S. S. Kresge

S.S. Kresge did not invent the so-called five-and-dime discount department store concept, but he might be said to have perfected it. “He was not so much a format builder or inventor so much as a great experimenter,” Harvard Business School professor Nancy Koehn told Kevin Harlin in Investor's Business Daily. Kresge developed retailing features that have become characteristic of large discount stores: central purchasing in large volumes to maintain low prices, self-service with most employees concentrated in a large bank of cash registers at the front of the stores, sale prices advertised in weekly print newspaper circulars, and more. Kresge built his chain into one of the largest retailers in the United States, plowing much of his profit into the Kresge Foundation, a philanthropic organization whose efforts continue to bear fruit in the Detroit area that was home to his original stores, and beyond.

Sebastian Spering Kresge, Jr., was born on July 31, 1867, in Bald Mount, Pennsylvania, the son of farmers of Swiss background. Experiencing a rural childhood typical of the time, he began to help with farm chores at age five and developed a strong work ethic. After attending local rural schools, he enrolled at a teachers' preparatory school, the Fairview Academy, in Brodheadsville, Pennsylvania. After graduation, he landed a job as a teacher at Gower's School in Monroe County, making a salary of $22 per month and supplementing that with work as a grocery store clerk in nearby Scranton. Kresge had his eye on bigger and better things, however. He reportedly told his father that he would turn over all his earnings until age 21 if the man would finance his business-school education. Sebastian Sr. agreed, and Kresge attended Eastman Business College in Poughkeepsie, New York.

Kresge's opportunity came in 1897, when his savings had reached $8,000 and he found a partner, John McCrory, who operated a small chain of five-and-dime stores. The partners soon opened new stores in Memphis and Detroit, and by putting in up to 18 hours a day at work, Kresge quickly became manager of the Detroit store and bought McCrory out. In 1900, he and his brother-in-law, Charles J. Wilson, launched the Kresge & Wilson chain, consisting of the original Detroit store plus a store in Port Huron, Michigan; the chain would soon expand to Toledo, Pittsburgh, Cleveland, Columbus, Indianapolis, and Chicago. In 1907, Kresge bought out Wilson as well and changed the company name to S.S. Kresge. In 1912 his company made a public offering of stock, achieving a market capitalization of $7 million and, after a 1916 reincorporation, $12 million. Kresge remained the company president until 1925, and he served as chairman of the board from 1913 to 1966, retiring shortly before his death.

As of 1912, there were 85 S.S. Kresge Company stores, with total sales of $10.3 million, and it was with the cash infusions from stock sales that the growth of the chain began in earnest. The shelves of each store featured an enormous variety of merchandise, “ranging from hairpins to false hair to wood-handled scrub brushes and bench vises,” according to Kresge's New York Times obituary. S.S. Kresge stores heavily advertised their prices—at first, they sold everything for a dime or less, and once inflation made that impossible, their prices ranged from 25 cents to one dollar. By 1925, when Kresge stepped down as president, there were 307 S.S. Kresge Company stores, and by 1928 that number had grown to 451. S.S. Kresge stock was one of the best investments of the so-called “Roaring 1920s,” with prices before the 1929 stock crash approaching $900 a share.

While no single factor explains the company's prosperity during this period, the hard work of its founder played a major role. Kresge took the success of each store as a personal challenge, visiting newly opened retail locations, meeting the managers and employees, and taking a hand in creating store displays. “Father had an instinctive flair for promotion and display,” Kresge's son Stanley recalled in an article for Michigan History. He also had a knack for siting new stores in high-traffic areas, and he operated the Kresge Realty Company for purposes of land acquisition and development. This last factor helped Kresge make the transition from city to suburb as American consumer habits changed following World War II.

Kresge cultivated beekeeping as a hobby from an early age, saying (according to his New York Times obituary) that “My bees … always reminded me that hard work, thrift, sobriety, and an earnest struggle to lead an upright Christian life are the first rungs of the ladder of success.” A picture of Kresge's mother was displayed in all S.S. Kresge stores until her death in 1940 at age 100. A devout Methodist, Kresge forswore tobacco, card-playing, and alcohol, and he bankrolled the Prohibition movement that succeeded in outlawing the sale of alcoholic beverages in the United States between 1918 and 1933.

The success of S.S. Kresge Company stock made Kresge a wealthy man, and he built a substantial mansion on Detroit's Boston Boulevard that remains one of the city's landmarks. In smaller things, though, he was notoriously frugal. He reputedly wore shoes until they were completely falling to pieces, lining them with newspaper as the soles wore away, and he wore his simply cut suits until they were completely threadbare. When shoeshine boys at Detroit's Michigan Central Station train depot raised their prices from ten to 15 cents a shine, Kresge refused to pay the higher amount and shined his shoes himself. His skinflint attitude was personal, however, and did not extend to his employees; from the beginning, a job with S.S. Kresge offered sick leave, paid holidays, paid pensions, and profitsharing, making it among the first firms to boast an extensive benefits program.

Kresge was also a generous philanthropist, funneling most of his largesse through the Kresge Foundation. He established the foundation in 1924 with the stated mission (as quoted in the New York Times) of helping “human progress through benefactions of whatever name or nature.” By 1965, the foundation was worth $175 million and had given away $70 million. Among its largest gifts were those of $10 million to the Newark Museum in New Jersey, of $3 million for a medical research facility and $1.75 million for a hearing research building at the University of Michigan, and of $2 million for two major buildings at Harvard University. Although no longer connected with the Kmart chain that supplanted Kresge stores in the 1960s, the Kresge Foundation still exists; it disbursed $122 million in gifts in 2013, and its contributions helped to finance major revival efforts in the chain's home city of Detroit in the 2010s. As of 2017, the foundation's endowment stood at $3.6 billion.

As American retailing transitioned from downtown centers to large, new suburban strip shopping centers, the Kresge company established the new Kmart chain, with its first store in Garden City, Michigan, outside Detroit. The firm was the second-largest discount retailer in the United States as of 1965, trailing only F.W. Woolworth; thanks to Kmart, it surpassed Woolworth and became the largest discount chain and second-largest retailer (after Sears) until it was overtaken by Walmart in 1990.

Born in 1900, Stanley Kresge started with the S.S. Kresge Company as a stock boy after completing college in 1923, and he succeeded his father as chairman of the board in 1966. When the elder Kresge stepped down from the position, he was 98 years old, and his resignation letter, quoted by Leonard Sloane in the New York Times, stated that, “to my regret I find it is no longer possible for me to fulfill my duties.” Kresge died a few months later, on October 18, 1966, in East Stroudsburg, Pennsylvania.