kresge Company and indeed American retailing in general. Within a few short years, the Kmart stores would leave not only Kresge’s variety store competition, including Woolworths and Grants, in the proverbial dust, but a good number of other retailers as well.

The first artist’s rendering is of the Kresge store at Pontiac Mall (later Summit Place Mall) of Pontiac, Michigan and dates from 1960. The second one, in color, is from an unknown location, 1959. Below is the Kresge store located at Winrock Center, in Albuquerque New Mexico, from 1961 along with renderings of the new formats - Jupiter and Kmart, from the same year.

Note: Thanks to the anonymous commenter who was kind enough to provide us a link to some vintage 1964 Kresge store "mood music" - Fantastic!

http://www.oddiooverplay.com/ears/kresge.html