Walmart, Target, Kmart, Kohl's Lead 50 Years of Retail Revolution
Shaking Up Retail Landscape, Big Four Discounters Reshaped Our Idea of Shopping
The year was 1962.
John F. Kennedy was president. The nation was increasingly engaged in Vietnam, and the Cuban Missile Crisis brought the world to the brink of nuclear war. Johnny Carson became host of the "The Tonight Show," Marilyn Monroe died and the Rolling Stones made their debut in London. And in quiet cities across Middle America, a retail revolution was taking place.
Middle-class households were booming, and suburbs, as well as the first enclosed shopping malls, were catering to them. But savvy retailers were looking for ways to bring value to customers within a more profitable building footprint, according to Dan Butler , a VP at the National Retail Federation. Pioneers such as Walmart founder Sam Walton realized that people wanted value year-round, not just once a season when department stores cleared out merchandise.
Conditions were ripe for a new retail concept. Over the course of 1962, Walmart, Target , Kmart and Kohl's opened their first stores in Arkansas, Minnesota, Wisconsin and Michigan, respectively.
Department store chains fought back with promotional pricing policies at first, but most eventually determined that it was wiser to complement their full-service stores with separate discount operations.
Scroll over the chart below to explore our timeline.
"Retailers found that some consumers responded very well to sales, while another portion responded to the idea of value priced and low prices," Mr. Butler said. "Initially, if you were a department-store customer, you never shopped in a discounter. It was somewhat class- and income-driven."
Discounters expanded rapidly over the course of the decade. Kmart counted 162 stores by 1966, Walmart added stores in Oklahoma and Missouri and Target staked its claim in Colorado. Mass media made it relatively simple for them to introduce themselves as they entered markets. And a lot of their advertising was handled in-house (newspapers accounted for more than 90% of retailers' budgets). Target , for example, founded its in-house advertising department (still in existence) in 1968.
By 1970 discounters had become part of the nation's lexicon, so much so that Walker Art Center in Minneapolis commissioned artist Red Grooms to do a work titled "The Discount Store." Inspired by a Target , Mr. Grooms created an installation that was reminiscent of a carnival, with bright lights and popcorn stands. That same year, Target tapped comic Jonathan Winters to appear in 30-second commercials featuring merchandise promotions and calling attention to store openings. He was used in the spots to give Target a "fun image," Ad Age reported at the time.
Target had already earned a favorable reputation -- and flattering nickname -- in the burgeoning discount category. "When we first opened, it was unlike anything anyone in Minnesota had seen before. It was bright, well-organized, easy to shop," said Tony Jahn, Target 's senior corporate archivist and historian. "The store was so different to the folks in Duluth that they called it "Tar-zhay' and gave it more cachet by using a French accent."
On the whole, discounters were viewed as places where you paid your money and took your chances. But they had Wall Street 's respect. Walmart had the first of its 11 stock splits in May 1971 and was listed on the New York Stock Exchange the following year.
Meanwhile, Kmart, which worked with agency Ross Roy, Detroit, was becoming ubiquitous, opening 17 million square feet of retail space in 1976 alone. That same year, Ad Age named Robert Dewar, chairman of Kmart parent company S.S. Kresge, its Adman of the Year.
The retailer, which used the tagline "The saving place," was hailed for its "sense of practicality and enthusiasm." All corporate employees, including top executives, took their lunch hour in the dining room, Ad Age reported.
But despite its pragmatic nature, Kmart's aspiration was clear: Become the nation's No. 1 retailer by passing Sears Roebuck & Co. Kmart touted its plans throughout the 1970s and 1980s but never achieved its goal.
As discounters grew, they began to move away from the five-and-dime merchandising mentality. In 1974 Target introduced planograms, which brought uniformity to the stores.
"The overlying outline of what a store is today -- that 's one of the great things planograms gave us," said Mr. Jahn. "It gave structure to our business."
Competition in the discount category intensified. Walmart got particularly aggressive, setting up displays at store entrances that compared its prices with rivals'. That practice came under fire in the early 1990s, with Target running newspaper ads slamming what it called "dirty" tactics. In 1989, Walmart had unveiled a tagline, "Walmart -- always the low prices on the brands you trust. Always," with a TV campaign from GSD&M, Austin, Texas.
Kmart changed its tag to "The brand-name savings store" in national TV ads from Campbell-Ewald. And the retailer teamed with "Charlie's Angels" star Jaclyn Smith on the first of what would be many celebrity collections in the mid-1980s. It tapped Martha Stewart, at the time simply a syndicated columnist and author, as a consultant and spokeswoman for its home division in 1987. Kohl's, meanwhile, shed low-margin departments like candy, sewing notions and sporting goods in favor of higher-margin products like linens and jewelry.
Target , which worked with Paragon Advertising and Chuck Ruhr Advertising in the 1980s, used Aretha Franklin in a 1988 ad campaign. It also began to focus on a formal "Brand Differentiation Strategy," which involved building the advertising department into a true marketing organization. In the early 1990s, that spawned the now ubiquitous tagline, "Expect more. Pay less."
The stage was set for a coup, and with it came Sears' fall from grace. In 1990, Walmart became the No. 1 retailer by sales, relegating Sears to third place, behind Kmart.
A year later, the ominous Ad Age headline, "Brands in Trouble," heralded the rise of Walmart and Target . "By playing price as a trump card, these retailers are diverting customer loyalty from brands to themselves," the article said. Mr. Walton was named Ad Age 's Adman of the Year in 1991. The accompanying article noted Walmart's word-of -mouth marketing, advertising cost-to-sales ratio of just 0.49% and legendary expense controls. Employees and their children were used as models in circulars, for instance.
"No other retailer has shaped the marketing environment so completely as has "Mr. Sam,'" Ad Age wrote. "The homespun, 73-year-old Arkansan, who has seen his company become the leading retailer in the country, more importantly is helping shape the way consumers expect products to be marketed in the U.S."
Mr. Walton died less than four months later, on April 5, 1992.
The 1990s ultimately saw two major retail shifts: the rise of megastores and e-commerce. Both Amazon and eBay launched in 1995. Walmart and Target moved online in 1996 and 1999, respectively, but were slow to gain traction there. Ad Age reported that Walmart's site drew 452,003 visitors in May 1999, while Amazon.com attracted 6.4 million.
Walmart, Kmart and Target also made big bets on the combined mass-merchandise and supermarket concept. Time and convenience were at a premium, Ad Age reported, because of a rise in single-parent families and families where both parents worked.
Kohl's, meanwhile, began to insist that it was a "moderate department store" rather than a discounter. Its first branding campaign, from JWT, Detroit, aired in 1996 with the tagline: "That's more like it."
The turn of the century saw a power shift under way from merchants to marketers. It became more important to develop, nurture and promote a brand's personality -- as Target and agency Peterson Milla Hooks so aptly demonstrated with "Sign of the Times."
Spots featured "Bull's-Eye World," a funky place where cheerful blondes served up red target -shaped Jell-O molds and grooved to Petula Clark's "Sign of the Times" in a room papered with Target logos.
The campaign established the bull's-eye as an advertising icon and introduced Bull's-Eye the dog, who went on to be immortalized in wax at Madame Tussauds in New York. The campaign, as well as the launch of designer Michael Graves' first collection for Target , honed its position as the purveyor of cheap chic. It also earned the company Ad Age 's�Marketer of the Year nod in 2000.
"Our goal was to differentiate Target as the retailer that could give guests that high-end designer lamp or even a new outfit for less," said Shawn Gensch, senior VP-marketing. "Target makes everyday life fun, and that important message has continued throughout our subsequent advertising."
The 2000s were bookended by tough economies, with retailers scrambling to capture consumers' attention with big advertising budgets and escalating promotions. A struggling Kmart reintroduced the legendary Blue Light Special, though that didn't help it avoid bankruptcy in 2002. In 2004, Kmart merged with its historical rival, Sears, creating the nation's third-largest retailer.
Walmart emphasized its philanthropy -- and added hundreds of millions to its ad budget -- as it battled negative publicity surrounding its hiring and labor practices. Target embraced unorthodox advertising approaches, for example, buying all the ad space in an August 2005 issue of the New Yorker. It also staged a vertical catwalk and experimented with pop-up stores. Kohl's expanded private and exclusive brands as the category grew to 47% of the business in 2010 from 25% in 2004.
As these retailers celebrate their 50th anniversary, they find themselves operating in a dramatically altered landscape.
"If you looked at how [discounters] priced products in the past, a lot would compare against the department-store prices -- that 's now almost an irrelevant argument," Mr. Butler said.
"Consumers are educated, and retailers have to come up with a compelling offer that stands on its own. It's also more important [for retailers] to understand who their customer base is and how they're going to grow that base. In the past, you could somewhat predict what your sales would be one to three years out. Now that 's tough to do."
Population growth is slowing, family units are evolving and the minority is becoming the majority. Consumers are shifting from suburban to urban centers, and they are shopping across a dizzying array of platforms. Media has become fragmented, with digital, social and mobile shaping the industry
A revolution is happening, and discounters in particular must adapt to changing consumer preferences or risk becoming insignificant.