Bill Virgin: Kmart is another sad retail chapter for Sears

A Tacoma retailing landmark, of a sort, will be closing this quarter, although it’s not likely to generate the sort of outpouring of emotion that might be prompted by the shuttering of a beloved neighborhood institution.

“Beloved” was rarely an adjective assigned to Kmart. Nor would the word “surprising” be appended to the noun “news” to describe the pending closure of the Sixth Avenue store, open since the 1960s.

Kmart isn’t in the business of charming or cute. It is in the business of moving a lot of merchandise conveniently and affordably. And while today Kmart barely registers as an afterthought, in its day it was something of a retail pioneer.

Kmart was one segment of a timeline or a generational chart that had its origins in the traditional department store and the 5-and-dimes such as Kresge and Woolworth. From there a new category emerged, the discount department store, first in the form of regional players, then with Kmart as the first true national brand.

Those discounters weren’t long on service or amenities; that wasn’t the point. The discount department store’s rise tracked the growth of car-centric middle-class suburbs; the stores offered shoppers a broad selection at reasonable prices close to where they were (and when they added groceries they became true one-stop-shopping destinations). Portland-based Fred Meyer got to the idea even earlier; it was always a regional chain, but unlike many of those other regionals that came along later, it’s still around.

Unfortunately for Kmart, the timeline didn’t stop with its emergence and the category didn’t stop evolving. New national competitors emerged, first Target, then Walmart. What are still described as drugstores (Bartell’s locally, Walgreens, RiteAid and CVS nationally) have increased in physical space and inventory. Costco no doubt took a bite out of Kmart’s business.

And now we’re in the online age, led by Amazon but with every other retailer trying to figure out how to get in on the game. Kmart does offer online ordering, with the option of picking up orders in stores, but what sort of mindshare does Kmart have vs. the Goliath of internet retailing.

Perhaps someday a new model of retail will emerge to do to Amazon what it did to Walmart and Walmart did to Kmart, but no one knows what that might look like, and that’s Amazon’s worry. Kmart’s problems are more immediate. It’s owned by Sears Holdings, another retailing brand trying to make a 1960s retailing model work in 2017.

So far the answers have been to close stores and sell its assets. The latter strategy works only as long as you’ve got something profitable to pour the proceeds into; also, eventually you run out of furniture to throw on the fire to keep the house warm.

As for store closings, it’s rare that companies can cut their way to prosperity. In 2008 Starbucks announced it was closing as many as 600 U.S. locations, but that wasn’t because the fundamental model was in trouble. The company had gotten aggressive about expansion to the point it was cannibalizing its own sales. The recession wasn’t helping.

For its most recent quarter Starbucks reported net income of $801 million. It opened 690 stores in one quarter, for an overall total of 25,085. Stores open for more than a year showed an increase in revenue.

For its most recent quarter Sears Holdings reported a net loss of $748 million (adjusted loss of $333 million) and a drop in comparable-store sales. Kmart operated 801 stores (down from 952 in 2015) while Sears had 702 (down from 735).

Those numbers continue to drop. The company will shut down 108 Kmart stores and 42 Sears stores by April, according to reports last week.

In the October-quarter earnings release, Sears’ chief executive said the company remains “fully committed to restoring profitability,” and will do so by closing unprofitable stores, reducing space in stores that remain open and cutting underperforming categories. The company also is banking on a shopper-membership rewards program, including a tie-in with Uber.

But those seem like stopgap measures, not a coherent program to not only stem the flow of red ink but make the company relevant and attractive to consumers. Finding such a strategy may be impossible, but it’s also imperative. There will always be retail, and there will always be a Sixth Avenue retail scene (at least we think there will be), but as history demonstrates nothing guarantees Kmart will perpetually be part of either.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

This story was originally published January 6, 2017 at 5:10 PM with the headline "Bill Virgin: Kmart is another sad retail chapter for Sears."