WEBVTT 00:00:00.000 --> 00:00:02.620 Welcome back to the Deep Dive. Today, we aren't 00:00:02.620 --> 00:00:04.980 just looking at a business case study. I think 00:00:04.980 --> 00:00:07.160 it's fair to say we are performing a full -scale 00:00:07.160 --> 00:00:10.119 autopsy on a giant. A giant that for a very, 00:00:10.179 --> 00:00:13.179 very long time felt... Well, it felt immortal, 00:00:13.359 --> 00:00:16.300 didn't it? It really did. OK, so let's just unpack 00:00:16.300 --> 00:00:18.179 this for a second. I want you to look at the 00:00:18.179 --> 00:00:19.699 date on your phone or your calendar, whatever 00:00:19.699 --> 00:00:23.399 you use. It is February 14th, 2026. Valentine's 00:00:23.399 --> 00:00:25.519 Day. Exactly. Valentine's Day. Now, I want you 00:00:25.519 --> 00:00:27.940 to imagine it's Valentine's Day back in, say, 00:00:27.980 --> 00:00:31.660 1994. You need to grab a last minute box of chocolates, 00:00:31.940 --> 00:00:35.439 maybe a cheesy card. maybe a blender because 00:00:35.439 --> 00:00:37.979 you're a practical romantic, I don't know. You 00:00:37.979 --> 00:00:40.820 had a really, really easy option. You could just 00:00:40.820 --> 00:00:43.500 drive to one of the nearly two and a half thousand 00:00:43.500 --> 00:00:46.579 locations of a specific retailer. A retailer 00:00:46.579 --> 00:00:49.020 that was at that exact moment, one of the largest 00:00:49.020 --> 00:00:51.340 corporate entities on the entire planet. We are 00:00:51.340 --> 00:00:54.079 talking a force about Kmart. And I think the 00:00:54.079 --> 00:00:56.960 scale of Kmart in 1994 is, it's actually hard 00:00:56.960 --> 00:00:59.500 to overstate. Oh, completely. They operated 2 00:00:59.500 --> 00:01:03.719 ,486 stores globally. They were the original 00:01:03.719 --> 00:01:06.359 category killer. They really defined the whole 00:01:06.359 --> 00:01:09.000 concept of the discount department store long 00:01:09.000 --> 00:01:11.620 before Sam Walton was a household name. And that 00:01:11.620 --> 00:01:14.239 right there, that is the hook for today's mystery. 00:01:14.579 --> 00:01:18.340 Because here we are in February 2026, and that 00:01:18.340 --> 00:01:22.739 empire has, it's completely evaporated. Vanished. 00:01:22.760 --> 00:01:25.120 And I don't just mean it's struggling or downsizing. 00:01:25.180 --> 00:01:27.799 I mean, for all intents and purposes, it is gone. 00:01:27.959 --> 00:01:30.920 It's a vanishing act of historical proportions. 00:01:31.260 --> 00:01:33.700 If you pull up a map. of the mainland United 00:01:33.700 --> 00:01:36.560 States right now, today, and you search for a 00:01:36.560 --> 00:01:39.239 Kmart, you will find exactly one pin on that 00:01:39.239 --> 00:01:42.359 map. One, just one, in the entire lower 48 states. 00:01:42.540 --> 00:01:44.400 And even that one, which is down in Miami, Florida, 00:01:44.519 --> 00:01:46.900 I mean, it's barely a Kmart. It has an asterisk 00:01:46.900 --> 00:01:48.659 next to its name the size of a billboard, which 00:01:48.659 --> 00:01:50.560 I'm sure we'll get to later. Oh, we will. But 00:01:50.560 --> 00:01:54.629 aside from that one, that single anomaly. The 00:01:54.629 --> 00:01:56.430 brand has been just wiped off the continent. 00:01:56.549 --> 00:01:58.590 You literally have to get on a plane and fly 00:01:58.590 --> 00:02:01.530 to Guam or the U .S. Virgin Islands just to see 00:02:01.530 --> 00:02:04.689 that big red K on a storefront. So the mission 00:02:04.689 --> 00:02:06.909 for this deep dive is to answer the question, 00:02:07.129 --> 00:02:10.490 how? How does that happen? We have a massive 00:02:10.490 --> 00:02:12.849 stack of sources in front of us. We've got corporate 00:02:12.849 --> 00:02:15.430 history records going all the way back to 1899. 00:02:15.530 --> 00:02:18.050 We have bankruptcy filings that. I'm not kidding. 00:02:18.210 --> 00:02:20.870 Read like a Shakespearean tragedy. Right. Store 00:02:20.870 --> 00:02:23.449 closure timelines, operational reports. We need 00:02:23.449 --> 00:02:25.949 to figure out how a company that had such a massive 00:02:25.949 --> 00:02:28.389 head start on Walmart, a company that was a cultural 00:02:28.389 --> 00:02:31.310 icon with the blue light special, how it managed 00:02:31.310 --> 00:02:33.669 to collapse so completely. It's really a story 00:02:33.669 --> 00:02:38.189 about the tension between innovation and stagnation. 00:02:38.229 --> 00:02:40.509 It's about an identity crisis that spanned decades. 00:02:40.810 --> 00:02:43.490 It's also about a disastrous merger that. I think 00:02:43.490 --> 00:02:45.289 I remember one financial analyst at the time 00:02:45.289 --> 00:02:47.729 described it as two drowning people trying to 00:02:47.729 --> 00:02:49.389 save each other by grabbing onto each other. 00:02:49.530 --> 00:02:51.849 That's a perfect description. And crucially, 00:02:51.930 --> 00:02:54.689 it's about specific, almost granular strategic 00:02:54.689 --> 00:02:58.590 failures. Failures with technology, with supply 00:02:58.590 --> 00:03:01.490 chains, things that sealed their fate 20 years 00:03:01.490 --> 00:03:03.949 before the end was even in sight. Well, let's 00:03:03.949 --> 00:03:05.729 start at the foundation then, because I think 00:03:05.729 --> 00:03:08.090 there's this common assumption that Kmart just 00:03:08.090 --> 00:03:10.669 sort of popped up fully formed in the suburbs 00:03:10.669 --> 00:03:14.500 in the 1970s. But the roots go way, way back, 00:03:14.500 --> 00:03:17.460 don't they? Much, much further back. To understand 00:03:17.460 --> 00:03:19.699 the fall, you really have to respect the rise. 00:03:19.919 --> 00:03:22.259 And the story starts in the late 19th century. 00:03:22.759 --> 00:03:25.139 We're talking about a man named Sebastian Sparing 00:03:25.139 --> 00:03:27.780 Krez. S .S. Krez. It sounds like the name of 00:03:27.780 --> 00:03:30.560 a ship, like a big steamliner. And he was a force 00:03:30.560 --> 00:03:32.599 of nature in a way. He was a traveling salesman 00:03:32.599 --> 00:03:35.740 originally. And get this, he actually sold tinware. 00:03:36.270 --> 00:03:39.110 to Frank Winfield Woolworth. Wait, wait. As in 00:03:39.110 --> 00:03:40.590 the Woolworth? The guy who basically invented 00:03:40.590 --> 00:03:42.629 the five and dime store. The very same. Yeah. 00:03:42.889 --> 00:03:44.969 Kredge was selling to the pioneer who invented 00:03:44.969 --> 00:03:47.949 the entire category. So he saw firsthand what 00:03:47.949 --> 00:03:50.469 Woolworth was doing, this model of high volume, 00:03:50.550 --> 00:03:52.449 low prices. And he thought, you know, I want 00:03:52.449 --> 00:03:54.110 a piece of that action. So he learned from the 00:03:54.110 --> 00:03:58.449 master. He did. So in 1897, Kredge takes $6 ,700, 00:03:58.830 --> 00:04:01.550 which was his entire life savings from being 00:04:01.550 --> 00:04:04.270 on the road, and he invests it into a store in 00:04:04.270 --> 00:04:07.740 Memphis, Tennessee with a partner. Wow. $6 ,700. 00:04:08.199 --> 00:04:12.280 And by 1899, he's traded his share in that store 00:04:12.280 --> 00:04:16.339 for full ownership of a store in Detroit. And 00:04:16.339 --> 00:04:20.199 that Detroit store. That is really the true beginning 00:04:20.199 --> 00:04:22.480 of the S .S. Kresch company. And just to be clear, 00:04:22.560 --> 00:04:24.959 this wasn't a Kmart yet. This was a classic variety 00:04:24.959 --> 00:04:26.939 store. Exactly. It was a five and dime. The whole 00:04:26.939 --> 00:04:28.600 gimmick was the price point. Everything was cheap, 00:04:28.720 --> 00:04:30.819 five or ten cents. In fact, during World War 00:04:30.819 --> 00:04:34.180 I, when inflation was really hitting hard, Kresch 00:04:34.180 --> 00:04:36.620 experimented with raising the price limit in 00:04:36.620 --> 00:04:39.060 his stores all the way up to one dollar. And 00:04:39.060 --> 00:04:41.959 that was seen as like a huge innovation at the 00:04:41.959 --> 00:04:44.540 time. A massive deal. But the company was a monster 00:04:44.540 --> 00:04:47.800 success. By 1912, they incorporated with 85 stores. 00:04:48.019 --> 00:04:51.660 By 1924, Kredge himself was worth about $375 00:04:51.660 --> 00:04:54.839 million. Which is what in today's money? Billions. 00:04:54.939 --> 00:04:56.319 Billions and billions. They survived the Great 00:04:56.319 --> 00:04:58.079 Depression. They survived two world wars. They 00:04:58.079 --> 00:04:59.899 were a blue chip staple of the American economy. 00:05:00.100 --> 00:05:03.000 But the pivot, the moment that really, really 00:05:03.000 --> 00:05:05.649 matters for our deep dive. that comes after World 00:05:05.649 --> 00:05:08.430 War II, the entire world changed and where people 00:05:08.430 --> 00:05:11.149 lived changed. Exactly right. The great migration 00:05:11.149 --> 00:05:14.189 to the suburbs. In the late 40s and 50s, the 00:05:14.189 --> 00:05:16.230 Kretsch executives, they were looking at the 00:05:16.230 --> 00:05:18.509 data. People were leaving the crowded city centers 00:05:18.509 --> 00:05:20.329 where all the Kretsch variety stores were. They 00:05:20.329 --> 00:05:22.670 were moving out to places like Levittown, these 00:05:22.670 --> 00:05:25.329 sprawling new communities. Right. And shopping 00:05:25.329 --> 00:05:27.709 patterns were shifting. It went from walking 00:05:27.709 --> 00:05:30.329 to the corner store to driving the family car 00:05:30.329 --> 00:05:33.050 to the new shopping center. And there was an 00:05:33.050 --> 00:05:35.810 executive at Kredge named Harry Cunningham who 00:05:35.810 --> 00:05:38.550 saw the writing on the wall. He knew they had 00:05:38.550 --> 00:05:41.350 to change. Cunningham is really the father of 00:05:41.350 --> 00:05:43.110 the modern Kmart, isn't he? He's the visionary 00:05:43.110 --> 00:05:45.170 in this part of the story. He absolutely is. 00:05:45.310 --> 00:05:48.370 In 1961, Cunningham went on what you could call 00:05:48.370 --> 00:05:51.389 a reconnaissance mission. He toured a store called 00:05:51.389 --> 00:05:54.319 Ann and Hope. in Rhode Island. And in Hope. I've 00:05:54.319 --> 00:05:57.300 never even heard of that. Most people today haven't. 00:05:57.399 --> 00:05:59.779 But they were the true pioneers of the discount 00:05:59.779 --> 00:06:02.420 department store model. Centralized checkouts, 00:06:02.540 --> 00:06:05.139 shopping carts, self -service. All the things 00:06:05.139 --> 00:06:06.920 we take for granted now, they were doing it first. 00:06:07.180 --> 00:06:09.040 Okay, so Cunningham goes there to take notes. 00:06:09.319 --> 00:06:12.480 He does. And here's where we get one of the great 00:06:12.480 --> 00:06:15.180 historical coincidences. One of the great what 00:06:15.180 --> 00:06:18.360 -ifs of retail history. Go on. In that same year, 00:06:18.560 --> 00:06:23.259 1961, A guy from Arkansas named Sam Walton, the 00:06:23.259 --> 00:06:26.480 founder of Walmart, also visited that exact same 00:06:26.480 --> 00:06:28.860 Anne and Hope store in Rhode Island. No way. 00:06:28.939 --> 00:06:31.759 At the same time. Roughly the same time. They 00:06:31.759 --> 00:06:33.620 were both walking the aisles of the same store, 00:06:33.779 --> 00:06:36.240 taking notes on the same business model. They 00:06:36.240 --> 00:06:38.240 were literally drinking from the same well of 00:06:38.240 --> 00:06:40.699 inspiration. That is just wild. That's a movie 00:06:40.699 --> 00:06:43.040 scene. It is. But here's the crucial difference. 00:06:43.839 --> 00:06:46.579 Cunningham had the massive resources of the S 00:06:46.579 --> 00:06:49.060 .S. Crush company behind him. He didn't have 00:06:49.060 --> 00:06:51.139 to scrape for loans and mortgage his house like 00:06:51.139 --> 00:06:53.060 Sam Walton did. Krez had the capital to move 00:06:53.060 --> 00:06:55.819 fast. And they moved very fast. On January 25, 00:06:56.199 --> 00:06:59.319 1962, the S .S. Kredge Company opened the very 00:06:59.319 --> 00:07:01.899 first store that had the name Kmart on it. It 00:07:01.899 --> 00:07:03.959 was in San Fernando, California. Now, was that 00:07:03.959 --> 00:07:06.720 the big 80 ,000 square foot box store that we 00:07:06.720 --> 00:07:09.500 all remember? Actually, no. And this is an interesting 00:07:09.500 --> 00:07:12.779 little footnote. Kredge called it a Bantam Kmart. 00:07:13.220 --> 00:07:16.040 It was smaller, only about 27 ,000 square feet. 00:07:16.709 --> 00:07:18.689 It was actually supposed to be a traditional 00:07:18.689 --> 00:07:21.329 Kredge store until very late in the planning 00:07:21.329 --> 00:07:23.949 process when they decided to test out the new 00:07:23.949 --> 00:07:26.250 branding. So it was like a prototype. A proof 00:07:26.250 --> 00:07:29.129 of concept. But just a few months later, on March 00:07:29.129 --> 00:07:33.189 1st, 1962, they opened the first ground -up, 00:07:33.209 --> 00:07:36.550 full -sized, purpose -built Kmart in Garden City, 00:07:36.709 --> 00:07:39.009 Michigan. How big was that one? 80 ,000 square 00:07:39.009 --> 00:07:41.129 feet. This was the real deal. This was the template 00:07:41.129 --> 00:07:42.970 for the thousands of stores that would follow. 00:07:43.110 --> 00:07:46.670 And that year, 1962... We have to talk about 00:07:46.670 --> 00:07:48.509 that year. It keeps coming up in business textbooks 00:07:48.509 --> 00:07:50.910 for a very good reason. It's what people call 00:07:50.910 --> 00:07:53.910 the class of 62. It's incredible. In that single 00:07:53.910 --> 00:07:55.750 year, you had the founding of Kmart, the founding 00:07:55.750 --> 00:07:58.189 of Walmart, and the founding of Target. All three 00:07:58.189 --> 00:08:00.829 retail giants launched within months of each 00:08:00.829 --> 00:08:02.769 other. But Kmart was the big brother in that 00:08:02.769 --> 00:08:05.050 class, right? They were the ones with the advantage. 00:08:05.470 --> 00:08:07.810 Oh, absolutely. Kmart was the rich kid on the 00:08:07.810 --> 00:08:10.319 block. They had the capital. They had the existing 00:08:10.319 --> 00:08:12.459 supply lines. They had the real estate expertise 00:08:12.459 --> 00:08:15.819 from the Krezh empire. They opened 17 more stores 00:08:15.819 --> 00:08:18.860 just in 1962 alone. And Walmart at that point 00:08:18.860 --> 00:08:22.000 was just a handful of stores in Arkansas? A tiny 00:08:22.000 --> 00:08:24.620 speck in Arkansas by comparison. Kmart had this 00:08:24.620 --> 00:08:28.100 huge head start. And by 1977, the business was 00:08:28.100 --> 00:08:30.600 so dominant that the company officially changed 00:08:30.600 --> 00:08:33.419 its name from S .S. Krezh Co. to Kmart Corporation. 00:08:34.059 --> 00:08:36.460 They were the force. They were the ones putting 00:08:36.460 --> 00:08:38.519 everyone else out of business. And that dominance, 00:08:38.720 --> 00:08:41.230 that brings us right into the golden era. The 00:08:41.230 --> 00:08:43.669 time when Kmart wasn't just a store, it was a 00:08:43.669 --> 00:08:46.309 cultural phenomenon. We have to talk about the 00:08:46.309 --> 00:08:47.889 blue light. We have to. The blue light special. 00:08:48.029 --> 00:08:50.950 It was introduced in 1965, and it is arguably 00:08:50.950 --> 00:08:53.769 one of the most famous, most effective marketing 00:08:53.769 --> 00:08:56.730 tactics in the entire history of retail. Okay, 00:08:56.769 --> 00:08:58.629 so for our younger listeners who might strictly 00:08:58.629 --> 00:09:00.730 be online shoppers who've never experienced this, 00:09:00.850 --> 00:09:03.429 paint the picture for us. How did this actually 00:09:03.429 --> 00:09:07.549 work physically inside the store? It was so brilliantly 00:09:07.549 --> 00:09:11.139 low tech, but psychologically. It was genius. 00:09:12.000 --> 00:09:15.059 A store employee would literally wheel a cart, 00:09:15.200 --> 00:09:18.500 like a tall metal stand on wheels, with a rotating 00:09:18.500 --> 00:09:21.120 blue police -style light on top. Just a regular 00:09:21.120 --> 00:09:23.419 plug -in light? Yep. They'd wheel it to a specific 00:09:23.419 --> 00:09:25.840 aisle, plug it into an outlet, and the light 00:09:25.840 --> 00:09:27.700 would start spinning. And then a voice would 00:09:27.700 --> 00:09:29.840 come over the store's PA system, and it always 00:09:29.840 --> 00:09:32.919 started the same way. Attention, Kmart shoppers. 00:09:33.100 --> 00:09:35.789 Chills. I can still hear that voice. Yeah. And 00:09:35.789 --> 00:09:37.769 it was a flash sale, right? A flash sale. For 00:09:37.769 --> 00:09:40.409 the next 15 minutes only, in aisle four, men's 00:09:40.409 --> 00:09:44.529 tube socks are 50 % off. Or motor oil. Or blenders. 00:09:44.529 --> 00:09:47.009 Or whatever it was. So it started as just a way 00:09:47.009 --> 00:09:48.970 to get rid of inventory they had too much of. 00:09:49.129 --> 00:09:50.929 That was the original idea. It was a mechanism 00:09:50.929 --> 00:09:52.990 to clear out slow -moving merchandise. If you 00:09:52.990 --> 00:09:54.429 had way too much stock of something, you just 00:09:54.429 --> 00:09:56.049 flash the blue light on it and clear the shelf. 00:09:56.470 --> 00:09:59.389 But it became so much more than that. It became 00:09:59.389 --> 00:10:01.590 a pop culture touchstone. It created this sense 00:10:01.590 --> 00:10:05.240 of urgency. an event happening it totally did 00:10:05.240 --> 00:10:08.980 it gamified shopping before gamification was 00:10:08.980 --> 00:10:11.419 even a buzzword you might be on the other side 00:10:11.419 --> 00:10:13.080 of the store but you'd hear that announcement 00:10:13.080 --> 00:10:15.759 and you would literally run over just to see 00:10:15.759 --> 00:10:17.460 what was happening you didn't want to miss out 00:10:17.460 --> 00:10:20.059 it was a classic impulse by a driver exactly 00:10:20.059 --> 00:10:22.679 it created a collective experience in the store 00:10:22.679 --> 00:10:26.230 everyone would converge on that blue light It 00:10:26.230 --> 00:10:28.149 was like a little party in aisle seven. It worked 00:10:28.149 --> 00:10:31.809 so, so well that Kmart used it aggressively for 00:10:31.809 --> 00:10:34.909 nearly 30 years. It was their signature. And 00:10:34.909 --> 00:10:37.509 that marketing engine, it just fueled this incredible, 00:10:37.590 --> 00:10:40.009 relentless growth. Throughout the 70s, Kmart 00:10:40.009 --> 00:10:42.970 was just ruthless. They were the apex predator 00:10:42.970 --> 00:10:45.789 of discount retail. They put a ton of regional 00:10:45.789 --> 00:10:48.110 competitors out of business. Chains like Zare, 00:10:48.269 --> 00:10:50.730 Ames, Hills. Kmart just rolled into town and 00:10:50.730 --> 00:10:52.769 crushed them. And the numbers just kept climbing. 00:10:52.889 --> 00:10:55.860 Oh, yeah. By 1981, they opened their 2000th store. 00:10:56.179 --> 00:10:58.899 And by 1990, they were the second largest retailer 00:10:58.899 --> 00:11:01.559 in the United States, second only to Sears. Which 00:11:01.559 --> 00:11:04.559 is so ironic considering what happens later in 00:11:04.559 --> 00:11:07.679 the story. But here, right here at their peak, 00:11:07.840 --> 00:11:09.980 this is where the cracks really start to form. 00:11:10.659 --> 00:11:13.360 In the 80s and 90s, while they were sitting on 00:11:13.360 --> 00:11:16.480 top of the world, Kmart completely lost focus. 00:11:16.580 --> 00:11:18.700 They absolutely did. They fell into what I call 00:11:18.700 --> 00:11:21.129 the diversification trap. Instead of pouring 00:11:21.129 --> 00:11:24.309 all their resources, all their brainpower into 00:11:24.309 --> 00:11:26.470 making the Kmart stores better, cleaner, and 00:11:26.470 --> 00:11:29.509 more efficient, the leadership, they kind of 00:11:29.509 --> 00:11:31.590 got bored with just selling discounted goods. 00:11:31.850 --> 00:11:34.210 They wanted to build an empire of brands. They 00:11:34.210 --> 00:11:37.690 went on a shopping spree. A massive one. It's 00:11:37.690 --> 00:11:39.370 almost hard to believe the list of companies 00:11:39.370 --> 00:11:41.269 they bought. They bought the bookstore chain 00:11:41.269 --> 00:11:43.809 Walden Books. Okay, I remember that. Then they 00:11:43.809 --> 00:11:46.629 bought Borders and merged them. They bought a 00:11:46.629 --> 00:11:48.750 home improvement chain called Builder's Square 00:11:48.750 --> 00:11:50.769 to compete with Home Depot. Right, Builder's 00:11:50.769 --> 00:11:52.789 Square. They bought Sports Authority in 1990. 00:11:53.009 --> 00:11:55.710 They bought Payless Drugs in 1985. They bought 00:11:55.710 --> 00:11:58.169 OfficeMax in 1991. I think they owned OfficeMax, 00:11:58.210 --> 00:11:59.669 too. I had no idea. It's like they were trying 00:11:59.669 --> 00:12:02.110 to be everything to everyone all at once. They 00:12:02.110 --> 00:12:04.889 were building a conglomerate. And the major consequence 00:12:04.889 --> 00:12:07.769 of that was that the corporate focus. the attention 00:12:07.769 --> 00:12:10.129 of the C -suite. It shifted away from the core 00:12:10.129 --> 00:12:12.850 business. While the top executives were busy 00:12:12.850 --> 00:12:14.710 figuring out how to manage a bookstore chain 00:12:14.710 --> 00:12:17.690 and a sporting goods chain, the actual Kmart 00:12:17.690 --> 00:12:20.169 stores, the engine of their profit, started to 00:12:20.169 --> 00:12:22.830 suffer from serious neglect. And meanwhile, down 00:12:22.830 --> 00:12:25.230 in Arkansas, Sam Walton is doing the exact opposite. 00:12:25.309 --> 00:12:28.490 He isn't buying bookstores. No, he's obsessing 00:12:28.490 --> 00:12:31.289 over one thing and one thing only, supply chains. 00:12:32.009 --> 00:12:34.730 And that brings us to part three, the stumble. 00:12:35.259 --> 00:12:38.259 The 1990s are really where the war was lost, 00:12:38.399 --> 00:12:40.519 even if the company managed to survive for another 00:12:40.519 --> 00:12:42.620 30 years. And it starts with a huge psychological 00:12:42.620 --> 00:12:45.779 blow. It does. In November 1990, Walmart officially 00:12:45.779 --> 00:12:48.159 surpassed Kmart in size to become the number 00:12:48.159 --> 00:12:50.120 one retailer in America. That must have been 00:12:50.120 --> 00:12:52.679 a massive shock to the ego in Troy, Michigan 00:12:52.679 --> 00:12:55.759 at Kmart headquarters. It had to be. But the 00:12:55.759 --> 00:12:57.639 reasons for it were structural and they were 00:12:57.639 --> 00:13:00.009 technological. This is the part of the story 00:13:00.009 --> 00:13:01.789 that isn't as sexy as the blue light special, 00:13:02.029 --> 00:13:04.850 but it is the absolute core reason why Kmart 00:13:04.850 --> 00:13:07.669 died and Walmart lived. It all comes down to 00:13:07.669 --> 00:13:11.090 data. Explain that. How did data, or a lack of 00:13:11.090 --> 00:13:14.070 it, kill Kmart? Well, starting in the late 80s, 00:13:14.090 --> 00:13:17.830 Walmart and Target invested billions with a B. 00:13:18.299 --> 00:13:21.580 into computer systems, into barcodes, into satellite 00:13:21.580 --> 00:13:23.679 tracking for their truck fleets. They built this 00:13:23.679 --> 00:13:25.460 incredible high -tech system where they knew 00:13:25.460 --> 00:13:28.320 exactly what was on every single shelf in every 00:13:28.320 --> 00:13:31.159 single store in real time. So if a tube of toothpaste 00:13:31.159 --> 00:13:34.480 sold in Kansas at 2 .0 p .m. The central warehouse 00:13:34.480 --> 00:13:37.159 knew about it instantly, and a replacement was 00:13:37.159 --> 00:13:39.139 already queued up to be shipped that night. It 00:13:39.139 --> 00:13:41.799 was called just -in -time inventory. It was revolutionary. 00:13:42.519 --> 00:13:44.460 Okay, so that's Walmart. What was Kmart doing? 00:13:44.720 --> 00:13:47.200 Kmart did not invest. It's as simple as that. 00:13:47.470 --> 00:13:49.830 The board prioritized paying high dividends to 00:13:49.830 --> 00:13:51.830 their shareholders. They took the short -term 00:13:51.830 --> 00:13:54.629 profit, the easy money, over the long -term expensive 00:13:54.629 --> 00:13:57.149 and difficult infrastructure investment. So what 00:13:57.149 --> 00:13:58.809 did that mean in practice? Their supply chain 00:13:58.809 --> 00:14:01.850 was just old. It was antiquated. This meant they 00:14:01.850 --> 00:14:04.049 often had shelves that were either empty of the 00:14:04.049 --> 00:14:06.889 stuff people actually wanted to buy or they were 00:14:06.889 --> 00:14:09.730 overflowing with stuff that nobody wanted. Their 00:14:09.730 --> 00:14:11.629 distribution costs were higher. They couldn't 00:14:11.629 --> 00:14:13.750 compete with Walmart on price because their whole 00:14:13.750 --> 00:14:16.639 back -end system was so inefficient. So while 00:14:16.639 --> 00:14:19.620 Walmart is becoming this finely tuned, data -driven 00:14:19.620 --> 00:14:23.539 machine, Kmart is essentially flying blind. That's 00:14:23.539 --> 00:14:25.600 a great way to put it. And because they were 00:14:25.600 --> 00:14:27.759 losing ground, they started to have this massive 00:14:27.759 --> 00:14:29.840 identity crisis. They kept trying to rebrand, 00:14:29.940 --> 00:14:31.860 just hoping a new coat of paint would somehow 00:14:31.860 --> 00:14:34.919 fix the rotting foundation. Oh, I remember this 00:14:34.919 --> 00:14:37.360 era so well. The logo just kept changing, didn't 00:14:37.360 --> 00:14:40.039 it? It was constant. In 1990, they ditched that 00:14:40.039 --> 00:14:42.759 classic turquoise italic K and went to the big 00:14:42.759 --> 00:14:45.360 red block letter K with the word March written 00:14:45.360 --> 00:14:47.679 inside it. And one we all know. Right. But then 00:14:47.679 --> 00:14:48.960 they started messing with the store formats. 00:14:49.279 --> 00:14:52.000 They launched the Super Kmart Center in 1991. 00:14:52.639 --> 00:14:55.379 That was their big attempt to compete directly 00:14:55.379 --> 00:14:58.080 with Walmart super centers. They added full grocery 00:14:58.080 --> 00:15:01.059 stores, bakeries, delis, seafood counters, the 00:15:01.059 --> 00:15:03.659 works. I remember the Super Kmarts. They were 00:15:03.659 --> 00:15:06.600 absolutely huge, cavernous. They were massive. 00:15:07.200 --> 00:15:10.120 But then, just a few years later, they pivoted 00:15:10.120 --> 00:15:13.980 again. In 1997, they launched a new concept called 00:15:13.980 --> 00:15:17.120 Big Kmart. Okay, Big Kmart. What was the difference, 00:15:17.200 --> 00:15:18.820 really? It sounds almost the same. Well, Big 00:15:18.820 --> 00:15:21.299 Kmart was supposed to be brighter with wider 00:15:21.299 --> 00:15:24.740 aisles. The focus was more on home fashion and 00:15:24.740 --> 00:15:27.899 children's apparel, and they had a big consumable 00:15:27.899 --> 00:15:30.940 section called the pantry. By the year 2000, 00:15:31.240 --> 00:15:33.960 they had converted something like 1 ,900 of their 00:15:33.960 --> 00:15:36.440 stores to the big Kmart format. It just feels 00:15:36.440 --> 00:15:38.519 like flailing. It feels desperate. Like maybe 00:15:38.519 --> 00:15:40.679 if we call it big, people will come back. It 00:15:40.679 --> 00:15:42.639 was absolutely flailing. They even had another 00:15:42.639 --> 00:15:45.779 really short -lived concept in 1995 called Today's 00:15:45.779 --> 00:15:47.940 Kmart. They were just trying to find a format. 00:15:48.299 --> 00:15:50.440 any format that would stick, but they weren't 00:15:50.440 --> 00:15:52.879 fixing the underlying issue, which was that the 00:15:52.879 --> 00:15:54.980 stores were often getting dirty, the inventory 00:15:54.980 --> 00:15:57.879 was completely unreliable, and the customer service 00:15:57.879 --> 00:16:00.519 was lagging way behind Walmart and Target. You 00:16:00.519 --> 00:16:02.399 can change the sign out front as many times as 00:16:02.399 --> 00:16:04.639 you want, but if the floor is dirty and the shelves 00:16:04.639 --> 00:16:07.220 are empty, the customer's not coming back. And 00:16:07.220 --> 00:16:12.299 all of this, this downward spiral, it leads directly 00:16:12.299 --> 00:16:15.960 to the first big crash. It does. January 22, 00:16:16.220 --> 00:16:19.539 2002. Kmart files for Chapter 11 bankruptcy. 00:16:20.379 --> 00:16:22.539 At the time, it was the largest retail bankruptcy 00:16:22.539 --> 00:16:24.679 in American history. And this wasn't just a, 00:16:24.720 --> 00:16:26.500 well, we had a few bad sales quarters kind of 00:16:26.500 --> 00:16:28.200 bankruptcy. There was a lot of scandal involved 00:16:28.200 --> 00:16:30.360 with this one. Oh, yes. The leadership at the 00:16:30.360 --> 00:16:33.100 time, the chairman, a guy named Chuck Conaway, 00:16:33.179 --> 00:16:35.279 and the president, Mark Schwartz, they faced 00:16:35.279 --> 00:16:38.159 some very serious accusations. Like what? They 00:16:38.159 --> 00:16:40.120 were accused of deliberately misleading shareholders 00:16:40.120 --> 00:16:43.679 about the company's financial crisis. And optics 00:16:43.679 --> 00:16:46.570 were just... They were terrible. There were all 00:16:46.570 --> 00:16:48.129 these reports coming out that they were spending 00:16:48.129 --> 00:16:50.710 company money on private airplanes, on expensive 00:16:50.710 --> 00:16:53.889 houses, on boats, all while the ship was literally 00:16:53.889 --> 00:16:56.409 sinking beneath them. That is the absolute classic 00:16:56.409 --> 00:16:59.289 corporate villain story right there. It is. And 00:16:59.289 --> 00:17:01.370 the fallout from the bankruptcy was just brutal. 00:17:01.909 --> 00:17:04.529 They closed over 300 stores almost immediately. 00:17:04.890 --> 00:17:07.230 They pulled out of the entire state of Alaska. 00:17:07.630 --> 00:17:10.450 34 ,000 workers lost their jobs. A huge number. 00:17:10.849 --> 00:17:13.410 And... In a move that was just so symbolic of 00:17:13.410 --> 00:17:16.210 their confusion, they officially discontinued 00:17:16.210 --> 00:17:19.049 the blue light special. They tried to modernize 00:17:19.049 --> 00:17:21.390 by killing the one unique beloved thing that 00:17:21.390 --> 00:17:23.589 made them famous in the first place. So they 00:17:23.589 --> 00:17:26.269 emerge from bankruptcy, but everything is different 00:17:26.269 --> 00:17:29.390 now. The company is vulnerable. And this is where 00:17:29.390 --> 00:17:31.650 a new player enters the game. This is where Eddie 00:17:31.650 --> 00:17:34.890 Lampert comes in. This is part four. The merger 00:17:34.890 --> 00:17:37.039 in the Lampert era. And this is probably the 00:17:37.039 --> 00:17:39.579 most controversial, most debated chapter in the 00:17:39.579 --> 00:17:42.119 entire history of modern retail. So what happened? 00:17:42.240 --> 00:17:44.980 While Kmart was in bankruptcy, a hedge fund called 00:17:44.980 --> 00:17:47.660 ESL Investments, which was run by Edward Lampert, 00:17:47.779 --> 00:17:50.720 started buying up a huge chunk of Kmart's corporate 00:17:50.720 --> 00:17:53.240 debt for pennies on the dollar. So he wasn't 00:17:53.240 --> 00:17:55.019 buying stock. He was buying the debt. He was 00:17:55.019 --> 00:17:57.819 becoming their biggest creditor. Exactly. Which 00:17:57.819 --> 00:18:01.059 gave him control. When Kmart emerged from bankruptcy, 00:18:01.359 --> 00:18:04.309 he became the new chairman. And Lampert had a 00:18:04.309 --> 00:18:07.109 very, very specific philosophy. He was a hedge 00:18:07.109 --> 00:18:10.109 fund guy, not a merchant. He didn't grow up stocking 00:18:10.109 --> 00:18:12.250 shells like Sam Walton or Harry Cunningham. He's 00:18:12.250 --> 00:18:15.289 a numbers guy. A pure numbers guy. His view was, 00:18:15.470 --> 00:18:18.630 and this is a direct quote, sales without profit 00:18:18.630 --> 00:18:21.210 do not allow a business to be successful. Which, 00:18:21.250 --> 00:18:23.289 I mean, that sounds perfectly logical on paper. 00:18:23.349 --> 00:18:25.069 You don't want to lose money on sales. It does 00:18:25.069 --> 00:18:27.950 sound logical. But in the world of retail, sometimes 00:18:27.950 --> 00:18:30.960 you need to spend money to make money. You have 00:18:30.960 --> 00:18:33.200 to renovate stores. You have to run big ad campaigns. 00:18:33.460 --> 00:18:35.720 You have to drive traffic, even if the margins 00:18:35.720 --> 00:18:38.500 on some items are thin, because that traffic 00:18:38.500 --> 00:18:42.240 buys other, more profitable things. Lampert prioritized 00:18:42.240 --> 00:18:44.519 the balance sheet above all else. He cut costs. 00:18:45.119 --> 00:18:47.720 Ruthlessly. He didn't want to spend a dime on 00:18:47.720 --> 00:18:49.920 renovating stores if the ROI wasn't guaranteed 00:18:49.920 --> 00:18:53.119 almost immediately. Many analysts at the time 00:18:53.119 --> 00:18:55.180 and since would argue that he was stripping the 00:18:55.180 --> 00:18:57.279 assets. He was treating the company more like 00:18:57.279 --> 00:18:59.500 a real estate portfolio than an actual living, 00:18:59.599 --> 00:19:02.220 breathing retailer. That's the argument. And 00:19:02.220 --> 00:19:05.119 then he made the move that just shocked the entire 00:19:05.119 --> 00:19:10.039 financial world. The Sears merger. In 2004, Kmart, 00:19:10.259 --> 00:19:12.579 this company that had just clawed its way out 00:19:12.579 --> 00:19:15.279 of a massive bankruptcy, announced it was purchasing 00:19:15.279 --> 00:19:19.589 Sears. For $11 billion. So let me get this straight. 00:19:19.670 --> 00:19:23.369 A struggling, just out of bankruptcy Kmart buys 00:19:23.369 --> 00:19:27.609 a struggling, slowly dying Sears. That's exactly 00:19:27.609 --> 00:19:29.869 what happened. They call the new parent company 00:19:29.869 --> 00:19:32.920 Sears Holdings Corporation. The idea supposedly 00:19:32.920 --> 00:19:36.240 was to create this new hybrid retailer. They 00:19:36.240 --> 00:19:37.720 thought they could cross -sell. They started 00:19:37.720 --> 00:19:40.220 putting Sears' famous house brands like Kenmore 00:19:40.220 --> 00:19:42.880 Appliances and Craftsman Tools into Kmart stores. 00:19:43.119 --> 00:19:44.920 Oh, I remember seeing that. It was so weird. 00:19:44.980 --> 00:19:46.720 You'd walk into a Kmart and there'd be this whole 00:19:46.720 --> 00:19:48.779 wall of Craftsman lawnmowers right next to the 00:19:48.779 --> 00:19:51.380 pantry section. It felt disjointed. It was a 00:19:51.380 --> 00:19:53.400 very strange mix. But the reality was they just 00:19:53.400 --> 00:19:55.339 merged two companies that both had the exact 00:19:55.339 --> 00:19:57.779 same massive unsolved problems. Problems with 00:19:57.779 --> 00:19:59.640 inventory, problems with the store experience, 00:19:59.920 --> 00:20:01.990 and problems with brand. relevance in the 21st 00:20:01.990 --> 00:20:04.369 century. And neither one had ever solved that 00:20:04.369 --> 00:20:07.130 tech gap with Walmart and Target. Not even close. 00:20:07.390 --> 00:20:10.390 So now you didn't have two sinking ships. You 00:20:10.390 --> 00:20:13.049 just had one much bigger, much more complicated 00:20:13.049 --> 00:20:15.250 sinking ship. And the decline from that point 00:20:15.250 --> 00:20:18.269 on, which it wasn't a sudden crash. It was just 00:20:18.269 --> 00:20:21.390 a slow, painful bleed. The slow bleed is the 00:20:21.390 --> 00:20:23.670 perfect way to describe the period from, say, 00:20:23.789 --> 00:20:27.630 2010 to 2018. It wasn't a sudden event. It was 00:20:27.630 --> 00:20:31.250 a long, agonizing decay. Reports just kept coming 00:20:31.250 --> 00:20:33.089 out about the terrible condition of the stores. 00:20:33.230 --> 00:20:35.569 Oh, yeah. Ceiling tiles falling down, dirty floors, 00:20:35.750 --> 00:20:38.549 disorganized shelves, roofs leaking. It became 00:20:38.549 --> 00:20:41.890 a meme almost. The sad Kmart aesthetic became 00:20:41.890 --> 00:20:44.470 a whole thing online. It did. There are whole 00:20:44.470 --> 00:20:46.990 Internet communities dedicated to just photographing 00:20:46.990 --> 00:20:49.109 the decay of these stores. Right. And then came 00:20:49.109 --> 00:20:50.990 the data breaches, which made things even worse. 00:20:51.309 --> 00:20:53.609 2014, there was malware in their payment systems. 00:20:53.849 --> 00:20:56.869 Then in 2017, credit card information was exposed. 00:20:57.230 --> 00:21:00.150 It just completely eroded any trust that was 00:21:00.150 --> 00:21:02.390 left in the brand. And all the while, Lampert 00:21:02.390 --> 00:21:04.609 just kept closing stores. It was liquidation 00:21:04.609 --> 00:21:07.089 by attrition. Just round after round of closures. 00:21:07.170 --> 00:21:11.089 2011, 2014, 2016, 2017. Every few months, you'd 00:21:11.089 --> 00:21:12.890 see a new list of 100 stores that were closing. 00:21:13.289 --> 00:21:15.450 And I remember reading something just incredible 00:21:15.450 --> 00:21:18.750 about their advertising strategy, or lack thereof, 00:21:18.910 --> 00:21:21.950 in 2017. Yes. This is one of the most telling 00:21:21.950 --> 00:21:25.410 details. In the 2017 holiday season, the biggest, 00:21:25.490 --> 00:21:27.710 most important shopping time of the year, the 00:21:27.710 --> 00:21:30.250 time when every single retailer is screaming 00:21:30.250 --> 00:21:34.130 for your attention, Kmart ran exactly zero television 00:21:34.130 --> 00:21:37.589 ads. Zero. None. Not a single one. That just 00:21:37.589 --> 00:21:39.289 feels like giving up. That feels like waving 00:21:39.289 --> 00:21:42.130 the white flag. They claimed it was a pivot to 00:21:42.130 --> 00:21:44.299 digital marketing. But to the average consumer, 00:21:44.599 --> 00:21:46.539 it just looked like the brand had completely 00:21:46.539 --> 00:21:50.319 ceased to exist. In 2018, the last Super Kmart 00:21:50.319 --> 00:21:53.420 closed in Warren, Ohio. The whole grocery store 00:21:53.420 --> 00:21:55.799 concept was officially dead. Which brings us, 00:21:55.859 --> 00:21:58.279 inevitably, to the second bankruptcy. October 00:21:58.279 --> 00:22:01.859 2018. Sears Holdings files for Chapter 11. The 00:22:01.859 --> 00:22:03.980 Great Lampert experiment had officially failed 00:22:03.980 --> 00:22:06.220 to turn the retailer around. But even then, Kmart 00:22:06.220 --> 00:22:08.180 didn't disappear completely. Not right away. 00:22:08.420 --> 00:22:11.220 No. In a controversial move, Lampert created 00:22:11.220 --> 00:22:14.079 a new entity called TransformCo and basically 00:22:14.079 --> 00:22:15.980 bought the remaining assets out of bankruptcy 00:22:15.980 --> 00:22:18.920 himself to prevent a total liquidation. So he 00:22:18.920 --> 00:22:21.819 sold the company to himself. Essentially. But 00:22:21.819 --> 00:22:24.779 from 2019 onward, it was just an extinction event 00:22:24.779 --> 00:22:27.710 in slow motion. We can literally track the timeline 00:22:27.710 --> 00:22:30.390 of extinction by the key milestones. Walk us 00:22:30.390 --> 00:22:31.970 through that timeline. It really is like watching 00:22:31.970 --> 00:22:34.769 a species just go extinct. Okay, so 2019 saw 00:22:34.769 --> 00:22:37.569 another massive wave of closures. That's the 00:22:37.569 --> 00:22:39.250 year they pulled out of states like Arkansas, 00:22:39.609 --> 00:22:43.509 Georgia, and Kansas entirely. The map was getting 00:22:43.509 --> 00:22:46.569 emptier and emptier. Then 2021 was a big one, 00:22:46.630 --> 00:22:49.009 wasn't it? A really symbolic blow. It was a gut 00:22:49.009 --> 00:22:52.769 punch. In 2021, Kmart closed its last remaining 00:22:52.769 --> 00:22:55.170 store in the state of Michigan. In Marshall, 00:22:55.269 --> 00:22:56.809 Michigan. The home state, the state where it 00:22:56.809 --> 00:22:59.410 all began. The birthplace. Closing the last store 00:22:59.410 --> 00:23:01.690 in the state where S .S. Krigich started it all 00:23:01.690 --> 00:23:04.569 over a century before. That same year, they closed 00:23:04.569 --> 00:23:06.890 their last West Coast store in Grass Valley, 00:23:07.029 --> 00:23:09.849 California. The entire western half of the country 00:23:09.849 --> 00:23:13.049 was now a Kmart -free zone. And by 2022, it was 00:23:13.049 --> 00:23:15.309 down to just a handful. Just four stores left 00:23:15.309 --> 00:23:17.910 in the mainland U .S., three in New Jersey, and 00:23:17.910 --> 00:23:20.029 the one in Florida. Why did New Jersey hold out 00:23:20.029 --> 00:23:22.210 for so long? Any idea? That's a good question. 00:23:22.970 --> 00:23:25.809 Probably a mix of factors. High population density, 00:23:26.009 --> 00:23:28.450 maybe some older demographics who were loyal 00:23:28.450 --> 00:23:31.730 shoppers, favorable long -term leases. But even 00:23:31.730 --> 00:23:34.190 they couldn't hold on forever. Westwood, New 00:23:34.190 --> 00:23:36.970 Jersey closed in 2023. And then there was the 00:23:36.970 --> 00:23:39.329 Bridgehampton, New York store. That one was a 00:23:39.329 --> 00:23:41.490 fascinating case study. It really was. It was 00:23:41.490 --> 00:23:44.029 one of the last to go, closing on October 20. 00:23:44.549 --> 00:23:47.670 2024. Why did that particular one survive for 00:23:47.670 --> 00:23:49.849 so long? I mean, Bridge Hampton is in the Hamptons. 00:23:49.869 --> 00:23:52.089 It's an extremely wealthy area. And that's exactly 00:23:52.089 --> 00:23:53.730 why it survived. It was all about isolation. 00:23:54.109 --> 00:23:57.390 The nearest Walmart or Target was a 45 -minute 00:23:57.390 --> 00:23:59.690 drive away, sometimes longer with Hamptons traffic. 00:23:59.930 --> 00:24:02.069 So it had a captive market. A completely captive 00:24:02.069 --> 00:24:04.930 market. The locals, even the very wealthy ones, 00:24:05.109 --> 00:24:07.630 still needed a place to buy basic household goods, 00:24:08.210 --> 00:24:10.549 toilet paper, cleaning supplies, light bulbs, 00:24:10.670 --> 00:24:12.769 without having to drive for an hour and a half 00:24:12.769 --> 00:24:15.779 round trip. But even that perfect isolated environment 00:24:15.779 --> 00:24:18.380 wasn't enough to save it in the end. And as the 00:24:18.380 --> 00:24:20.819 mainland stores vanished, the islands started 00:24:20.819 --> 00:24:23.460 to fall too. Right. The U .S. Virgin Islands, 00:24:23.619 --> 00:24:25.400 which had been a stronghold for a long time, 00:24:25.500 --> 00:24:28.839 the store in Sunny Isle on St. Croix closed on 00:24:28.839 --> 00:24:32.940 July 5, 2025. Then the Lockhart Gardens store 00:24:32.940 --> 00:24:36.019 on St. Thomas closed just a month later on August 00:24:36.019 --> 00:24:39.839 16, 2025. So that brings us right back to today, 00:24:40.039 --> 00:24:43.390 Valentine's Day 2026. Let's talk about what's 00:24:43.390 --> 00:24:45.730 actually left. Let's talk about that mainland 00:24:45.730 --> 00:24:48.930 anomaly down in Miami. This is truly the strangest, 00:24:48.930 --> 00:24:51.769 most surreal part of the entire story. The last 00:24:51.769 --> 00:24:54.730 Kmart in the mainland United States is in Miami, 00:24:54.910 --> 00:24:57.869 Florida, in an area called Kendale Lakes. But 00:24:57.869 --> 00:25:00.029 if you go there expecting to see a Kmart, you're 00:25:00.029 --> 00:25:02.410 going to be very, very confused. Why? What is 00:25:02.410 --> 00:25:04.819 it? Because it's not really a Kmart. The main 00:25:04.819 --> 00:25:07.240 store space, the big 80 ,000 square foot box, 00:25:07.359 --> 00:25:09.720 was leased out a few years ago to a home decor 00:25:09.720 --> 00:25:12.680 chain called At Home. Okay, so where is the Kmart? 00:25:12.819 --> 00:25:14.599 The Kmart now operates out of what used to be 00:25:14.599 --> 00:25:16.380 the building's garden center. Wait, what? So 00:25:16.380 --> 00:25:18.140 it's a tiny little store that's bolted onto the 00:25:18.140 --> 00:25:20.619 side of another store? Exactly. It's about the 00:25:20.619 --> 00:25:23.619 size of a CVS or a Walgreens. They sell a very 00:25:23.619 --> 00:25:25.920 limited selection of pantry items, a few small 00:25:25.920 --> 00:25:29.079 appliances, some cleaning supplies. It's a ghost 00:25:29.079 --> 00:25:31.660 of a store. It's a placeholder. Why does it even 00:25:31.660 --> 00:25:35.259 exist? Nobody knows for sure. It likely exists 00:25:35.259 --> 00:25:37.400 just to satisfy some weird clause in a lease 00:25:37.400 --> 00:25:39.579 agreement or maybe to hold on to the trademark 00:25:39.579 --> 00:25:43.920 in the U .S. But it is Kmart in name only. It's 00:25:43.920 --> 00:25:47.240 not a department store. That is profoundly sad 00:25:47.240 --> 00:25:49.910 in a way. It is. But if you want to see a Kmart 00:25:49.910 --> 00:25:52.809 that is still in its full glory, a thriving Kmart, 00:25:52.970 --> 00:25:55.730 you have to get on a plane and go to Guam. Guam. 00:25:55.730 --> 00:25:57.809 You called it the retail Galapagos. That is the 00:25:57.809 --> 00:26:00.289 perfect term for it. Because the Kmart in Temening, 00:26:00.470 --> 00:26:03.269 Guam, is an absolute beast. It opened in 1995, 00:26:03.529 --> 00:26:06.130 and it is 170 ,000 square feet. It's one of the 00:26:06.130 --> 00:26:07.890 largest Kmarts ever built. And it's still open. 00:26:07.970 --> 00:26:11.369 Still doing well. As of 2026, yes. And for many, 00:26:11.430 --> 00:26:13.349 many years, it was the single highest -grossing 00:26:13.349 --> 00:26:15.819 Kmart in the entire world. We're talking sales 00:26:15.819 --> 00:26:18.559 of around $100 million a year from one store. 00:26:18.900 --> 00:26:21.980 Wow. Okay, so why Grom? What's the magic formula? 00:26:22.000 --> 00:26:23.700 Why does it work there when it failed everywhere 00:26:23.700 --> 00:26:26.559 else? Isolation. The same reason the Bridgehampton 00:26:26.559 --> 00:26:28.759 store lasted so long, but on a much bigger scale. 00:26:29.240 --> 00:26:32.869 Think about it. Amazon shipping to Guam. is incredibly 00:26:32.869 --> 00:26:36.390 slow and expensive there is no nearby target 00:26:36.390 --> 00:26:39.509 or walmart supercenter to undercut them on price 00:26:39.509 --> 00:26:42.450 so it's the only game in town for a lot of things 00:26:42.450 --> 00:26:45.690 yes it serves as the pantry for the entire island 00:26:45.690 --> 00:26:48.710 but then there's a second really strange reason 00:26:48.710 --> 00:26:52.220 for its success tourism Tourists? Who goes to 00:26:52.220 --> 00:26:54.900 Kmart as a tourist? Asian tourists, specifically. 00:26:55.339 --> 00:26:57.460 Tourists from Japan and South Korea, they visit 00:26:57.460 --> 00:26:59.799 Guam, and they make a special trip to Kmart to 00:26:59.799 --> 00:27:02.240 buy American snacks, cases of spam, chocolates, 00:27:02.460 --> 00:27:04.339 things they can't get at home. For them, it's 00:27:04.339 --> 00:27:06.119 a slice of Americana. It's a tourist destination. 00:27:06.420 --> 00:27:08.519 It blows my mind. It's a totally unique retail 00:27:08.519 --> 00:27:11.240 ecosystem where the modern predators, Amazon 00:27:11.240 --> 00:27:13.440 and Walmart, they just can't reach it effectively. 00:27:13.880 --> 00:27:15.579 And you said there's still one left in the U 00:27:15.579 --> 00:27:18.359 .S. Virgin Islands, too. Yes. As of the 2025 00:27:18.359 --> 00:27:21.240 closures, the location at the Tutu Park Mall 00:27:21.240 --> 00:27:23.599 in St. Thomas is the last holdout in the Virgin 00:27:23.599 --> 00:27:26.559 Islands. So the entire Kmart empire has been 00:27:26.559 --> 00:27:29.240 reduced to a garden center in Miami and a few 00:27:29.240 --> 00:27:31.980 heavily fortified island fortresses. That is 00:27:31.980 --> 00:27:35.160 an incredible story. OK, before we wrap this 00:27:35.160 --> 00:27:37.259 up, I want to hit part seven, the fascinating 00:27:37.259 --> 00:27:39.359 footnotes, because in your research, you found 00:27:39.359 --> 00:27:42.829 some really, really weird stuff. that kmart tried 00:27:42.829 --> 00:27:44.730 over the years well they tried everything they 00:27:44.730 --> 00:27:47.410 were desperate to innovate but often in the strangest 00:27:47.410 --> 00:27:50.049 possible ways for instance did you know about 00:27:50.049 --> 00:27:53.450 kmart chef kmart chef was that like a line of 00:27:53.450 --> 00:27:56.809 cookware no it was a restaurant chain from 1967 00:27:56.809 --> 00:28:00.690 to 1974 they ran a fast food chain in the parking 00:28:00.690 --> 00:28:03.670 lots of kmart stores called kmart chef they served 00:28:03.670 --> 00:28:07.410 hamburgers fries Hot dogs. It was their attempt 00:28:07.410 --> 00:28:09.930 to be McDonald's. I had absolutely no idea. I 00:28:09.930 --> 00:28:11.549 can't imagine telling someone, hey, let's go 00:28:11.549 --> 00:28:13.710 out for a nice dinner at Kmart. And it gets weirder. 00:28:13.769 --> 00:28:16.190 Then there was Kmart Dental. Stop it. You're 00:28:16.190 --> 00:28:18.230 making that up. I am not. It was a prototype. 00:28:18.369 --> 00:28:21.170 A dentist's office located inside a Miami Kmart 00:28:21.170 --> 00:28:23.369 store. You could get your teeth cleaned and then 00:28:23.369 --> 00:28:25.690 go buy a lawnmower in the same trip. That sounds 00:28:25.690 --> 00:28:28.250 both terrifying and somehow convenient. Clean 00:28:28.250 --> 00:28:30.029 up on aisle four and we have a root canal on 00:28:30.029 --> 00:28:32.769 aisle five. And let's not forget blue light internet. 00:28:33.089 --> 00:28:35.269 Oh, wait. I actually vaguely remember this one. 00:28:35.309 --> 00:28:38.009 The blue CD -ROMs. That's the one. Launched in 00:28:38.009 --> 00:28:41.710 1999. It was a dial -up internet service to compete 00:28:41.710 --> 00:28:44.450 directly with AOL. They gave away free internet 00:28:44.450 --> 00:28:47.630 access, or very cheap access, to try and get 00:28:47.630 --> 00:28:49.670 people to shop on their website. And it actually 00:28:49.670 --> 00:28:51.599 worked for a little while, didn't it? It was 00:28:51.599 --> 00:28:54.759 surprisingly popular for a brief moment right 00:28:54.759 --> 00:28:57.920 before the dot -com bottle burst. It showed that 00:28:57.920 --> 00:28:59.519 they understood the internet was coming. They 00:28:59.519 --> 00:29:02.359 just had absolutely no idea how to properly monetize 00:29:02.359 --> 00:29:04.900 it or integrate it with their stores. It just 00:29:04.900 --> 00:29:06.480 shows how much stuff they were throwing at the 00:29:06.480 --> 00:29:08.740 wall, hoping something would stick. And, you 00:29:08.740 --> 00:29:10.420 know, we should also mention their environmental 00:29:10.420 --> 00:29:13.720 record, which... Wasn't great. They got hit with 00:29:13.720 --> 00:29:17.720 some heavy EPA fines in 2007 for mishandling 00:29:17.720 --> 00:29:19.880 hazardous waste. And there was a big scandal 00:29:19.880 --> 00:29:22.940 in 2012, an investigation by Mercy for animals 00:29:22.940 --> 00:29:25.640 regarding their pork suppliers and the use of 00:29:25.640 --> 00:29:27.640 gestation crates. Did they do anything about 00:29:27.640 --> 00:29:30.160 that? They did. To their credit, they pledged 00:29:30.160 --> 00:29:31.839 to phase them out after the report came out. 00:29:31.940 --> 00:29:33.819 But on the other side of that coin, they were 00:29:33.819 --> 00:29:37.000 also huge philanthropists, right? Massive. We 00:29:37.000 --> 00:29:39.420 can't overlook that part of their legacy. For 00:29:39.420 --> 00:29:41.720 a very long time, they were the number one corporate 00:29:41.720 --> 00:29:45.220 sponsor for the March of Dimes. They raised $114 00:29:45.220 --> 00:29:49.400 million over 30 years. And they raised over $59 00:29:49.400 --> 00:29:52.099 million for St. Jude's Children's Research Hospital. 00:29:52.359 --> 00:29:54.960 They were a major part of the community fabric 00:29:54.960 --> 00:29:57.119 in thousands of towns across America. And they 00:29:57.119 --> 00:29:59.740 went racing. They did. If you watched IndyCar 00:29:59.740 --> 00:30:02.319 or NASCAR in the 90s, the Kmart car was iconic, 00:30:02.619 --> 00:30:05.299 sponsoring Newman Haas Racing. Michael Andretti 00:30:05.299 --> 00:30:07.299 won a championship in a Kmart -sponsored car 00:30:07.299 --> 00:30:10.440 in 1991. They sponsored Daryl Waltrip in NASCAR. 00:30:10.559 --> 00:30:13.839 That red K was everywhere. So here we are, February 00:30:13.839 --> 00:30:17.960 14, 2026. The autopsy is complete. When you put 00:30:17.960 --> 00:30:19.420 it all together, what does this all mean? What's 00:30:19.420 --> 00:30:21.460 the lesson here? If you look at that whole trajectory 00:30:21.460 --> 00:30:25.720 from a $6 ,700 investment by SS Kredge to a global 00:30:25.720 --> 00:30:29.420 retail powerhouse to this cautionary tale, I 00:30:29.420 --> 00:30:31.539 think the lesson is painfully clear. No retailer 00:30:31.539 --> 00:30:34.359 is too big to fail. It's the Titan problem. You 00:30:34.359 --> 00:30:36.240 get so big, you become arrogant and you think 00:30:36.240 --> 00:30:39.359 you can't fall. Exactly. And the failure to digitize 00:30:39.359 --> 00:30:42.140 their supply chains in the 90s. that sealed their 00:30:42.140 --> 00:30:44.819 fate. By the time Amazon became a dominant force, 00:30:45.039 --> 00:30:47.460 Kmart was already dead. It just didn't know it 00:30:47.460 --> 00:30:50.160 yet. They lost the war to Walmart in the 1990s, 00:30:50.160 --> 00:30:53.400 not to Amazon in the 2010s. Stagnation is death, 00:30:53.599 --> 00:30:56.099 especially in retail. Precisely. You have to 00:30:56.099 --> 00:30:58.160 keep moving, you have to keep investing, or you 00:30:58.160 --> 00:31:00.500 become a relic. So here's a final provocative 00:31:00.500 --> 00:31:03.019 thought for you listening. The only places that 00:31:03.019 --> 00:31:06.619 Kmart truly survives today, Guam, the USVI, are 00:31:06.619 --> 00:31:08.859 places where geography itself creates a high 00:31:08.859 --> 00:31:11.140 barrier to entry for their competitors. It's 00:31:11.140 --> 00:31:14.359 all about isolation. So is isolation the only 00:31:14.359 --> 00:31:17.140 protection left for the old way of doing retail? 00:31:17.319 --> 00:31:20.160 Can a physical store only survive if the digital 00:31:20.160 --> 00:31:22.900 giants literally can't reach its customers effectively? 00:31:23.440 --> 00:31:25.599 It's a fascinating question and one worth asking 00:31:25.599 --> 00:31:27.819 as we watch the entire retail landscape continue 00:31:27.819 --> 00:31:30.059 to shift. change around us I want you to go home 00:31:30.059 --> 00:31:32.380 and check your attics check your basements if 00:31:32.380 --> 00:31:34.299 you have any old blue light merchandise or maybe 00:31:34.299 --> 00:31:36.880 a Kmart receipt from 1994 tucked inside a book 00:31:36.880 --> 00:31:39.059 hold on to it it's a relic of a fallen empire 00:31:39.059 --> 00:31:41.420 thanks for listening to this deep dive we'll 00:31:41.420 --> 00:31:42.039 see you next time