It was 1962. John F. Kennedy was President. Europe and Asia were recovering from the devastation of WWII. The suburban migration was in full swing. People had money to spend but the pricing, formality and urban locations of traditional department stores were not attractive to the emerging car-bound, family-oriented middle class shopper. Global prosperity tempted the new generation with their growing families. But new concepts were needed to bring these consumers, new to middle class living and often unsure of themselves, into the stores.
Of the four companies founded that year, three were spin-offs from traditional department store chains and they focused their growth on the suburbs ringing the Midwestern cities in which they had been founded (Minneapolis, Detroit and Milwaukee). Only Walmart was an original and it chose an under-served market, smaller cities with populations of fewer than 25,000, primarily in the south and mountain states.
What they all shared was a belief that there was more profit to be made outside the big urban centers and that to succeed, a new strategy was required. Shopping malls with ample parking rather than urban street grid locations, products that reflected the lifestyle of the customer rather than imposing one on them and, most important of all, discounts to lure shoppers into the new formats.
The concept has worked spectacularly well. Even Kmart, now derided as a failed enterprise, was at one point the most innovative retailers of its time. The lesson is that some of the most successful business ideas come as a result of competition. The companies involved learn from each other and are spurred to experiment further in order to survive. Some of the same forces are at work today in the technology field. It will be interesting to see how many of them will still be around in 50 years time. JL
Laura Heller reports in Forbes:
Walmart, Target, Kmart and Kohl’s are all celebrating a milestone 50th anniversary this year. It’s hard to believe that all four were founded in the same year, but combined these stores changed the way America shops. Happy Birthday to modern retail!
Three of the four began as department store offshoots. Target sprang from Minnesota’s Dayton‘s and Kmart from Detroit-based S.S. Kresge. Both were developed as formats to reach shoppers beyond their core businesses. Kohl’s started as a department store when the Wisconsin based supermarket chain branched out into a new format from the Kohl family.
Only Walmart started organically. Sam Walton — “Mr. Sam” — sold low cost goods to people well outside the trading areas of most retailers. It’s telling that the one retail brand with the most difficult path ultimately became not only the biggest retailer in the world, but at one point was the largest company on the planet too.
Kmart grew the fastest, and fell first. In its first three years it had 150 locations and $1 billion in sales; 271 Kmart stores opened in a single year, 1976.
Target, always slow and steady, plodded along. It took the retailer five years to expand beyond its home state of Minnesota with a Target store in Denver.
Walmart expansion was solely funded by the Walton family. In 10 years Walmart had opened just 15 stores, but once the company went public growth kicked into high gear and in 1975, Forbes named Walmart the top general retailer in the nation, and then awarded it the same title for eight consecutive years. By its 25th anniversary, Walmart operated nearly 2,000 U.S. stores.
Kohl’s inched along, as well. In 1986 there were just 40 locations, although the concept had been sold (to Batus Retail Group) and ultimately bought back by the Kohl family.
Each of these four retailers helped change the way America shopped. Kmart may seem an irrelevant relic today, but it brought discount shopping to the masses the fastest. The “Blue Light Special” became synonymous with deals. Celebrity design partnerships were born with Jaclyn Smith and Kathy Ireland; and let’s not forget that Kmart helped to make Martha Stewart a household name.
Target took the concept of designer partnerships to new heights and coined the phrase “cheap chic.” It created a discount store so successful and appealing to a demographic not accustomed to buying at discount that it put its made its own department store business an after thought. Middle class, and even affluent shoppers were so comfortable at a Target store, Dayton Hudson renamed the company Target and sold off all remaining formats not part of the discount chain.
Kohl’s too, helped further the department store’s decline. Its new format of house brand apparel, low price shoes and accessories, and brand name home good for less took the most popular department store product segments and put them in a small, easier to shop format.
And then there’s Walmart, now the dominant retailer on the planet. Its everyday low pricing policy proved so successful that Walmart itself stumbled only when it strayed from that simple premise.
Fifty years of retail. Happy Birthday Walmart, Target, Kmart and Kohl’s. We will never shop that old way again.
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