Discount birthday: Walmart, Kmart, Target hit 50

[JoeC2364]

Discount birthday: Walmart, Kmart, Target hit 50  From the USA Today 9/17/12


http://www.usatoday.com/money/business/story/2012/09/17/discount-birthday-walmart-kmart-target-hit-50/57792288/1

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[JoeC2364]

Discount birthday: Walmart, Kmart, Target hit 50

by Hadley Malcolm and Jayne O'Donnell, USA TODAY  9/17/12

Discounting wasn't invented in 1962, but it might as well have been.
That was when Walmart, Target and Kmart were born, each with their distinctive style of low-price retailing. As the three celebrate their 50th anniversaries this year, they can take credit for much of the way bargain-obsessed America now shops.
Retailers of every stripe have followed their lead, making shopping the equivalent of "Blue Light Specials" all the time. There were plenty of stand-alone or regional "five-and-ten" or "dime stores" back then, including Woolworth's, Ben Franklin and W.T. Grant. Kmart, Walmart and Target built on the concept and brought self-service, low-price shopping to the masses.
"For the first time ... there were long aisles of merchandise, merchandise was well assorted, and the customers helped themselves," says Walter Loeb, a retail consultant and former analyst who spent 20 years as an executive for May Co. and Macy's. "People looked for bargains, and that feeling of bargains never left retail."
It only expanded, with bricks-and-mortar wholesale stores, including Costco and Sam's Club, followed by online discounters such as Amazon.
In 1967, discount stores accounted for 42% of all retail sales. In 2010, that number rose to 87%, Loeb says, citing data from Consumer Reports.
"Discounting today is a way of life," Loeb says.
Oddly enough, companies founded by Sam Walton, George Dayton and Sebastian Kresge all gave the concept of a high-volume store with lower-price merchandise a try in the same year. Odder still, it was S.S. Kresge's Kmart -- the now-beleaguered of the trio -- that set the standards for discount retailing that the others built upon.
Kmart expanded the fastest of the three, growing to hundreds of stores by the mid-'70s, vs. a few dozen Targets and Walmarts. Kmart's rapid growth and hugely popular Blue Light Specials made it an early leader.
"Kmart brought the carnival aspect of shopping -- the idea of deal and excitement around price," says Ken Nisch, chairman of retail branding and design firm JGA.
Nisch recalls his delight as a child when the arrival of Kmart into the Toledo, Ohio, suburbs meant the end of long trips downtown with his mother and brother to visit the rundown Tiedtke's department store.
With Kmart's big parking lot, wide aisles, shopping carts and bright fluorescent lights, "it was sort of like Oz had opened up," he says. Kmart, he says, had "all the things the middle class wanted," such as brand names including Jockey and Levi's.
Looking back, retail experts say it was no accident that each of the three chains started far away from the East and West Coasts.
The chains' leaders were responding to the post-World War II growth in Middle America.
"The most important thing was that American suburban living was exploding," Loeb says. "Because of that, the need for stores in the neighborhoods was immediate."
Walmart founder Sam Walton went even further out to rural areas, opening his first store in Rogers, Ark., where the nearest city was Tulsa, two hours away, says Alan Dranow, senior director for heritage and marketing at Walmart.
"He saw the opportunity to serve the underserved," Dranow says. "If you look at how the company grew, it really grew in the heartland."
Walton understood the reach and power of the agrarian economy, and felt farmers needed an affordable place to shop, says Allen Questrom, who has been CEO of Federated Department Stores, Neiman Marcus, Barney's and J.C. Penney. While department store executives including himself "kind of looked down our noses at discount stores," Questrom says he admired their foresight.
Each of the chains made a lasting contribution to retail that continues to be expanded upon today.


Target. "Fifty, fun and friendly" are the buzzwords in Target's anniversary literature. But it's fashion that comes most to mind, even when people look at its history.
The discounter, often affectionately known as "Targét," was started as an offshoot of Dayton's department stores, which contributed to its fashion-forward mindset, Loeb says.
"It was more fashion-oriented than the other stores," he says.
"Both Kmart and Walmart came out of the five-and-dime-store mentality. And while they both had visions that transcended it, they did not have the background of fashion merchandising."
Starting with its housewares and home decor design partnership with Michael Graves in 1999 (which ended this year), Target pioneered the concept of exclusive, designer lines at affordable prices, more recently with a line of immediately sold-out successes from Jason Wu and Missoni.
"Bringing great design and affordable prices into the mass retailing space was a huge innovation," says Shawn Gensch, senior vice president of marketing at Target.
Even fashionable discounters need to compete on the basics, though. Barbara Collette, who has worked for Target for 40 years, says, "The biggest thing I remember is, we built this company on toilet paper and laundry soap."
When Target would have "dollar sales," Collette, who gives her age at "over 60," says, "we would just sell trailerloads of it."


Walmart. The fact that farmers needed to pay less prompted Walton to work to "deliver products to them cheaper," says Questrom. In doing so, Walmart became the leader in supply chain efficiency that retailers up the price ladder try to emulate.
"Everyone tries to copy Target from the front door in, and everyone tries to copy Walmart from the back door in," Nisch says.
Finding ways to cut costs and pass the savings on is a value Walmart continues to execute on, Dranow says, from truck drivers using more direct routes so they use less gas, to installing solar panels and skylights in stores to save on electricity.
Walton, Questrom says, is "more responsible than anyone for keeping inflation to sustainable levels, at least up until now."
Walmart's strategy of "everyday low prices" -- a slogan the chain adopted in the 1980s -- was its biggest contribution to retail, Dranow says.
"If Walmart hadn't been driving down the prices, our competitors would not have been doing the same," he says.
"Sam did this from the beginning. He lowered his prices not just so he could make more money. He really saw that by saving people money, they're going to live better."


Kmart. When it seems as if everyone in Hollywood has their own clothing line, it's easy to forget one of the first major celebrity fashion launches. Former Charlie's Angel Jaclyn Smith started her clothes and housewares line at Kmart 27 years ago, and it's still among the most popular brands, says Kmart's interim Chief Marketing Officer Andrew Stein. Selena Gomez and Sofia Vergara also have Kmart lines now.
Nisch recalls shopping while eating popcorn you could smell throughout the store. Karen Davidson, who started with the S.S. Kresge company that became Kmart in 1971, fondly remembers the excitement when the blue light on a rolling cart would move near different products in the store. A loud-speaker announcement would declare that product's price cut, and, "Customers would run over there to take advantage," recalls Davidson, 58. Then they'd wait to see where it rolled next.
After companywide stops and starts through the years, Blue Light Specials are now only done on a store-by-store basis, and there's no more actual light, Stein says.
It's been hard to maintain the excitement at Kmart, which was under bankruptcy protection and had a disappointing merger with Sears in the past decade. And it has been shrinking as its two biggest competitors grow.
Stein says Kmart's "biggest challenge is what every retailer faces. It's very competitive." He says Kmart has moved quickly to respond to shoppers' desires, including adding free layaway and membership rewards card deals.
Even Walmart, the world's largest retailer, has had its challenges. It's had decades-long struggles with labor unions that want to organize workers. It also got off to a messy start.
Sam Walton planned to give away watermelons to the first customers at the 1964 opening of his second store in Harrison, Ark., on an August day when temperatures hit 110 degrees, Dranow says.
He was also offering donkey rides to the kids. The two promotions didn't mix well.
"The watermelons started to pop, so you had all this watermelon juice and guts running into the parking lot," Dranow says. "The donkeys were walking around, and donkeys do what donkeys do, and it started to mix together. Customers were traipsing thorough it and then going into store."
David Glass, the head of a discount drug chain, was at the store opening to see Walton's vision in action. He wasn't too impressed that day.
"David Glass thought Sam was a nice enough fella, but he didn't really think much of this new store," Dranow says.
Glass apparently reconsidered his position. He joined the company in 1974 and became its CEO in 1988.
Walmart now has more than 10,000 stores around the world. But where does discount retail go from here?
Today, the discount stores that revolutionized how America shops have paved the way for aggressive and constant price competition between physical stores and online retailers.
"You say to yourself, 'My God where is it going to go?'" Loeb says. "Pretty soon, they're going to give it away."

[IGA/Kmart Is Forever!]

Very nice article. Thank you for posting it, JoeC2364

[Zayre88]

Rich's (New England) was also founded in 1962.

[Retail Fan+ (Justin Hill)]

ShopKo celebrated 50 years of discounting with a special t-shirt.

[MikeRa]

Woolworth also started Woolco in 1962.  Woolco was gone by 1983.