Thomas O. GraffUniversity of ArkansasWal-Mart and Kmart, the two largest American discount retailers, have begun to utilize a supercenter retailing formatthat combines a full-service grocery store with a discount department store. Supercenters are expected to be the majorformat for future expansion of each of these firms. The purpose of this paper is to analyze the spatial expansion strategiesof each firm for the locations of its supercenters. Wal-Mart is quickly expanding its number of supercenters inmodest-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 hasyet to develop a grocery distribution network. Kmart currently has major financial problems that severely restrict theexpansion of the Super Kmart Center format. Key Words: Kmart, Wal-Mart, supercenter, diffusion.

Introduction

During the 1990s, major changes have oc-curred in the retailing structure of the

United States. The longtime merchandisingleader 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 Searshas again assumed the position as the secondlargest retailer in the nation. Long-establishedretail chains such as Federated, Caldor, Otasco,Ames, Bradlee’s, Jamesway, Montgomery Ward,and even Kmart and Sears have been forced torestructure and downsize. A few of these chainshave even faced bankruptcy. In attempts to sur-vive and expand in this environment of intensecompetition and rapid change, many retailershave started to experiment with new retailingformats.

The three leading discount chains, Wal-Mart,Kmart, and Target, emulated successful regionalchains by adapting the supercenter format forthe highly competitive American retailing envi-ronment of the 1990s. A supercenter is a com-bination discount department and full-servicegrocery store. The average supercenter of eachof 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 ofthe space devoted to groceries. In addition to thestandard discount and grocery merchandise,many supercenters include services such asbanking, video rental, fast food restaurants, drycleaning, optical services, portrait studios, hair

salons, and income tax preparation (in season).Both Kmart and Wal-Mart have identified thesupercenter as the prime format for future ex-pansion. Target is still experimenting with theSuperTarget format and has yet to announce therole of this format in its expansion plans.

This paper analyzes the spatial expansionstrategies of Wal-Mart and Kmart for the loca-tions of supercenters. More specifically, this pa-per compares and contrasts the locations ofsupercenters by each firm, describes the grocerydistribution system of each firm, and identifiesthe impact of acquisitions on the expansion ofeach firm into grocery retailing.

Review of Retailing Diffusion Studies

Meyer and Brown (1979, 242–43) examined theexpansion of the Friendly Ice Cream chain toidentify five factors that influence the spatialdiffusion of a retail firm: (1) spatial pattern ofacquisitions, (2) spatial variability of the marketpotential, (3) market elasticity, (4) logistical fac-tors that create the organizational infrastruc-ture, and (5) capital availability. Theyrecognized that the availability of financial capi-tal can influence the roles of the other factors. Afirm with minimal capital resources might pur-sue a strategy of contagious diffusion in order toutilize existing logistical infrastructure. Con-versely, a firm with substantial capital mightutilize a hierarchical diffusion strategy as it pur-sues the goal of sales volume maximization.

In a text of case studies analyzing the diffusionstrategies employed by individual retail chains,

The Locations of Wal-Mart and Kmart Supercenters: Contrasting

Corporate Strategies

Professional Geographer, 50(1) 1998, pages 46–57 © Copyright 1998 by Association of American Geographers.Initial submission, April 1997; revised submission, June 1997; final acceptance, July 1997.

Published by Blackwell Publishers, 350 Main Street, Malden, MA 02148, and 108 Cowley Road, Oxford, OX4 1JF, UK.

Laulajainen (1987) shows that retailers have util-ized a variety of diffusion strategies. In a furtherstudy, Laulajainen (1988) notes that discountersand grocers often utilize diffusion strategies thatemploy hierarchical elements. Both grocers anddiscounters market massive quantities of bulky,low-cost merchandise. For both types of mer-chants, the development of an efficient distribu-tion system is a key element in successfulexpansion. A good warehouse and distributionsystem assures the retailer of the timely arrivalof merchandise and permits the purchase andstorage of large quantities of inventory obtainedat particularly attractive prices. The close asso-ciation between distribution centers and retailoutlets often dictates a hierarchical diffusionstrategy for grocers and discounters. By locatingmultiple outlets in a single metropolitan market,retailers can absorb much of the capacity of asingle warehouse and spread advertising costsamong many outlets. As the distribution systembecomes more efficient, the number of retailoutlets served by this warehouse can be ex-panded, and additional outlets can be opened insurrounding communities, further dividing ad-vertising and distribution costs.

Laulajainen (1987) and Graff and Ashton(1994) examined the expansion of the Wal-Martdiscount store chain. Both found that the firmdid not adopt a hierarchical diffusion strategy,but utilized a reverse hierarchical strategy withmajor elements of contagious diffusion. Wal-Mart started in small towns in the mid-Southand from a strong, small-town base eventuallyexpanded to metropolitan markets. When thefirm acquired sufficient financial resources, itquickly developed the corporate infrastructure(distribution centers) to supply its retail outlets.

This literature suggests several research ques-tions toward which this study is directed: (1) AreWal-Mart and Kmart utilizing similar expansionstrategies in the selection of locations for super-centers? (2) To what degree have acquisitionsinfluenced the locations of the supercenters?(3) Have these discounters established gro-cery distribution centers to supply their super-centers? and (4) Is Wal-Mart repeating itssuccessful diffusion strategy for discountstores with supercenters?

Corporate Histories

Wal-Mart and Kmart have exhibited many simi-larities in becoming massive discount chains.

Both firms initiated discount store operations in1962. In the 1980s, both firms started to experi-ment with a combined grocery and discountstore format modeled after the European hyper-mart. Both firms introduced combination for-mats of approximately 250,000 sq. ft. in size.Wal-Mart labeled its combined format Hyper-mart USA while Kmart chose American Fare.Both firms found their first combination proto-types too large and developed the slightlysmaller, supercenter format. Wal-Mart openedits first supercenter in 1988, and the first SuperKmart Center opened in 1991. By the mid-1990s, both firms had identified the supercenteras the prime format for future expansion. De-spite the superficial similarities, however, majorcorporate differences exist between Kmart andWal-Mart.

Wal-Mart

Wal-Mart Stores, Inc. has been a firm focusedon discount merchandising and growth. Thefirm’s rate of growth has been phenomenal. Inless than three decades of existence, Wal-Martgrew from a single small discount store in Ro-gers, Arkansas, to the largest retailer in the na-tion (Castro 1991). In 1994, Wal-Mart salesvolume exceeded the combined sales volume ofKmart and Sears, the number two and threeretailers in the nation, respectively (Schulz1994). By 1996, Wal-Mart sales volume ex-ceeded the combined sales volume of Sears,Kmart, and Target (Schulz 1996). Wal-Mart isprojected to continue its rapid expansion for theforeseeable future (Sosnick 1997).

Wal-Mart has been remarkably successful inutilizing the discount department store format,but the extremely competitive retail environ-ment of the 1990s has provided challenges to thecontinuing success of the firm. The area of theoriginal discount stores, small towns in the mid-South, has the greatest concentration of Wal-Mart stores (Graff and Ashton 1994). Thesetowns include the firm’s smallest, oldest, andmost profitable stores (Poneman 1995). De-tailed consumer surveys reveal significantlylower levels of consumer satisfaction with Wal-Mart in the Dallas metropolitan market than inthe Atlanta or Indianapolis markets, metropoli-tan markets that have comparatively new Wal-Mart stores (Tigert et al. 1993). Although majordiscount chain competitors have yet to mount achallenge to Wal-Mart in the small towns of its

Locations of Wal-Mart and Kmart Supercenters 47

base area, major new competition is a possibility(Poneman 1995).

Several events occurred in the 1980s that fore-shadowed Wal-Mart’s expansion into groceryretailing. David Glass succeeded Sam Walton,the discount giant’s founder, as CEO. Previousto his Wal-Mart employment, Glass was an ex-ecutive with Consumers Market, a major Ozarksgrocery chain. Then Wal-Mart made two acqui-sitions that provided the firm with grocery mar-keting expertise. Wal-Mart purchased PhillipsFood Centers, a major Arkansas grocery chainheadquartered in Bentonville, Arkansas, also thelocation of Wal-Mart corporate headquarters.Phillips operated almost two dozen retail gro-cery outlets scattered around Arkansas. Wal-Mart also purchased MacLane Company, Inc., afood distributor for convenience stores,headquartered in Waco, Texas, with distributioncenters located in the South and West.

By the mid-1990s, the supercenter had sup-planted the discount department store as theprime format for Wal-Mart expansion (Sosnick1997). Through its supercenter format, Wal-Mart was implementing plans to become thelargest grocery retailer in the nation by the endof the century (Gilliam and Zwickel 1994).Within a decade, one analyst predicts that thesupercenter will replace the discount store for-mat as the dominant retail format of Wal-Mart(Sosnick 1997).

Kmart

In contrast to the Wal-Mart evolution from asingle, isolated store to a discount chain of mas-sive size, Kmart began as a new retailing formatof S.S. Kresge. This well-known and well-financed retailer quickly expanded its discountoperations from the Detroit suburbs to othermetropolitan markets. In the 1980s, after beingfirmly entrenched as the largest discount mer-chandiser in the nation for more than a decade,Kmart attempted to expand its retail identitybeyond that of a discount merchandiser. KmartCorporation acquired, among others, Walden-books, Home Centers of America (renamedBuilder’s Square), PACE Membership Ware-house, Sports Authority, Furr’s Cafeterias, Of-fice Max, and Payless Drug Stores Northwest(Markowitz 1992).

In 1990, Kmart lost its position as the topAmerican discount merchandiser to Wal-Mart.The Kmart corporate focus on new acquisitions

left the firm with many older, rundown, andpoorly located discount stores (Poneman et al.1995). In addition, the multiple Kmart acquisi-tions had not been as profitable as projected, sothe firm decided to reposition itself as a topdiscount merchandiser. Kmart identified the Su-per Kmart Center as its prime format for futureexpansion (Liebeck 1996, 35). Kmart sold manyof its acquisitions, closed several hundred of itsless profitable discount stores, and initiated aprogram to refurbish its older discount stores.The Kmart effort to refurbish its discountstores was less than completely successful.Many of the refurbished stores were stillsmall, unattractively located, and unprofitable(Poneman et al. 1995). In 1995, Kmart facedthe possibility of bankruptcy (Vlasic andNaughton 1995, 108).

At the end of 1996, both Kmart and Wal-Martwere trying to expand their number of supercen-ters. Wal-Mart was planning to open approxi-mately 100 supercenters annually and wasrapidly expanding its grocery distribution sys-tem to serve its growing number of supercenters(Sosnick 1997). Although Kmart averted bank-ruptcy in 1995, the precarious financial condi-tion of the firm precluded rapid expansion of thenumber of Super Kmart Centers (Sellers 1996).In 1997, only three additional Super Kmartsare scheduled to open. In addition to the ex-pansion of the number of Super Kmart Cen-ters, Kmart has been trying to increase salesvolumes at its approximately 2,000 discountstores and to finalize the sale of its Builder’sSquare chain.

Data and Methods

Data on store locations were collected for thesupercenters of Kmart and Wal-Mart. For Wal-Mart, the data set starts in 1988 with the Wash-ington, Missouri, supercenter. The first SuperKmart Center opened in 1991 in Medina, Ohio.Both data sets include store openings through1996. Maps were prepared to display the super-center locations for each of the firms. The 1990populations of the counties where the supercen-ters were located were also recorded. Countyrather than city populations were used to reflectmore accurately the total market for each super-center. These population data indicate the sizeof the markets for the supercenters of each firm.

48 Volume 50, Number 1, February 1998

Findings

Wal-MartBy the end of 1996, Wal-Mart had opened 332supercenters. The Wal-Mart Supercenters areclustered around the firm’s grocery distributioncenters located in Arkansas, Texas, Mississippi,Florida, and Kentucky (Fig. 1). The greatestconcentrations of supercenters are in Arkansas,Texas, and Missouri, the sites of the first super-centers. Several new supercenters have beenopened in advance of new grocery distributioncenters announced for Olney, Illinois, Bedford,Pennsylvania, and Pageland, South Carolina.

Wal-Mart Supercenters are located in a vari-ety of different size communities (Fig. 2). How-ever, a majority of the supercenters (177 of the332) are located in lightly settled, nonmetropoli-tan counties. Considering the size of a super-center (about 170,000 sq. ft. on average) such alarge store in a sparsely settled rural environ-ment seems incongruous. Yet almost half of thesupercenters are in counties of fewer than50,000 people, and 30 are in counties of fewerthan 25,000 people. In fact, several supercentersare in isolated counties with no towns classed asurban. The average county with a supercenterhas a population of fewer than 105,000 people.

At the other extreme, a few supercenters arelocated within major metropolitan markets.Several are located at the periphery of majormetropolitan markets such as St. Louis, Dallas,Atlanta, Kansas City, Memphis, and Houston.Also, supercenters are located inside the KansasCity and Topeka city limits, as well as withinDallas and Tarrant (Ft. Worth) Counties, Texas.These four supercenters were originally openedas Hypermarts USA and have been redesignatedSupercenters.

Although Wal-Mart has entered many metro-politan markets with supercenters, the firm hastended to locate the stores in modest-sized met-ropolitan markets. Lee County, Florida, the lo-cation of Fort Myers, has four supercenters, thegreatest concentration of any county in the na-tion. Of the four Lee County Supercenters, twoare located in strip developments in the FortMyers area, and the other two are located inlarge retirement communities on opposite sidesof the county. Additional cities with two Wal-Mart Supercenters are Lubbock, Amarillo, Cor-pus Cristi, Tulsa, Paducah, and Springfield,Missouri. Wal-Mart plans to continue to locate

multiple supercenters in modest-sized commu-nities. In Arkansas, the firm has announced plansto open second supercenters in Fayetteville,Jonesboro, and Conway. Larger cities such asLittle Rock, North Little Rock, and Pine Bluffhave yet to acquire a single supercenter.

By locating its first supercenters in modest-sized communities in the mid-South, Wal-Martreplaces some of its smallest, oldest, and mostprofitable stores (Poneman 1995). Since Wal-Mart already dominates the discount store busi-ness in most of these small towns, a new orupgraded discount store would be unlikely togreatly increase the firm’s sales volume or prof-its. But a new supercenter permits Wal-Mart toincrease its sales by selling groceries to attractmore customers and increase its discount mer-chandise sales (Sosnick 1997). In addition, a newsupercenter makes it more difficult for competi-tors to successfully enter the Wal-Mart base areaand thus may also be viewed as a profit protec-tion measure (Poneman 1995).

Wal-Mart seems to be replicating its originaldiffusion strategy for discount stores with thelocations of its first supercenters. Most of thefirst discount stores were in locations similar tothe new supercenters (Graff and Ashton 1994).In fact, most of the new supercenters are reloca-tions of existing discount stores (Sosnick 1997).By replacing older discount stores with super-centers, Wal-Mart is entering grocery retailingin markets where it already has tremendous cus-tomer identification and loyalty. Wal-Martseems to be attempting to transfer its discountmerchandising success to groceries.

The acquisition of Phillips Food Centers pro-vided Wal-Mart with about two dozen groceryoutlets, but no grocery distribution centers. Fora time Wal-Mart operated the Phillips grocerystores, but all have been replaced by Wal-MartSupercenters. None of the Phillips grocerystores are now operated by Wal-Mart, and manyof the old Phillips buildings have been sold toother grocery chains. The Phillips acquisitionappears to have provided Wal-Mart with man-agement expertise in grocery retailing and hasnot provided locations for the Wal-Mart expan-sion into grocery retailing.

As it did with discount stores, Wal-Mart isquickly establishing the infrastructure to supplyits supercenters. The firm plans to supply about100 supercenters within a radius of 300 milesfrom each of its grocery distribution centers

Locations of Wal-Mart and Kmart Supercenters 49

Figure 1: Location of Wal-Mart Supercenters

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Figure 2: Number of Wal-Mart Supercenters vs. County Population. Average County Population is 104,748.

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(Troy 1997). At present, Wal-Mart operates fivegrocery distribution centers and is developingothers in Bedford, Pennsylvania, Pageland,South Carolina, and Olney, Illinois. These addi-tional distribution centers define the regions offuture supercenter expansion. Wal-Mart willhave the grocery distribution capacity to servicea greatly increased number of supercenters bythe end of this century.

Stock analysts project that Wal-Mart willquickly become a giant in grocery retailing withat least 600 supercenters by the end of the cen-tury (Feiner et al. 1994). Another analyst pre-dicts that Wal-Mart will soon become the largestgrocery retailer in the country (Gilliam andZwickel 1994). By examining the location of thepresent supercenters, the Wal-Mart grocery dis-tribution network, projections of rapid expan-sion are believable.

KmartIn contrast to the aggressive and geographicallyfocused expansion of Wal-Mart, Kmart’s expan-sion into grocery retailing has been slower andless concentrated geographically. AlthoughKmart made many acquisitions in the l980s, itdid not make any grocery acquisitions. In addi-tion, the severe financial problems of the mid-1990s have constrained Kmart’s ability toquickly expand the number of Super KmartCenters (Sellers 1996, 103).

The first Super Kmart Center was opened in1991 in Medina, Ohio, and through 1996 a totalof 96 Super Kmarts had been opened. In con-trast to Wal-Mart Supercenters, Super Kmartsare scattered in 19 states from Connecticut toCalifornia and from the Mexican to the Cana-dian border (Fig. 3). The major concentrationof Super Kmart Centers is in the Southern GreatLakes states, the location of Kmart corporateheadquarters (Troy, Michigan). Secondary con-centrations of Super Kmart Centers are locatedin Texas and North Carolina.

As with Wal-Mart, Kmart appears to be ex-perimenting with stores in a variety of marketsizes (Fig. 4). Most Super Kmart Centers havebeen located in the suburbs of some of the largestU.S. cities. Among the major metropolitan mar-kets to receive multiple Super Kmarts are Chi-cago, Cleveland, Detroit, Los Angeles,Houston, and the Tidewater, Virginia area. TheChicago metropolitan area has the greatest con-centration, with seven Super Kmart Centers. At

the other extreme is nonmetropolitan HighlandCounty, Ohio (the location of the ChillicotheSuper Kmart), with a 1990 population of about35,000. The average population of a county witha Super Kmart Center is over 700,000, and 81of the 96 Super Kmarts are located in countiesclassed as metropolitan. Clearly, Kmart shows amuch greater propensity than Wal-Mart to lo-cate supercenters in heavily populated metro-politan counties.

Kmart has not focused its Super Kmartsaround grocery distribution centers. With theirsmall number and the scattered distribution, itwould be difficult to envision a distribution sys-tem that could efficiently serve the SuperKmarts. Kmart foresees a potential market ofseveral hundred Super Kmarts, but until a criti-cal mass of grocery outlets is established, thecompany plans to continue to use existing gro-cery wholesalers to supply its grocery outlets(Robins 1992). The firm does not plan to openany grocery distribution centers in this century(Robins 1992).

Super Kmart Centers and Wal-Mart Super-centers compete directly in 19 counties. SinceKmart has pursued a strategy of locating SuperKmarts in major metropolitan areas and mostWal-Mart Supercenters are located in non-metropolitan counties, the large number of lo-cations with competing supercenters issurprising. Several cities in Texas, Greeley,Colorado, Terre Haute, Indiana, Hattiesburg,Mississippi, and Rome and Gainesville, Georgiahave supercenters of both firms. Other countieshave supercenters of both firms even though thestores are not within the same corporateboundaries.

A major consumer study of Gainesville, Geor-gia and Victoria, Texas has been completed toevaluate competitive positions of Kmart andWal-Mart supercenters and to identify impactsof these supercenters on existing grocery retail-ing patterns (Tigert et al. 1995). The supercen-ters were found to have had a major negativeimpact on the market shares of existing groceryretailers. Each supercenter was found to have asignificant price advantage in groceries overmost existing grocery stores. In the direct com-petition between Wal-Mart and Kmart, theWal-Mart Supercenter was preferred over theSuper Kmart Center by a large proportion ofconsumers. The Wal-Mart preference was notthe result of perceived superiority of grocery

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Figure 3: Location of Super Kmart Centers

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Figure 4: Number of Super Kmart Centers vs. County Population. Average County Population is 740,113.

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merchandise, but the perception that the Wal-Mart discount merchandise was superior to thatof Kmart. The perceived superiority of the Wal-Mart discount merchandise was such that con-sumers also selected Wal-Mart for grocerypurchases. The preference for the Wal-MartSupercenters was so great that the authors of thestudy questioned the profitability and eventualsurvival of the Super Kmart Centers. Theauthors also observed that the success of theWal-Mart Supercenters was likely to forcesome existing grocery chains to abandon thesemarkets. The authors project that the Wal-Mart success is likely to be repeated in othermarkets.

If it attempts to expand the number of SuperKmart Centers in areas where it has SuperKmart concentrations, Kmart will face strongcompetition. In general, large metropolitanmarkets, the locations of most Super KmartCenters, have extremely competitive retailingenvironments. Kmart has developed concentra-tions of Super Kmart Centers in the SouthernGreat Lakes states, Texas, and North Carolina.Texas is also the location of Wal-Mart’s secondgrocery distribution center and many Wal-MartSupercenters. Eight counties in Texas have su-percenters from both firms. At present only onecounty in North Carolina (Moore County, thelocation of Southern Pines and Aberdeen) hassupercenters from both firms, but the plannedopening of the Wal-Mart grocery distributioncenter in Pageland, South Carolina, foreshad-ows a rapid Wal-Mart Supercenter expansioninto the Carolinas.

The Great Lakes states are the location of thegreatest concentration of Super Kmart Centers.Although Wal-Mart has just started to locatesupercenters in the region and is still developinga grocery distribution center in Olney, Illinois,Super Kmarts and Wal-Mart Supercenters di-rectly compete in Terre Haute and Lake County,Indiana (Portage and Valparaiso). Meijer, Inc.,an extremely successful regional supercenterchain with 106 supercenters in Michigan, Ohio,Indiana, Illinois, and Kentucky, is also aggres-sively expanding in the region. Meijer has beenidentified as the top practitioner of the super-center format in the nation in an analysis of thequality of grocery operations of supercenters(Weinstein 1995). Meijer averages greater salesvolume per supercenter than either Kmart orWal-Mart (Liebeck 1996, 37). Meijer has been

aggressively expanding out of its Michigan baseand has just opened multiple stores in the Cin-cinnati area (the headquarters of Kroger). Atpresent, both Meijer and Kmart have supercen-ters in Champaign, Mansfield, and multiple lo-cations in the Detroit area. Meijer has beenrumored to be considering expansion in theChicago area, the location of the greatestnumber of Super Kmart Centers.

Summary and Conclusions

This study provides answers to the researchquestions originally posed in this paper: (1) Wal-Mart and Kmart are pursuing contrasting strate-gies in location of supercenters; (2) acquisitionshave had little impact on the locations of thesupercenters of either firm; (3) Wal-Mart is de-veloping a grocery distribution network andKmart is not; and (4) Wal-Mart appears to berepeating its successful expansion strategy fordiscount stores with supercenters.

In becoming a discount merchandising giant,Wal-Mart has been identified as a firm that didnot conform to traditional expansion strategies.Both Laulajainen (1988) and Meyer and Brown(1979) suggest that the development of a distri-bution system (infrastructure) is a key elementin the development of a chain of stores. Wal-Mart Supercenters are clustered in modest-sized communities near its new grocery distri-bution centers. Most Wal-Mart Supercentersare located in areas where Wal-Mart is alreadywell established. Wal-Mart may be employing acontagious expansion strategy, one that Meyerand Brown suggest may be typical of a firm withlimited financial resources, but not the largestretailer in the nation. However, Wal-Mart hasnot avoided direct competition with Kmart withthe supercenter format.

Kmart is experimenting with the supercenterformat in a variety of location types, but mostSuper Kmart Centers are located in the suburbsof large American cities. Meyer and Brown(1979) suggest that a retailer with great financialresources might utilize a hierarchical diffusionstrategy as it pursues the goal of sales maximiza-tion. But Kmart has just avoided bankruptcy andis not in a strong financial position. Althoughmost Super Kmart Centers are in large metro-politan markets, the number of Super Kmarts isso small that Kmart is not the largest groceryretailer in any metropolitan market. In addition toestablishing Super Kmarts, the firm is struggling

Locations of Wal-Mart and Kmart Supercenters 55

to increase sales at its approximately 2,000 dis-count stores. Although Kmart has located SuperKmart Centers in the largest metropolitan areas,the firm does not seem to have the financialresources to implement a successful hierarchicaldiffusion strategy or to establish a grocery dis-tribution network.

If the supercenter becomes a dominant retail-ing format in the near future, Wal-Mart hasmassive advantages over its competitors. Wal-Mart already has more than 300 supercenters inoperation and is opening more than 100 newsupercenters annually. The firm has opened fivegrocery distribution centers and has announcedlocations of three additional such centers. Threeother firms (Kmart, Meijer, and Fred Meyer)have opened about 100 supercenters each. Mei-jer and Fred Meyer (located in the PacificNorthwest) are regional chains of supercentersthat have grocery distribution centers. Kmarthas attempted to utilize the format nationally,but in its weakened financial condition the firmis unlikely to be able to increase the number ofSuper Kmart Centers quickly. Target, the third-largest discount store chain in the country, is stillexperimenting with the SuperTarget format andhas yet to determine the future of that formatfor the firm.

The location of Wal-Mart Supercenters inmodest-sized towns in the mid-South permitsthe firm to confront several corporate problemssimultaneously. By locating its supercenters inits base area of the mid-South, Wal-Mart is ableto upgrade its oldest and most profitable dis-count stores, preempt potential competitorsfrom mounting a challenge in the firm’s basearea, increase sales volume and profitability byentering a new merchandising format, and de-velop and refine its grocery marketing expertisein smaller, less competitive, nonmetropolitanmarkets. Wal-Mart has identified the supercen-ter as a successful, emerging retail format, andthe firm is aggressively utilizing the format forits future growth.

Since both Kmart and Wal-Mart are just en-tering the retail grocery business, several futureresearch topics are apparent. Probably the mostbasic question to be answered is, “How success-ful will the combined discount-grocery storeformat be?” Some financial analysts (Gilliamand Zwickel 1994) and a detailed consumerstudy (Tigert et al. 1995) suggest that it will beextremely successful, but both discounters dis-

carded larger formats as too big, and some con-sumers may view these new supercenters as toolarge. Will the impact and degree of success ofthe supercenter format vary with the size of themarket? How will the supercenter format bemodified in the future? Other topics to be inves-tigated include the future patterns of SuperKmarts and Wal-Mart Supercenters and the as-sociated grocery distribution systems developedto serve the supercenters. Will Target adopt theSuperTarget as a major format for future expan-sion? Will established grocery chains such asKroger or Safeway enter the supercenter com-petition? Will Meijer or Fred Meyer developnational chains of supercenters? Will the expan-sion of Wal-Mart Supercenters into the GreatLakes states produce major direct competitionwith the Meijer outlets? The United States re-tailing environment is very dynamic, and largenumbers of huge new supercenters operated bythe country’s largest retailers are certain to havea major impact on the retailing structure of thenation. ■

Literature Cited

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stores—Will savvy shoppers break the bank? RetailQuarterly February 1–42.

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THOMAS O. GRAFF (Ph.D., University of Kan-sas, 1973) is Associate Professor at the Universityof Arkansas. His research interests include retailingand diffusion of retail chains.

Donald W. BuckwalterIndiana University of PennsylvaniaThis paper analyzes Hungary’s export linkages of the interwar and Cold War periods using gravity model and historicalanalyses. Hungary is a useful example of former Soviet satellites because it combines relative political stability (since1956) and experimentation with the New Economic Mechanism (NEM) during the 1970s and 1980s. Historical analysisreveals seven events since World War I that changed Hungary’s trade patterns. Gravity model analysis for 1955, 1965,1975, and 1985 shows the dramatic cleavage of the “Iron Curtain,” the effect of the NEM, and particularly strong andweak linkages for Hungarian trade that may result from historical legacies, complementarity, or specific politicalcontacts. Key Words: Central Europe, Cold War, geopolitics, international trade, transition economies.

Introduction

Export linkages present a challenge for for-mer Soviet satellite countries of Central

Europe.1 Political stability requires an accept-able standard of living, and this requires exportsof sufficient quantity to allow ample imports ofconsumer goods with a reasonable degree ofmacro-economic balance. These countrieswere, until 1991, members of the Council ofMutual Economic Assistance (CMEA)—an eco-nomic organization established and influencedby the Soviet Union. Linkages within CMEA

dominated the trade volume and controlled thetrade composition of Soviet satellites during theCold War. The collapse of CMEA in the early1990s accompanied production declines and un-employment to a degree that surprised politicalleaders within the region and some Westerneconomic analysts (Csaba 1993).

Improved export access to advanced marketeconomies would help current restructuring ef-forts of former Soviet satellites. Such efforts canbenefit from analysis of linkages with WesternEurope prior to World War II and during theCold War. Economic severance along the “Iron

Professional Geographer, 50(1) 1998, pages 57–70 © Copyright 1998 by Association of American Geographers.Initial submission, March 1997; revised submission, July 1997; final acceptance, August 1997.

Published by Blackwell Publishers, 350 Main Street, Malden, MA 02148, and 108 Cowley Road, Oxford, OX4 1JF, UK.

*Research for this paper was supported in part by a grant from the Indiana University of Pennsylvania Senate Research Committee. The authorthanks Zoltán Raffay of the Hungarian Academy of Sciences for assistance with data collection.

Geopolitical Legacies and Central European Export Linkages:

A Historical and Gravity Model Analysis of Hungary*

Geopolitical Legacies and Central European Export Linkages 57