There’s been a lot of talk about the demise
of Kmart, and how this once mighty giant is heading towards oblivion. Back in the day Kmart was the king of retail,
but those time are long gone and very few people remember them. That’s why, today we’ll be exploring the
fascinating origin and tragic downturn of Kmart. This video is brought to you by Squarespace,
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your first purchase. The story of Kmart starts all the way back
in the 1890s with this guy, Sebastian Kresge. Born and raised on a farm in Pennsylvania,
Kresge made his big break by travelling across the state as tinware salesman. He did that for about 5 years until 1899,
when he had saved enough money to settle down and start his own store. Kresge’s idea was simple: to sell everyday
goods for either nickel or a dime. In his store you could find anything, from
fishing bobbers and playing cards to tea kettles and perfume. This simple concept was so successful that
Kresge started opening stores left and right. By 1912 he had built 85 stores and his newly
incorporated company was worth $7 million. He breezed through World War 1 like it was
no big deal and even took his company public. By the time the Great Depression came around,
Kresge owned 600 stores, 20 of which were in Canada. While his competitors went bankrupt, Kresge
took advantage of the drop in share price and bought a lot of his shares back from the
public. During the 1940s when the Allies were busy
fighting in Europe, Kresge was raking in $20 million dollars in sales annually. Even in his old age, he remained a brilliant
businessman. He successfully predicted the rise of suburban
shopping, and by 1953 he had already built 40 stores in suburban areas. Towards the end of the 1950s, however, the
concept of the variety store with fixed prices was giving way to a new idea: the discount
store, where prices were still cheap but were not fixed to specific levels. Kresge opened his first discount store, called
Kmart, in 1962 and he made it much bigger than his usual ones, with its own plaza and
a lot of parking space. His aim was to fit as many products as possible,
and the store attracted so much traffic that he would turn his inventory over 8 times per
year. Suffice to say, the Kmart brand was an instant
success and Kresge poured millions into it. Just one year later he had opened 63 Kmarts,
and his company was approaching $1 billion in annual sales. Now, depending on how old you are, you may
have heard the phrase “Attention Kmart shoppers” a couple of hundred times. Those words were part of the now infamous
Blue Light Special, where a certain item would have its price drastically reduced at random
moments. Since nobody knew when or what would be discounted,
people would sometimes spend hours strolling around their local Kmart waiting for a sale. The Blue Light Special became a key part of
Kmart and was used constantly up until 1991, after which it’s only been seen intermittently. Sadly, Sebastian Kresge passed away soon after
starting Kmart. He died in 1966 with a net worth well into
the billions, leaving behind a charitable foundation that’s still around today. Not long after his death, the new management
replaced the Kresge name with Kmart, officially killing off the last remnant of its variety
store days. Without Kresge’s leadership, however, the
company began to struggle. Their sales did keep on climbing until the
early 1990s, but this was simply the result of them opening new stores with borrowed money. In reality, Kmart was losing market share:
Walmart could readily offer lower prices on the same level of goods, while Target sold
a slightly higher class of products. Kmart responded by buying barely-related businesses,
like Sports Authority and OfficeMax, all the while refusing to upgrade or redesign their
old, declining stores. Walmart surpassed it in sales in 1990, and
Kmart’s answer was to open even more stores despite rising levels of debt. At their peak in 1993, Kmart had over 370,000
employees and annual sales of $37 billion, and yet despite that their financial situation
was horrible. Just one year later they reported a loss of
almost a billion dollars, and that’s when everyone started to panic. By 1995 almost all of the unrelated businesses
they had purchased were sold off, and more than 200 stores were closed. Kmart made a short-lived comeback with their
Big Kmart format, which essentially just widened the shopping aisles. They also partnered with Yahoo to get their
own website, but if you try visiting it now you’ll see just how well that went. In 1997 Martha Stewart partnered with Kmart
to sell her brand of bedsheets and shampoo, and that fooled investors initially, but it
soon became clear that Kmart really was going down. They sold all of their Canadian stores in
1998, which briefly made them profitable again, but then Kmart made the colossally stupid
decision of trying to undercut Walmart. The brief price war quickly devoured what
little margins Kmart had left, and on January 22, 2002 Kmart filed for bankruptcy. Although not unexpected, it was still the
largest retailer bankruptcy in history and the sheer scale of it left few buyers on the
table. One of them was Eddie Lampert, the chairman
of Kmart who also had a large stake in Sears. Like Kmart, Sears was a struggling department
store and Eddie thought if he merged the two together, two wrongs would magically make
a right. After lumping the two chains together in 2005,
Eddie saved Kmart from downright oblivion, but his solution was only temporary. Every year more and more Kmarts close and
the ones that remain open report ever declining sales. While Target and Walmart renovated and improved,
Kmart remained drastically underfunded, with crumbling buildings and untrained staff that
made the shopping experience exceedingly unpleasant. The brand has totally lost its identity, and
yet its demise has been surprisingly silent. Eddie Lampert has made so few attempts at
saving Kmart that it’s fair to wonder whether he even wants to do that at all. His other chain, Sears, has also been doing
terribly, and just this July his company narrowly avoided bankruptcy by promising to close even
more stores. Employees have been extremely critical of
him, calling him “out of touch with reality” and judging by his performance, he seems like
a captain that is determined to go down with his ship. When Kmart inevitably finds itself in another
round of bankruptcy proceedings, who knows whether it’ll just get auctioned off and
forgotten or whether someone will be brave enough to attempt reviving this fallen giant. Just looking at Kmart’s website should be
enough to discourage anyone from ever visiting them again, but I’ll let you in on a little
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and you’ll have no trouble creating a world-class website that will make Eddie Lampert cry. On a final note, I’d like to thank both
our kind patrons for supporting us, and you, dear viewer, for watching
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