CSCMP's Supply Chain Quarterly
November 11, 2019

Farewell, Big K

The demise of my local retailer has me pondering: What went wrong?

My local Kmart closed this February. It had served my community of North Versailles, Pennsylvania, for more than 50 years and was a store where my family shopped weekly.

Kmart and its sister retailer, Sears, were once U.S. retail giants. Now, it remains to be seen if a deal struck in U.S. Bankruptcy Court in early January can save the approximately 425 remaining stores of Sears Holdings.

My store will not be among them. On November 8, 2018, Sears Holdings announced that my Kmart would be one of 11 Kmart and 29 Sears stores slated to close by the end of February. That's on top of the 142 stores shuttered last fall.

In a way, we had been waiting for the shoe to drop for a long time. It was not hard to see the brand's decline, even though this Kmart store had endured much since it opened in 1964. It survived numerous recessions, changing demographics, and the 1980s decline of steel and manufacturing in Pittsburgh, Pennsylvania. In fact, during that period of local job losses, it actually expanded its footprint to become a "Big" Kmart.

We also wondered how this Kmart would survive when, in 1998, one of the largest Walmart stores in the nation was built just two miles down the road. Yet it hung on for two more decades.

What caused its final demise? I believe that, more than anything, it was a lack of a good corporate supply chain.

Sears (and by extension, Kmart) believed that its size and service were enough to keep customers coming back. It had solid brands, like Craftsman tools, DieHard batteries, and Kenmore appliances. Sears was a retail behemoth built on a successful catalog operation, the forerunner of today's e-commerce model. If anyone should have been able to successfully transition to online retailing, it was Sears.

But while Sears and Kmart relied on their reputations, their chief competitors—Walmart and Target—built more resilient supply chains. Walmart, in particular, continually strengthened its distribution capabilities, refined its transport fleet, embraced new technologies, and relentlessly pursued efficiencies that would allow it to slash prices to attract customers. Walmart understood that low prices could only be achieved if the company saved elsewhere. A superior supply chain was key to lower costs.

And because they had efficient supply chains, Walmart and Target were better equipped than Sears was to withstand the assault by Amazon and other e-tailers. Walmart has actually become the poster child for the successful meshing of brick-and-mortar andonline operations.

So, after 55 years, farewell to my Kmart. It's a death that might have been prevented by a better supply chain.

David Maloney is editorial director of CSCMP's Supply Chain Quarterly.

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