Stepping Into A Retail Time Machine
A brief history of KMart
On a beautiful October day in 2018, my wife and I left the brisk sunshine in Long Beach, California and traveled back in time to 1998. As we entered Kmart, we passed the former Little Caesars Pizza Station, which was now blocked off and abandoned. I remembered eating at the full-service Kmart Café as a child, in the back of the store in Harbor City, not too far from Long Beach. The hot dogs, hamburgers and spaghetti of the café had given way to pizza and Crazy Bread, before closing entirely. The store had a slightly dim pallor. The Halloween costumes were on sale, ranging in price from 3.49 to 14.99, which was 50 percent off. We bought a five-dollar top.
Making our way through the entire store, we passed the grocery section, which featured cold cases that were angrily complaining with a mechanical grinding noise. They looked straight out of the 90s and some of the brands, like South Gate, were the kind of fare you would find at the 99 Cents Only Store. About 25 people or less were in the store, and when it was time to check out, the wait was somewhat long, even though only one other person was ahead of us, owing to the ancient register. If the store was competing with Walmart, it did not stand the slightest chance, despite the clothes being of somewhat good quality. The East Long Beach store closed in 2021.
It was not always this way. Kmart opened its doors in Garden City, Michigan in 1977. At the time, it was well regarded as a quality store with good value. Until 1990 when it was surpassed by Walmart, the chain was the second largest retailer in the country, behind Sears. At its apex in 1994, Kmart had almost 2,500 stores. Due to a long-term lack of investment and failed purchases of Builders Square, Borders Books and Sports Authority, the company fell on hard times. I remember shopping at the Harbor City Kmart frequently in the 80s and 90s, at one point buying my beloved Nintendo on layaway. On January 22, 2002 Kmart filed for Chapter 11 bankruptcy and laid off approximately 34,000 employees. At this point, hedge fund manager Eddie Lampert got involved by buying up stock as the company emerged from bankruptcy and was able to increase the stock price enough after selling stores to Sears (which caused the market to think that Kmart’s stores were more valuable than they likely were) that Kmart was able to purchase Sears. The new Sears Holdings would leverage the power of Kmart’s off-mall locations and Sears good name to make a big impact in the marketplace. However, by 2008, and after suffering more neglect since Lampert did not believe in investing in stores, the combined company started suffering losses. Many claim that Lampert was self-dealing to enrich himself at the expense of Kmart and Sears. By October 2018, the company was forced to declare bankruptcy once again. Today, Kmart operates just 5 stores, two in the Virgin Islands, one in Guam and one each in New York and Florida. If there is a moral of this story, it is that there is no company that is too big to fail (unless you are a well connected bank, of course) and that nothing should be taken for granted.
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