FedMart was a chain of discount department stores started by Sol Price, who later founded Price Club. Originally a discount department store open to government employees paying a $2 per family membership fee, FedMart earned four times more than its investors had projected in its first year. Over the next 20 years, FedMart grew to include 45 stores, mostly in California, and the Southwest[1] in a chain that generated over $300 million in annual sales. The business expanded to several states in the Southwest United States. Many stores were previous White Front or Two Guys locations. Price later sold two-thirds of the chain to Hugo Mann, a German retail chain, in 1975 and was forced out of his leadership position the following year. FedMart went out of business in 1982.[1]

FedMart
Company typeDiscount store
IndustryRetail
Founded1954; 70 years ago (1954) in San Diego
FounderSol Price
Defunct1982; 42 years ago (1982)
FateLiquidation; many stores rebranded as Target
HeadquartersSan Diego, California
Number of locations
  • 70 (1979)
  • 46 (1982)
Area served
  • California
  • Arizona
  • New Mexico
  • Texas
Productsclothing, footwear, housewares, sporting goods, hardware, toys, electronics, food
FedMart store in San Antonio, Texas, 1979
FedMart notepad, 1964

History

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"One day we noticed he [Bertrand] was getting rid of most of the watches up in Los Angeles.” The place in Los Angeles was FEDCO, an interesting new wrinkle in the retail economy at the time. From its modest outlet at the end of Slauson Avenue near a cow pasture, FEDCO sold wares at extraordinary discounts to federal employees only — discounts made possible because it was a nonprofit corporation acting almost as a commissary for civilian federal workers. “We found out there were 5000 employees of the federal government in San Diego,” Weiss continues, “and they were all going up to Los Angeles once a week to do their shopping. So we all wondered, why not have one here?"[2][3]

Sol Price began his career in the mid-1950s, when he worked as an attorney in San Diego. Clients were in the wholesale jewelry business, and had been selling watches to a non-profit, member-owned retail operation in Los Angeles called Fedco. When he visited Fedco, Price noticed that its facility was similar to the warehouse he had inherited. He suggested to his clients that his mother-in-law's[4] building, at 2380 Main St., could be used for the same purpose.[5] His clients agreed, marking the beginning of FedMart.

The business began in 1954[6] with a $50,000 ($450,184 in 2023) capital investment.[7] Price solicited the help of eight individuals, who each invested $5,000 and convinced his law firm to invest the remaining $10,000. He obtained his inventory from clients, beginning with two jewelry wholesalers. Another client, in the furniture business, provided Price with a small selection of furniture. A third client sold liquor, giving Price's FedMart the odd merchandise mix of jewelry, furniture, and liquor. He opened membership to government employees of all levels—federal, state, and local. Despite the less than comprehensive selection of goods, Price's business thrived, collecting $4.5 million during its first year, four times the total projected by Price and his investors.[7]

FedMart began as a membership store by opening in an abandoned warehouse in San Diego, California in 1954.[8] A second store opened in Phoenix, Arizona, in 1955 quickly followed by a third store in San Antonio, Texas. A second San Diego-area store opened in Kearny Mesa in 1958 followed by the opening of other stores in San Diego and the rest of Southern California. Membership requirements were dropped in the 1960s and FedMart become a non-membership discount store.[8] In October 1968, the company opened its 36th store in Window Rock, Arizona.[1] By 1975, FedMart had 44 stores in California, Arizona, New Mexico, and Texas.[8]

In 1994, the Window Rock FedMart closed.[9]

Success spawned establishment of other warehouse stores and a more coherent merchandising strategy. FedMart developed into a chain of stores, and Price pioneered several innovations in the retail industry. FedMart became the first retailer to sell gasoline at wholesale prices. The chain was the first to open an in-store pharmacy. FedMart also opened in-store optical departments, establishing a format that was widely copied decades later. Aside from developing several industry firsts, Price guided the company into food retailing, a product line that would underpin the chain's development.

Price was joined in his business by his son, Robert, who served as FedMart's executive vice president until they sold two-thirds of the chain in 1975 to the German retail company Hugo Mann.[7] The company was then 21 years old with sales in excess of $350 million at 40 stores. Price was fired less than a year after the Hugo Mann takeover. The store chain closed within seven years.[10]

In 1969, the company became publicly traded on the American Stock Exchange.[8] Hugo Mann began purchasing stock in the company in 1975 and obtained a controlling interest in the spring of that year and finally increased its holding to 68% later that fall.[11] In 1981, Mann was able to obtain the rest of the stock and take the company private.[12]

After obtaining a controlling interest in FedMart, Mann pumped more money into the company to enable rapid expansion. Besides building new stores, FedMart purchased the 22-store West Coast division of Two Guys from Vornado in 1977 (California)[13][14] and the 10 store Globe Store chain from Walgreens in 1978 (Arizona and Texas).[15][14] FedMart had approximately 70 stores by 1979.[14]

In 1979, the German president of FedMart was outraged upon discovering that FedMart was selling books about Nazi Germany at its stores in the US. He immediately banned the sale of all books on "political issues that are highly controversial", including books about Jimmy Carter, Richard Nixon, and the Democratic Party.[16]

By the early 1980s, FedMart began to lose money and started to close stores, mostly outside of California. There were 46 stores left when Hugo Mann decided to close the chain in 1982 and lease the store locations to other retail firms.[17][18] 35 of the locations were leased to Target[19][20] and the rest were leased to Ralphs Grocery Stores.[21] The closing of FedMart allowed Target an entry into the highly competitive Southern California marketplace.[20]

James Sinegal, the founder and former CEO of Costco, started at FedMart as a bagger and eventually became an executive vice president at the company.[22]

References

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  1. ^ a b c Donovan, Bill (2018-03-08). "50 Years Ago: Fed Mart opens in Window Rock". Navajo Times. Retrieved 2022-06-06.
  2. ^ "Mean Business: Sol Price and the FedMart story". San Diego Reader. Retrieved 22 March 2023.
  3. ^ "Pioneering 'big box' retailer". Baltimore Sun. Retrieved 22 March 2023.
  4. ^ Zwiebach, Elliot (2012). "2012 Hall of Fame: Sol Price". supermarketnews.com. Retrieved 22 March 2023.
  5. ^ "Price was right in retailing". San Diego Union-Tribune. 3 February 2013. Retrieved 22 March 2023.
  6. ^ "kearny_mesa_historic_context" (PDF). sandiego.gov. 2018. Retrieved 22 March 2023.
  7. ^ a b c Jakobson, Cathryn (December 4, 1988). "Sol Price and his warehouse clubs have sparked a revolution in the retail trade". The New York Times. p. TBW24. ProQuest 110405776.
  8. ^ a b c d "First FedMart set up shop in 1954 in abandoned warehouse". Los Angeles Times. September 21, 1980. p. h8. ProQuest 162921913.
  9. ^ "St. Michaels Ch'íhootsooí (green meadow spreading out from narrow point) - Fort Defiance Agency". navajoprofile.wind.enavajo.org. Navajo Nation Division of Community Development. Retrieved 22 March 2023. In 1994, the Fed Mart Shopping Center finally closed doors after operating in Window Rock for over 30 years.
  10. ^ Markowitz, Arthur (August 22, 1988). "Discounting Hall of Fame: Sol Price: his deeds speak louder than words - founder of Price Club". Discount Store News. Vol. 27, no. 17. Business Insights: Essentials. Gale A6580396. Under Price's leadership, FedMart became the leading discounter in Southern California, a highly competitive market that saw a host of chains fail. FedMart's chance to expand from a regional chain to a national retailer came in 1975 when Hugo Mann, a West German retailing giant, made an offer for the $350 million, 40-store company.
  11. ^ "Fed-Mart Holders Clear Purchase by Retailer Of 300,000 New Shares". The Wall Street Journal. August 7, 1975. p. 27. ProQuest 133981811.
  12. ^ Bry, Barbara (February 18, 1981). "Largest Holder Plans to Take FedMart Private". Los Angeles Times. p. g1. ProQuest 152713220.
  13. ^ "Vornado, Fed-Mart Expand Their Talks To Include Merger". The Wall Street Journal. July 26, 1977. p. 27. ProQuest 134187222.
  14. ^ a b c Bry, Barbara (February 4, 1979). "Fed Mart Marketing Plan: Fast Turnover and Rapid Expansion". Los Angeles Times. p. g3. ProQuest 158824257.
  15. ^ "Fed-Mart buying out 10 Globe units". WWD. Vol. 136, no. 116. June 13, 1978. p. 20. ProQuest 1627370417.
  16. ^ Smollar, David (September 18, 1979). "Rise, Fall of FedMart Books". Los Angeles Times. p. sd_a1. ProQuest 159009598.
  17. ^ "Fedmart Retail Chain". The New York Times. April 29, 1982.
  18. ^ Hiltzik, Michael A (April 29, 1982). "FedMart Will Close All 46 Stores; 8,000 to Lose Jobs: FedMart: Discount Chain to Close All Its Stores". Los Angeles Times. p. b1. ProQuest 153084711.
  19. ^ "Target to Reopen 35 Fedmart Stores". The New York Times. August 7, 1982.
  20. ^ a b Yoshihara, Nancy (January 11, 1983). "Target Plans to Hire 6,000 in Southland". Los Angeles Times. p. e1. ProQuest 153367549.
  21. ^ Bry, Barbara (August 4, 1982). "15 FedMart Stores May Be Taken Over by Ralphs Markets". Los Angeles Times. p. sd_a1. ProQuest 153227712.
  22. ^ Rogers, Taylor Nicole (September 16, 2020). "Meet Costco's multimillionaire cofounder Jim Sinegal, a Democrat megadonor who was only paid a third of the average CEO's salary during his time leading the wholesale retailer". Business Insider. Retrieved May 24, 2023.
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