By: Richard K. Cacioppo, Sr., J.D.
1962 was a seminal year for sure. SS. Kreske, around since 1886 founded Kmart. F.W. Woolworths, another 5 & 10 of even more renown also launched their own discount megastore, Woolco. Years before it was profitable enough for Frank Woolworth to be able to build the Woolworth Building on lower Broadway in Manhattan, which held the title of the world’s tallest building from 1912 until 1929 when the 77 story Chrysler Building was erected on 42nd Street. It was not financed, but Woolworth simply used his own cash for the entire project.
A third 5 & 10, with far less fame, and only a fraction of the size of either Kreske’s or Woolworth also went big in 1962 just south of the Ozark foothills in Rogers, Arkansas. Sam Walton, who first got interested in retailing in his first post WW II job at J.C. Penny’s, had found some success in owning a couple of the Ben Franklin Stores in Arkansas, before founding the Walton’s 5 & 10 in the village square in the now world famous hamlet of Bentonville, neighbor larger Rogers. His idea became the first retailer to earn $100billion a year in sales, and now is closing in on four times that amount.
Kmart did the impossible within less than twenty years, it passed Sears Roebuck and company as the world’s top retailer, blowing right by the Chicago-based behemoth, which like Woolworth built the world’s tallest building, and still had that honor when it fell to second place for the first time in decades and decades. Less than a decade passed when Wal-Mart did the same for Kreske’s brainchild. Today, Sears and Kmart are part of Sears Holding, which left the Sears Tower for the suburban confines of Hoffman Grove, Illinois, something of a return to its corporate roots.
Dayton-Hudson, headquartered in Minneapolis also had the same idea, or at least copied very quickly those of the others that same year. Starting out not as a 5 & 10, but Dayton Dry Goods Company in 1903, the company grew into a large chain of department stores, especially when Dayton and Hudson stores merged in the 1970s.
On to the American scene came what is now the country’s fourth largest retailer, behind Wal-Mart, Home Depot and Kroger’s, Target Stores.
1962 also saw the birth of Meijer’s, the largest regional department discount store chain, and a number of other large chains, including Kohl’s department stores.
And I was there! At least physically.
52 years ago, In a period of only 124 days, the three great discount department stores, Wal-Mart, Kmart and Target, were all launched. They were joined by many others, like Kohl’s and Meijer which have endured and prospered and others such as Woolco which didn’t.
What was so special about that year? Did Sam Walton have a magic bullet? In order to fully understand the answers to these intriguing questions, and determine if there was indeed a smoking gun, and if so, what it was, the author conducted an exhaustive and comprehensive study and analysis of the seeds that were to germinate and flower, along with some that simply died on the vine. This truncated, abridged version of 1962 The Year American’s Shopping Habits Changed. Forever? tells the story in an unusual format that included education, entertaining and in some cases alarming facts, figures, anecdotes and images. An abridged version, complete with detailed notes, reports and appendixes will be published in the futre.
The Golden (50th) Anniversary of the modern DDS industry was 2012. Plans to publish the work in time for that half centennial celebration were delayed for one main reason, we are in the midst of the fastest and life-changing retail metamorphosis ever.
In 1962 the wave of discounting that culminated in the launching of so many iconic retailers were referred to as “The Juggernaut.” The sub-title “The Year America’s Shopping Habits Changed. Forever” was meant to imply that 1962 was the culmination of many year years of the creation of mass merchants, and the birth of possibly a permanent wave of change. As it turned out it was in fact the year of a tremendous change, but not of a permanent change. The so-called “Walmart Effect” resulted in the virtual end of the era of small retailers on America’s main streets, and the beginning of the demise of suburban and then urban and even rural shopping centers. Walmart changed everything. Last year according the National Retail Foundations Stores magazine’s list of the top 100 retailers its global sales were just short of $470 billion. It was the fastest company in history to reach $1 billion in annual sales and currently does that in less than every 24 hours.
In 1962 a cover article in Time magazine which featured the reclusive Eugene Ferkauf founder of Korvettes (who passed away at the ripe old age of 91 only a few days before this writing) described the movement that began in post-World War II empty warehouses in New England as a “juggernaut.” That same year Fortune magazine ran a longer artilce “The Revolutions of Retailing,” an eight-page analysis of the subject. It was a wave the covered the nation and even had a peripheral effect across the pond in Europe with the founding of the second largest retailer in the world, Carrefour in 1963. Not ironically for those who have studied the s0-called “Life Cycle” of products, businesses and even retail evolution, that same year new seeds were planted for the Second Juggernaut, about thirty years away with the formation of the APANENT which would evolve in the Internet and once again change everything we ever knew or conceived about retailing.
Merriam Webster Dictionary defines “juggernaut” as “something (such as a force, campaign, or movement) that is extremely large and powerful and cannot be stopped.” It fit the movement to tee …. at least up until 1962 and through well into the first half of the first decade of the 21st century. But, all good things come to an end. Joel Dean in 1950 coined and defined the term Product Life Cycle to represent the period of time over which an item is developed, brought to market and eventually removed from the market. In general all products run their course. The same is true of companies, especially retailers, they run their course. There are many sociological and technical reasons for this as discussed in detail below.
In 1930 A&P became the world’s top retailer. Starting inauspiciously as most great retailers were, it holds the title of “The first mass merchant.” It was founded in 1859 as Gillman & Company and almost immediately renamed The Great American Tea Company as a small tea leaf retailer that weas to quickly add locations. Before long it was renamed again, this time as The Great Atlantic and Pacific Tea Company, although it never evolved into a great west coast retailer, ultimately its Achilles Heel. Sales before The Great Depression hit its peak in 1932. Representing about 3% of the gross national product (sales of all products), about the same percentage Walmart has achieved. It took 35 years before it was surpassed in sales in 1965 by Sears Roebuck & Company in the latter’s 50th year as a brick and mortar retailer and 79 years after it was founded as a mail order catalogue. In 1991 Sears was knocked from its throne by Kmart, and less than a year later Walmart took the title which it has held for the last 23 years and counting.
Few who do not understand this life cycle concept could imagine Woolworth’s, A&P predecessor as #1 would ever fade away as it has. Even less might have believed the Great Atlantic and Pacific Tea Company which in 1930 had over 15,000 locations would fall from grace and become a bankrupt organization that filed a Chapter 11 petition a couple of years ago. It does not make the Top 25 list of Worldwide Food Retailers for 2012 by Super Market News (Walmart is #1). It was ranked 18th in the United States by the Progressive Grocer.
So Walmart which has annual sales nearly four times that of the second largest global retailer, Carrefour and five times that of the second largest American retailer, Kroger would seem to be poised to easily challenge A&P 35-year reign as champ, and certainly easily will surpass Sears’ 26-year run. But, not so fast. There is a new kid in town, and about as unlikely one that conceivably could challenge the Bully of Bentonville which was an extension of the little variety store that in 1950 began in that backwater community of Bentonville in the backwater state of Arkansas and was born in 1962 in nearby Rodgers.
Al Gore claimed that he invented the Internet, but not many agree. Fact is the prevailing opinion is that the Advanced Research Projects Agency Network (ARPANET) was one of the first successful operational packet switching network, an idea that contained almost everything the composes the contemporary Internet does when it was conceived in 1963. Another incredible life cycle began, but no one knew?
In 1994, two years after Walmart surpassed Kmart as the top retailer in the world and its founder died (as did the founders of Kmart and Target … almost exactly 30 years after all three were founded) amazon.com was born (incorporated) Seattle, Washington. It had an even more inauspicious start than A&P or Walmart. A&P began in 1859 as a tiny store near the intersection of Church and Vesey Streets (31 Vesey Street) ironically on the northwest section of the land mass where the ill-fated World Trade Center was located. Walmart’s predecessor began as the Walton 5 & 10 in 1950 in the town square of Bentonville, Arkansas. It was quite larger than the first A&P, but certainly not with any impressive dimensions. It grew to numerous locations much like A&P. amazon.com started in Jeff Bezos’ garage, but his vision at that time was never for his brainchild to become a brick and mortar retailer. In the telltale biography of the company, The Everything Store, Jeff Bezos an Age of Amazon by Brad Stone, visionary, founder and current CEO Bezos describes his child as “A technology company, not a retailer.” While unquestionably both, this “not-a-retailer” is on a path to become the greatest, top-selling retailer in the history of the world. Of note, Apple, Google, Hewlett-Packard, Disney and Microsoft also started in a garage. Amazon thus, unlike all other great retail icons that came before it, exploded onto the scene with an entirely different premise, perhaps the first successful company of all time that disproved the formula for success was “Location, location, location,’ unless one interprets its location as “everywhere.”
Bezos never intended to follow any of the prescripts on any other major retail business in history. Quite frankly he always believed he could build a business that was the marketplace for every product available for every shopper in the world. Crazy? Like a fox.
In 1962, in fact all through the 1960’s the growing publicity discount department stores began to get recognized by the media, including cover stories on national magazines like Time and Fortune, supra. Walmart nary was given a notice. When it went public in 1970 suddenly many took notice and then some. It shot up the charts and thirty years after its founding, 42 years after Sam Walton founded its birth company it became #1. It first reached $1Billion in eighteen years after its birth. Amazon achieved that in less than a decade. At the end of its first 15 years as a public company, Walmart had stunned the retailing world by generating sales of $6.4 billion. That was a stunning achievement for a retail chain—easily the fastest growth rate ever recorded by a retail chain. But it pales in comparison to Amazon’s growth in its first 15 years as a public company. During that period, the Seattle-based web merchant grew from a standing start to $48 billion in annual sales—fully 7.5 times the size Walmart reached after its first 15 years as a public company. Last year the company earned a reported $61 billion and has forecast $71 in 2014. However, some believe here too Bezos is acting like a fox and one economic forecaster has published an article that he would not be shocked if it surpassed $100 billion this year. While that is very unlikely, reaching that milestone cannot be far off. It is about to if not already has passed Target and Costco in annual sales, and will soon be breathing down on Kroger, founded in 1872 which in 2013 had earnings of $92 billion. Globally only France’s great hypermarket Carrefour at 2013 reported sales of $114 billion stands between Amazon and Walmart, albeit to the tune of over $300 billion. But, if it was to continue its present rate of growth which already is making brick and mortar giants like Walmart more than a little nervous we may soon have another royal on the throne. Is amazon.com the Crown Prince of Retailing? Very possibly.
While frequently discussed, the Walmart-Effect that represented the zenith of the pre-1962 and then beyond juggernaut as it turned out was not as permanent as it appeared over the rest of the century. In but just over 30 years the Amazon-Effect appears to be far more revolutionary. It was far more encompassing, extending worldwide almost immediately and was born out of not a migration from the cities to the suburbs and the new consumer age both of which spurred on the discount department store wave. Instead it was technology-born, the result of the computer age, personal computers, the Internet and wireless technology (Walmart’s great success in risingto #1 had many ingredients, but probably the most important was that it too utilized technology to track down and surpass every other retailer in the world as this story will explain.
The wireless, online (that term is now even passee and quickly becoming inaccurate) wave, overwhelming not only America as Walmart and the great discount department stores did, but the entire world is truly the 2nd juggernaut. Unlike the 1st juggernaut which resulted in the redesign, consolidation and compacting and in some many instances relocation of brick and mortar buildings, the one launched just before the beginning on the new millennium is on its way to obliterating the need and use of any physical architecture. The storefront was moved to the consumer’s home, and actually to his fingertips.
This work, due to the massive gathering of research material cannot possibly be consolidated into a single volume, but four. The first will be this one, which will cover the birth of retailing through the end of The Great Depression and conclude about 1940. Volume 2, which is the heart of the original concept will cover the development and explosive growth of and migration to the suburbs which fueled this “Revolution” as Fortune put it in 1962. Similar migration from the farms to the cities fueled earlier revolutions such as the birth of department stores, variety stores and supermarkets. Volume 3 will be a compilation of Historical Highlights, described just below. These are short essays, but varying in length which detail many of the trends and retail icons discussed here in Volume 1. In them are many inside stories, such as those provided the author by the son of the founder of Target that contain his father’s personal papers but which are included in a separate volume so as not to interrupt the flow of the main story.
Each volume, and in many respects each chapter and Historical Highlight are written in a manner to provide interested readers in the specific subject matter contained therein with a virtually independent reading all by themselves. However, to truly learn from and fully understand the entirety of this work, the author urges the reader if not to read line-by-line, page-by-page each volume chapter and Historical Highlight, then simply peruse each one so nothing is taken out of context.