Kmart: Fall of a Retailing Giant

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Case Details:

Case Code : BSTR056
Case Length : 16 Pages
Period : 2000 - 2003
Organization : Kmart
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Industry : Retailing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Kmart's story dates back to 1899, when Sebastian S. Kresge (Sebastian) set up the S.S. Kresge Company (Kresge) in Detroit, US. The company established a network of retail stores that sold everything for 5 and 10 cents. The low pricing strategy worked well, and by 1912 the company expanded to 85 stores, worth $ 10 million.

In 1918, Kresge was listed on the New York Stock Exchange. During the First World War and the Great Economic Depression, the company's low prices model kept it running. By the mid-1920s, Sebastian opened the forerunner of today's discount stores in the form of stores that sold items for $ 1 or less. In 1929, the company's Canadian subsidiary, S.S. Kresge Company, Ltd. was founded. By the end of the year, it ran 19 stores in Canada. In 1937, Kresge opened a store in the first suburban shopping center in the US, the Country Club Plaza in Kansas City, Missouri. As more companies entered the retailing arena and competition intensified, Kresge launched a newspaper advertising program that became highly popular and successful.

The campaign was extended to radio in due course of time. Over the next few decades, the company established many retail outlets across the country and became a name worth reckoning with in the US retailing industry.

In 1959, Harry B. Cunningham (Cunningham), a seasoned retailing expert, became the President of Kresge. Cunningham decided to launch a discount department store to help the company's stores stand apart from the rest of the players. Thus, the first Kmart store was opened in Garden City, Michigan, in 1962. In that same year, 17 more Kmart stores were opened. These stores contributed a major chunk of the company's sales of $ 483 million for that year. In 1966, Kmart recorded $ 1 billion in revenues for the first time through its 915 stores, of which 162 were Kmart stores. In 1968, Kmart (Australia) Ltd. was set up in association with G. J. Coles & Coy Ltd. of Australia, with Kresge holding 51% of the venture's equity...

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