Ten Retail Innovations Kmart Pioneered

Martha Stewart waxes nostalgic about Kmart.

“It was utterly phenomenal. I had written a couple of books at that time when they wanted me to be their lifestyle expert,” Stewart told WWD recently. “My husband negotiated the deal. It was a very lucrative, high royalty business designing quality, fairly priced merchandise for the masses.

“What was really great was that they listened to me. Why were they making only dark bath towels, like navy blue? You couldn’t buy a white towel.” Kmart, Stewart surmised, thought its customers wouldn’t buy white towels because they can require frequent washing and appear dirty.

“I said, let’s try pastels and whites,” Stewart said. “My bestselling towel was white and the second best was this beautiful sage green.” What Martha began selling at Kmart was a wake-up call. “What Kmart did was make fairly priced, good quality merchandise available to the widest possible audience. That was a fabulous thing. I was a big fan of that store. We even considered buying Kmart. Imagine — K Martha. We just didn’t do it. We should have.”

On Sunday, Kmart closed its last full-size, full-lined store, which anchored the Bridgehampton Commons center, along with the still standing King Kullen supermarket and T.J. Maxx, in Bridgehampton, N.Y., on Long Island’s east end. Unlike other Kmart locations, the Bridgehampton store (originally a Caldor unit) was distinguished by its diverse clientele of rich Hamptons homeowners, like Stewart, weekenders and working-class locals.

A former Kmart executive said: “Everybody shopped there once upon a time. Lately, it was like a morgue. The only Kmart left in continental U.S. is a small, convenience-type format in Miami, and a couple of Kmarts in Guam and the U.S. Virgin Islands.

What killed Kmart? Failure to react to emerging competition from Walmart and Amazon, losing focus and money by buying up and selling off noncore businesses such as Office Max, Builders’ Square and Waldenbooks, lack of inventory control and insufficient store updates.

Blame also falls on billionaire investor Edward Lampert. He bought Kmart out of bankruptcy in 2002, then Sears in 2005, forming Sears Holdings. He failed to make good on his promise to revive both retailers and proceeded to methodically close stores and sell off of the real estate while lining his pockets and eliminating tens of thousands of jobs. Currently, just a dozen Sears stores still operate.

“Unfortunately, Kmart’s legacy is going to be that of a missed opportunity,” said Barbara Kahn, the Patty and Jay H. Baker marketing professor at The Wharton School at University of Pennsylvania. “Clearly, Kmart had ideas that could have put them in the winner’s circle, but they did too little too late and [the business] was not focused enough. They did have good bones in real estate. Martha Stewart was a very strong brand with a very strong aesthetic that absolutely drew people into the store. But Kmart could have been what Target became. Martha Stewart was a better choice than Michael Graves,” the guest designer at Target. “But they didn’t build on that aesthetic to extend to the rest of Kmart. The stores didn’t have the right merchandising to support Martha Stewart. Joe Boxer was a strong brand, if they have leveraged that too, Kmart could have been a cool place.”

Kmart is named after S.S. Kresge, which was founded in 1899 by Sebastian Spering Kresge. The first store with the Kmart name opened in 1962 in Garden City, Mich. Sixty-two years later, with Kmart concluding its sad, slow disappearing act from the U.S. retail landscape, it’s time to look back at what the mass discounter can be credited for and what it pioneered.

Here’s the top ten list of what made Kmart special.

1. Advancing the Discount Department Store Model

Kmart was the first true discounter on a national scale, even the largest retailer in the U.S. at one time. Its annual volume peaked at $37 billion in 1992 and its store count topped out in 1994 with 2,323 doors in the U.S. and 160 abroad. Some considered Woolworth’s the first national discounter, but Woolworth’s is best classified as a Main Street, five-and-dime store, with counters for sandwiches and chocolate egg cremes. Kmart offered the type of products more associated with department stores, but at lower prices and often lower quality. Kmart outlasted several copycat regional discounters that are now defunct, including Ames, Jamesway, Caldor, Venture, Zayre, Bradlees, Mervyn’s and Korvettes, and can be credited for creating the template for Walmart’s and Target’s expansion. As one real estate executive said, “Kmart was a developer’s dream.” Kmart signed long-term leases, often 30 years, and paid rent, property taxes, insurance and other costs.

2. A Towering Headquarters

In 1972, Kmart moved from Detroit to Troy, Mich., into a sprawling, 900,000-square-foot-headquarters with nine towers on a 40-acre campus. The building, located at 3100 West Big Beaver Road, was designed by Smith, Hinchman and Grylls Inc., a Detroit-based firm. It won numerous architectural awards and was designed to reflect the grandeur of the business and accommodate the great growth expected from the company. Among the site’s unique features: an art collection with works by Pablo Picasso, Andy Warhol and Paul Klee, and in the basement, an ongoing sample sale for employees to shop. After Lampert took over Sears, Kmart’s headquarters was vacated in 2006 and employees relocated to the Sears’ headquarters in Hoffman Estates, outside Chicago. The former Kmart site is expected to be redeveloped for mixed use including parks and retail.

3. Jaclyn Smith

In 1985, Kmart launched its Jaclyn Smith collection, which is considered to be the longest-running celebrity fashion line. Smith — best known as one the original three angels in the “Charlie’s Angels” television series — was one of the reasons why Kmart was able to keep operating despite its mismanagement, bankruptcy and constant store closings over the years. In its peak years, the Jaclyn Smith collection encompassed women’s apparel, accessories, intimate apparel, footwear, seasonal gifts, bedding, tabletop, decor and furniture, and generated $250 million to $300 million in annual sales. All told over the decades at Kmart, the Jaclyn Smith brand sold more than 100 million items.

Her contract with Kmart expired at the end of July 2021, and there was about a yearlong sell-off period. Now Jaclyn Smith fashion is being sold on HSN, through a licensing agreement with RDG Global LLC. It’s a big change for Smith that speaks to the enduring relevance of her brand and customer loyalty. “Back then there was no social media and no fashion in the mass market,” Smith once told WWD. “I launched with store appearances, print ads and television, which gave me a strong footing with my customers. They could meet me and ask questions. I was visiting a different store and city every other weekend and doing talk shows. They were short trips, because I had young children. Certainly my career brought the customers to Kmart but what made them come back to the store was the product. My dream was to build something that would stand the test of time, to build a quality brand at an accessible price.”

4. The Layaway Legacy

Kmart was among the first retailers to popularize layaway programs, allowing customers to pay for items over time, making shopping more accessible to budget-conscious or low-income families who might not have credit cards or the cash on hand to purchase an item and take it home right at the point of purchase. The layaway was particular popular among families buying toys during the holiday season. One in-store ad reminded customers: “All Toy layaways must be paid out by Tuesday, Dec. 15 or they will be return to stock. Don’t disappoint your children.” Kmart’s layaway offering can be considered the precursor of what today is known as “buy now, pay later,” or BNPL, and which became a big trend during the COVID-19 pandemic. One key difference is that BNPL plans let shoppers receive products at the point of purchase, while, with layaway programs, shoppers are not able to take possession of products until they’re paid in full. At one point during the holiday season, Kmart expanded its layaway program and dropped a required down payment with a lease-to-own plan, joining other U.S. retailers in trying to get a jump start on Christmas shopping. Kmart also offered payment plan options with varying schedules. Service fees were charged, but the layaway has been considered a better deal than using a credit card.

5. Corporate Citizen

After the 1990 Columbine High School massacre in Colorado — where two students killed 12 classmates and one teacher and injured 20 others before committing suicide — Kmart stopped selling handguns and gun ammunition.

The move followed public pressure that arose once it became clear the assailants purchased their ammunition at a Kmart. Among the prominent voices speaking out were Rosie O’Donnell, who resigned as the company’s celebrity spokeswoman, and filmmaker Michael Moore.

Along with two survivors of the shooting, Moore confronted Kmart management at the retailer’s headquarters on the issue of gun violence. After the meeting, on the steps of Kmart headquarters, Lori McTavish, a senior vice president of corporate communications, announced that the company would phase out the sale of handguns and ammunition, surprising Moore. “I’m totally, totally stunned by the response from Kmart,” he said. The scene became part of Moore’s famous 2002 documentary, “Bowling for Columbine.” Kmart also eventually stopped selling rifles.

6. A Neighborhood Store

“People thought of Kmart as their local, community store, the place where you went to with your grandmother or mother,” said Lisa Schultz, executive vice president of product development and design, for Sears and Kmart from 2003 to 2013. “There is a lot of inherent history in Kmart. People continued to shop there because they had those deep memories. It was the store you felt connected to. You grew up with it in your neighborhood and you wound up buying everything there.”

Kahn said: “They had the strategy of a neighborhood store. That was a very good idea in hindsight, but it wasn’t implemented right. They didn’t exactly choose all the right locations, but they had a whole lot of operational issues in the implementation. What a shame Kmart is down to its last one or two store. Retail moves on.”

7. Private Label and Exclusives

Kmart was an early adopter of private label branding, which offered exclusives and filled voids in the merchandising while boosting margins and customer loyalty. Though Lampert is indelibly linked to the demise of Kmart — and Sears — there was a period when he supported the apparel business, and established a formidable presence in lower Manhattan for product design.

“We had a big product team with over 150 people,” Schultz said. “Eddie really invested in that and we did well. We had a moment in time.” Investments were made to pump up such exclusive labels as Joe Boxer specializing in flashy silk boxer briefs, sleepwear and accessories; the denim-based Route 66 line; Kathy Ireland sportswear, swimwear, activewear, accessories for younger women, and Jaclyn Smith for classic women’s apparel with details and style twists. Kmart also had exclusives with Sesame Street and Disney.

“We did a lot of unique things on the apparel side because we really took some brands that were languishing and created a robust offering for some time. We focused on them and we generated a lot of cash. Nobody was doing what we were doing to the same extent. Target was still contracting with people.”

Around the start of the new millennium, the fashion offering was overshadowed as vendors started “jamming” merchandise onto Kmart’s selling floors, according to one source and WWD reporting in 2001. A year later, Kmart had 15,000 trailers loaded with merchandise lurking behind stores as the overload was worked through.

8. Martha Stewart

According to sources close to Kmart, the deal Stewart for her home goods was great for her, even when Kmart was floundering. “Martha was a huge brand. She wasn’t effected by the downturn in Kmart for a long time. Kmart owed her minimums every year. She always got the minimums even though Kmart was failing.” Moreover, the deal gave Stewart “street credibility,” one source said. “When it was time to renew the deal, Eddie wasn’t doing it. So she went to Macy’s and Penney’s. Before Kmart, Martha Stewart was more of an elite brand, but Kmart got her exposed to many more people, a much more diverse audience.”

Stewart said: “When I had my legal problems, people continued to buy my products. It was tremendous. I became known nationally not only as an author of books, but as a celebrity because of the fabulous commercials and as a designer of home goods. The manufacturing was superb.”

Regarding negotiating with Lampert to renew the license, Stewart said: “He wanted to continue but didn’t want to pay royalties. He obviously didn’t want the line and didn’t care about Kmart one iota.”

9. Pop Culture Parody

Kmart has appeared in or been referenced in several movies, including “Beetlejuice” and “Dawn of the Dead.” But perhaps the retailer’s biggest star turn was in “Rain Man,” where the character Raymond, played by Dustin Hoffman, says he wants to buy his boxers at Kmart, and his brother Charlie, played by Tom Cruise, replies that Kmart sucks. “Saturday Night Live” also did little for Kmart’s image with several skits making fun of Kmart, zeroing in on its low prices and Blue Light Specials. There was also a 2017 skit lampooning customers for trying to return products at the store, and Kmart employees dealing with it. In one instance, actor Leslie Jones tries to return adult diapers claiming they did not fit her baby well.

10. The Blue Light Special

Perhaps Kmart’s most famous — or infamous — feature, the Blue Light Special, was an early precursor of the modern-day “flash” sale online. Like a police car’s rotating warning light, Kmart’s blue lights were set on poles. The public address systems would blare “Attention Kmart Shoppers” without any warning and have customers scrambling to grab merchandise offered at sharp discounts for an hour or so. The format centered on selling off slower-moving items or those being liquidated and first surfaced in the 1960s. Shoppers never knew which products will be BlueLighted. They were never advertised, creating anticipation in the stores. It was discontinued and restarted on different occasions over the years. In 2001, Kmart officials reformatted the Blue Light Special with stores having Bluelight areas with constant low prices (rather than sudden flash sales) in the middle of the selling floor, under blue canopies suspended from the ceiling. The Blue Light Special was originated by a Kmart assistant manager Earl Bartell who introduced it to management in 1965 as a red light, then amber and, finally, the preferred blue. He got a $25 gift certificate for the innovation.