Kmart

Kmart's 2002 bankruptcy ended the discount retailer's decades-long decline from market leadership to irrelevance. The company that pioneered discount retailing—opening the same year as Walmart (1962)—was destroyed by the competitor it should have crushed. Kmart's failure illustrates how execution superiority compounds over time until competitive gaps become insurmountable. The mechanism failure was operations inferiority in a business where operations are everything. Walmart invested in distribution technology, supply chain efficiency, and everyday low pricing; Kmart invested in advertising and promotions. Walmart's distribution centers could replenish stores faster and cheaper; Kmart stores frequently had empty shelves on promoted items. This is red queen dynamics where one competitor's improvements become another's death sentence—Kmart wasn't getting worse, but Walmart was getting better faster. Kmart's strategic responses made things worse. The company acquired Borders (sold pre-bankruptcy), OfficeMax (sold pre-bankruptcy), and Sports Authority (sold pre-bankruptcy), dissipating focus while Walmart concentrated relentlessly on discount retail. Each acquisition was an attempt to escape competitive pressure rather than address it. The 2005 merger with Sears combined two declining retailers, creating a company worse than either alone. Eddie Lampert's financial engineering extracted value from real estate while stores deteriorated. Kmart stores today are retail graveyards—reminders of how market leaders can become case studies in failure.