“Why did Kmart go out of business?” – this is one question that still lingers in the minds of those who remember the once-mighty retailer. Kmart, known for its Blue Light Specials and as a staple of American shopping culture, faded away, leaving only a handful of stores and a legacy of retail innovation.
But what really happened to this brand? Why did the might Kmart fall? Well, the collapse of Kmart was a culmination of various factors.
If you have concerns in your mind concerning the demise of this once-a-leading retailer in the U.S., then you should keep reading. We will talk about the rise and fall of Kmart to help you know all that you need to know!
A Closer Look at the Rise of Kmart
Before we consider what led to the demise of this favorite brand, let’s take a moment to familiarize ourselves with what it was in the first place.
Kmart was a brand born from the entrepreneurial spirit of Sebastian Spering Kresge. In its days, it was more than just a store, but an integral part of American culture. Kresge, who started with two five-and-dime stores in the late 19th century, saw his business blossom into hundreds of stores nationwide.
Kmart started as two humble five-and-dime stores in the late 19th century before rapidly growing into hundreds of stores across the country, and by 1962, the first Kmart was born.
The transition from Kresge to Kmart in 1966 marked a significant shift in retail, with the company becoming one of the first big-box discount stores. This transformation was a bold and successful move, putting Kmart at the forefront of the retail revolution.
The introduction of Blue Light Special discounts and partnerships with celebrities like Martha Stewart and Adam Levine further cemented Kmart’s popularity and market dominance.
However, the retailer’s innovative streak seemed to dwindle as it entered the 1990s. Kmart, once the second-largest retailer in the U.S., found its position competitively rivaled by Walmart. Despite having the resources to recover, Kmart struggled to keep up with its competitors.
Why Did Kmart Go Out of Business?
Now, let’s get to the question of the day: why did Kmart go out of business? Kmart’s decline can be traced back to its inability to effectively respond to the competition. The rise of Walmart and Target put Kmart in a precarious position.
While Walmart lured customers with low prices and Target captured the upscale market, Kmart fell behind in carving out a clear identity.
This lack of identity proved costly as Kmart lost ground to its competitors and failed to keep up with the shift to online shopping. Their attempt to emulate Walmart’s low-price strategy came too late, and their technology and logistics lagged behind, leaving Kmart unable to catch up.
Apart from that, demographic shifts also played a role in the downfall of Kmart. As populations moved from urban centers to suburbs, Kmart’s city-centric store locations became less ideal, while Walmart and Target strategically positioned themselves to capitalize on these demographic changes.
All these are what accumulated and became a huge issue for the brand. And after struggling for many years, it eventually went bankrupt and bowed out of business in 2018. So, the next time the question, ‘Why did Kmart go out of business?’ comes to your mind, you should know that competition is the major culprit to blame.
You may also like:
How Far Does Kmart Date Back?
The roots of Kmart stretch back to the late 1800s. Sebastian Spering Kresge’s venture into the retail world began with modest five-and-dime stores, as we said in the previous sections. This humble beginning laid the foundation for what would become a retail giant.
By the time Kmart was introduced in 1962, the Kresge Company was already a significant presence in the American retail landscape. So, while we can say Kmart has its origin in 1962, we should remember that without Five-and-dime already becoming a prominent brand, there may not be a chance for Kmart in the first place.
Not the First Time Kmart Has Filed for Bankruptcy
Well, the issue with Kmart did not start when it eventually packed up. In fact, the brand has once filed for bankruptcy in 2022 – though it survived it.
Kmart’s financial struggles became evident when it filed for Chapter 11 bankruptcy in 2002. It was a significant setback but not the end of the road for the retailer. Undergoing reorganization, Kmart focused on closing unprofitable stores and cutting costs.
This strategy allowed Kmart to emerge from bankruptcy in 2003, albeit as a smaller entity under the Kmart Holding Corporation. This period of restructuring offered a glimmer of hope, suggesting that Kmart could still turn things around.
Kmart’s Merger with Sears Sank Both Companies
In an attempt to salvage both Kmart and Sears, another struggling retail giant, billionaire Eddie Lampert orchestrated a merger. Initially, this move seemed promising, driving up stock prices. However, Lampert’s strategy focused on short-term gains rather than long-term sustainability.
The failure to reinvest in store sales and an emphasis on cost-cutting led to a rapid decline in both Kmart’s and Sears’ fortunes. And before you know it, the two brands went down for it.
So, if you have once heard about the merger between Kmart and Sears, it actually happened but did not bring any tangible results. It wasn’t enough to save either of the two companies.
Eddie Lampert Accused for the Collapse of Kmart
Perhaps you have also heard the story that Eddie was responsible for the demise of Kmart. Well, many of us also heard it. In fact, this is a common topic in places where you hear people ask the question, ‘Why did Kmart go out of business?’
Eddie Lampert’s tenure at the helm of Kmart is marked with controversy. Accused of stripping the company’s assets for personal gain, Lampert’s decisions are often cited as a primary reason for Kmart’s downfall.
Under his leadership, Kmart experienced a significant financial decline, with key figures like EBITDA plummeting. His approach led to a reduction in store size and a focus on non-core businesses, neither of which helped the struggling retailer. So, it is just natural to see people accuse such a leader for the downfall of such a prominent retail brand.
Kmart Eventually Filed for Bankruptcy in 2018
In 2018, under the umbrella of Sears Holdings, Kmart filed for bankruptcy again. This time, Eddie Lampert’s Transformco acquired the company. Despite Lampert’s optimistic outlook, the reality was stark. The move could not revive the company’s fortunes.
While Transformco announced plans for a diversified portfolio of stores, the reality was a continued closure of Kmart locations and a steady decline in public interest.
Who Is Kmart’s Biggest Competitor?
Kmart’s most significant competitors were Walmart and Target. These companies successfully adapted to market changes and consumer behaviors, something Kmart struggled with. Walmart’s dominance in low pricing and Target’s appeal to upscale markets left Kmart in an indefinable middle ground.
Why Did Kmart Go Out of Business – Final Note
Now, you can see that Kmart’s journey from a retail giant to its eventual decline is a story of missed opportunities and strategic missteps. Failing to adapt to changing consumer preferences, technological advancements, and competitive pressures led to its downfall.
Let’s take a moment to answer some more questions you might have on your mind concerning the brand.
FAQs
What Caused Kmart to Fail?
Kmart’s failure was a result of multiple factors. Chief among these were its inability to effectively compete with retailers like Walmart and Target, its failure to innovate in technology and logistics, and its slow response to the rise of online shopping.
Is Target and Kmart Owned by the Same Company?
Yes, both Kmart and Target in Australia are owned by the same company, Wesfarmers. They operate as part of the Kmart Group division under Wesfarmers and have been working closely together.
However, it’s important to note that this refers to the Australian operations of these brands. In the United States, Kmart and Target are entirely separate entities.
Will Kmart Make a Comeback?
The prospects of a Kmart comeback in the U.S. are slim. Since Sears Holdings Corp., the parent company of Kmart, exited bankruptcy, it has become more of a corporate shell with no significant plans to reopen shuttered Kmart and Sears stores.
The retail landscape has significantly evolved, and Kmart’s model has not shown signs of adjusting to these changes effectively.
What Bought out Kmart?
Kmart was merged with Sears in 2005, following affirmative shareholder votes from both companies. This merger created Sears Holdings Corporation. The corporate headquarters of Kmart was then moved from Detroit to the Sears Headquarters. This merger was seen as a strategic move to consolidate and strengthen both retail brands. Unfortunately, the effort failed.
Who has the Biggest Kmart in the World?
The world’s largest Kmart is located in Guam. This store has become a significant attraction in the region, especially for visitors from other Micronesian countries. The Guam Kmart offers a wide range of food and non-food products and stands out due to its size and variety.