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Assignment 1 article - The Locations of Wal-Mart and Kmart...

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Thomas O. Graff University of Arkansas Wal-Mart and Kmart, the two largest American discount retailers, have begun to utilize a supercenter retailing format that combines a full-service grocery store with a discount department store. Supercenters are expected to be the major format for future expansion of each of these firms. The purpose of this paper is to analyze the spatial expansion strategies of each firm for the locations of its supercenters. Wal-Mart is quickly expanding its number of supercenters in modest-sized communities clustered around its grocery distribution centers, especially in Southern states. Conversely, most Super Kmart Centers are located in the suburbs of widely scattered major metropolitan markets, and Kmart has yet to develop a grocery distribution network. Kmart currently has major financial problems that severely restrict the expansion of the Super Kmart Center format. Key Words: Kmart , Wal-Mart , supercenter , diffusion . Introduction D uring the 1990s, major changes have oc- curred in the retailing structure of the United States. The longtime merchandising leader in sales volume, Sears Roebuck and Com- pany, has been surpassed by Wal-Mart Stores, Incorporated. For a short time Kmart Corpora- tion also surpassed Sears sales volume, but Sears has again assumed the position as the second largest retailer in the nation. Long-established retail chains such as Federated, Caldor, Otasco, Ames, Bradlee’s, Jamesway, Montgomery Ward, and even Kmart and Sears have been forced to restructure and downsize. A few of these chains have even faced bankruptcy. In attempts to sur- vive and expand in this environment of intense competition and rapid change, many retailers have started to experiment with new retailing formats. The three leading discount chains, Wal-Mart, Kmart, and Target, emulated successful regional chains by adapting the supercenter format for the highly competitive American retailing envi- ronment of the 1990s. A supercenter is a com- bination discount department and full-service grocery store. The average supercenter of each of these discounters contains about 170,000 sq. ft. (a standard Kmart, Wal-Mart, or Target con- tains about 100,000 sq. ft.) with about a third of the space devoted to groceries. In addition to the standard discount and grocery merchandise, many supercenters include services such as banking, video rental, fast food restaurants, dry cleaning, optical services, portrait studios, hair salons, and income tax preparation (in season). Both Kmart and Wal-Mart have identified the supercenter as the prime format for future ex- pansion. Target is still experimenting with the SuperTarget format and has yet to announce the role of this format in its expansion plans. This paper analyzes the spatial expansion strategies of Wal-Mart and Kmart for the loca- tions of supercenters. More specifically, this pa- per compares and contrasts the locations of supercenters by each firm, describes the grocery distribution system of each firm, and identifies the impact of acquisitions on the expansion of each firm into grocery retailing.
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