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1. Introduction
For a considerable period, Kmart was one of the largest discount retail chains in the USA in terms of sales. Although the company apparently held an insurmountable lead, its market share shrank to the point of declaring bankruptcy in 2002. The aim of this study is to understand this collapse. Surprisingly, despite Kmart’s size and importance in its heyday, there have been very few studies of its downfall[1].
In our viewpoint, an understanding of Kmart’s bankruptcy is especially relevant in today’s hyper-competitive retail industry, where traditional brick-and-mortar chains find their market share to be threatened by the boom in online retailing. We consider that newcomers to the retail industry could also learn from previous failures in order to avoid repeating the same mistakes. Jeff Bezos, the CEO of Amazon, spoke about the inevitability of decline and the need for measures to delay it (Kim, 2018). In this study, we analyze Kmart’s last 30 years in a search for clues that explain how it went from peak to collapse. Our method can be useful for any retailer, physical or digital, that seeks to avoid such a downfall.
We analyze Kmart’s history within the business model framework. Our efforts are a continuation of a research line started recently that is attempting to provide a quantitative foundation of business model theory (e.g. Zott and Amit, 2007, 2008; Brea-Solis et al., 2015). This research agenda represents a significant challenge since the business model concept remains elusive to this day (Zott et al., 2011; Mäkinen and Seppänen, 2007; Morris et al., 2005). Nevertheless, there has been some progress in clarifying what a business model is (Casadesus-Masanell and Zhu, 2010; Baden-Fuller and Morgan, 2010). One of our objectives is to advance further in the area of quantifying the performance of business models.
An understanding of Kmart’s business model performance means not only analyzing raw data but also the actual policies implemented. We elaborated a brief description of Kmart’s business model based on annual reports, other publicly available corporate documents, and professional publications. Some of these documents, originally addressed at shareholders and prospective investors, provide a rich portrait of the company’s objectives, the perceived challenges, and the initiatives proposed to overcome obstacles.
Our analysis reveals a company...