Discount birthday: Walmart, Kmart, Target hit 50

 

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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."