Answered by Archie D’Cruz on Sept 5th, 2018
Herb Gibson is probably not a name you have heard of.
He had nothing to do with Walmart or Kmart or Target. What this serial business owner did have was an idea:
“Buy it low, stack it high, sell it cheap.”
Sounds familiar? It might be a statement you’d associate with Walmart’s Sam Walton or Kmart’s S.S. Kresge, but Gibson is the man who voiced the concept in 1958—four years before the launch of the Big Three.
It seems a rather obvious philosophy for retail success, but the reason Gibson could not have executed before then was simple: Texas, where he operated 34 distribution warehouses, forbade selling merchandise to individual customers at wholesale prices.
As soon as Texas relaxed that law, he began converting his warehouses into large discount retail establishments. He did so well that the new Gibson’s Discount Centers were soon offering franchises, and by the following year had expanded beyond the state.
One of the towns Gibson’s Discount Center opened was in Fayetteville, Arkansas, where a certain Sam Walton had recently launched his first independent variety store. (He also owned 15 Ben Franklin five-and-dime franchises in other cities, the equivalent of today’s dollar stores).
Walton, in his autobiography Made In America
, recalls that wake-up moment:
“(Gibson)…branched out to the square in Fayetteville and started competing with our variety stores. We knew we had to act. He was the only one discounting out this way, and because I had made all those trips back East, I was probably one of the few out here who understood what he was up to. By then, I knew the discount idea was the future.
While that was the immediate trigger, there was a broader reason for large discount stores like Walmart and Kmart emerging around the same time.
Dig into the early history of these stores, you will discover that they grew out of the suburbs and Middle America, rather than in the large cities on the East or West Coasts. Why? That had to do with the fallout of the Second World War.
Up until then, the big cities were the magnet for people as it was where the jobs were. When the war ended, the U.S. government suddenly had a problem. Some 15 million G.I.s were headed back from Europe, Asia and the Pacific, and they needed somewhere to live.
Finding affordable housing in the cities had become almost impossible, and with these mostly young soldiers getting married and starting families, a crisis was developing.
Times of great adversity often lead to great opportunity, and large construction firms sensed theirs. Rather than build on expensive city lands, they bought acres upon acres of outlying farms and fields, and began mass-producing homes on them.
Aerial view of Levittown in Long Island, New York, showing hundreds of small, identical houses set along curved streets. Completed around 1950 on 4,000 acres of potato fields, it formed the template for scores of suburban towns across America. Image: Mark Mathosian
, via Flickr.
Crucially, too, for the returning soldiers, President Roosevelt had introduced the GI Bill
, which, among other things, gave them loan guarantees and made the low-cost 25-year (rather than five-year) mortgage the national standard. In many cases, veterans were able to move into their new homes for little or no money down.
It was the perfect recipe for a suburban boom, and by 1960, the percentage of people living in the suburbs had almost caught up to those living in the central cities.
The explosive growth outside of the cities brought with it opportunities for those willing to think big.
Enter Eugene Ferkauf, who despite his unfortunate-sounding last name, was a rather enterprising New Yorker.
He had started by selling appliances at large discounts from his upstairs loft in 1948. Discounters operated on the fringe of retail at the time, but with the rise of the suburbs, Ferkauf decided to gamble. In 1954, he opened a full-line department store, E.J. Korvette, selling everything from clothes to furniture at well below list prices in the heavily populated New York suburb of Westbury, Long Island.
It was massively successful, and over the next few years, numerous other retailers aped his model, launching 70,000–200,000 square foot discount stores in the suburbs of virtually every major city.
Among them were newcomers to the business like Fed-Mart, Bargain City, Spartan and Unimart, but also several large, respected retailers which launched discount subsidiaries including F.W. Woolworth, L.S. Ayres, and—as the Sixties rolled in—S.S. Kresge (then an 800-store variety chain) and Dayton Co.
You might better recognize those last two by their discount store names, Kmart and Target.
But let’s get back to Sam Walton.
The rise of discount stores wasn’t lost on him. Indeed, as he notes in his autobiography, he “stole as many ideas from Sol Price (of Fed-Mart) as from anybody else in the business.”
In 1960, as the owner of 15 Ben Franklins, he was already the largest independent variety store operator in the U.S.
And yet, he was deeply dissatisfied. Total combined revenues from all 15 stores was a mere $1.4 million—a pittance compared to the $2 million plus that he learnt a single large store could bring in.
But it was only when Herb Gibson opened his discount center in his backyard in 1959 that Walton knew he had to act.
He had already refined the art of discount retailing with his Ben Franklin franchises. Within three years, he used those lessons to launch the first Walmart in Rogers, near Fayetteville.
Crowds outside Walmart’s first store ahead of its grand opening in 1962. The launch ad, inset, notes “Plenty of Parking”—a definite plus with suburban and rural residents.
What then was so special about 1962 that Walmart, Kmart and Target (and Kohl’s for that matter) all launched in the same year?
Nothing more than a coincidence, for they were just a few among many that rushed to take advantage of the explosive suburban growth that began in the Fifties.
The discount retail store was, quite simply, an idea whose time had come.
References and further reading:
Sam Walton: Made In America, by Sam Walton and John Huey
Mall Hall of Fame: Herbert Richard GibsonThe Revolutionists of Retailing (Fortune Classics, 1962)The growth of suburbiaDiscount birthday: Walmart, Kmart, Target hit 50
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