The Story of Gibson's-Part 2-Herbie git's the big head

By Greg Riley

READ PART 1 HERE: The Story of Gibsons

READ PART 2 HERE: This Man Gibson

One can imagine how exciting a time the early 1960's must have been for Herb Gibson. At the time of opening of the first Gibson's Discount Center he was 57 years old. From the moment that first store opened in Abilene, and for two decades after, everything Gibson touched seemingly turned to gold.

When that first store opened sales were nominal. By 1968 Gibson's was a $2 Billion concern with almost 700 stores. If you do a little quick math it is pretty mind boggling how fast the chain expanded. H.R. must have been beside himself as he had worked his entire life toward something big like this.

Sometimes when you have a great deal of success very quickly you get a feeling of infallibility and Lord knows Gibson had that for sure. In 1961 a brash young Sam Walton attempted to make an appointment to see 'ol Herb Gibson to see about getting a Gibson franchise for himself. Up until that time he operated couple of Ben Franklin stores and the Walton 5 and dime.

I've read two slightly different versions of this story in Walton's various biography's, but it follows the same general track. Sometime in 1961 Sam Walton showed up at the Gibson's HQ in Seagoville, Texas unannounced. One version claims he tried for an appointment, only to be told on the phone there was nothing to discuss if he owned his existing stores. Sam couldn't fathom letting go of his financial base.

Sam traveled to Gibson's headquarter at about noon and demanded an appointment with the big man, and was told to sit and wait. Well he waited all day and eventually about five o'clock Gibson called him into his inner sanctum. Gibson basically told Walton to go pound sand in an offhanded and likely immediately forgotten decision that would have massive implications for the chain, the franchisees, and the future of American retailing.

From Walton-The Inside Story of American's Richest Man by Vance H. Trimble, "Getting excited about Gibson's possibilities, Sam abruptly decided to beard the lion in his den. He went unannounced to Dallas and marched into Herb Gibson's headquarters, arriving about noon, and asked to see the head man. Sam was told to be seated, and Gibson would be informed he was waiting. Sam thumbed through trade magazines, using his idle time to look for new ideas. He was patient, this mission was important."

"Do you have one hundred thousand dollars?" Gibson asked

"No."

"Well, we buy in carload lots. Takes a lot of money to do that."

"But, I---"

"You're not fixed to do business with us. Good-bye."

History has shown that Sam Walton was not a man to take a snub like this lightly. Reportedly he left Gibson's office that day seething and determined he would find a way on his own, to establish a discount chain that would beat Gibson's in every way, Wal-Mart. And about a year later he did open that first Wal-Mart on July 2nd, 1962 in Rogers, Arkansas practically a stones-throw Gibson's hometown of Berryville, Arkansas. It took Walton much longer to get off the mark than Gibson's, and his fledgling chain nearly failed on several occasions, but soon enough he would experience his own hockey stick sales chart. At the peak in 1978 there were 684 Gibson's stores, but today only two Gibson's store survive. In 1970 there were 38 Wal-Marts, in 1980 330, 1985 859. Today there are 5,358 Wal-Marts in the US. As you can see the period from 1980-1985 was a time of monumental growth at Wal-Mart, largely at the expense of Gibson's.

None of the Wal-Mart story should diminish how influential old H.R. was to American retailing. For a time in the 1960's he was almost as famous with his constantly expanding discount stores, as is Jeff Bezos today. Gibson's also did many new and innovative things that contributed to modern American retailing. When the first stores opened, they had hand built wooden racks to hold the merchandise. A few short years later the stores were smartly but basically styled with the most up to date professional looking fixtures, all store were well lit and most of all filled with merchandise. The unofficial Gibson's slogan was, "Stack it Deep and Sell it Cheap." He also introduced supermarket style check stands to speed customers along. And we mustn't forget the popcorn. More on that in part 3!

During the 60s the ex-carnival barker in Gibson was on full display and he concocted all sorts of stunts to drive traffic to the stores. One summer a salesperson had bet him that he couldn't sell a truck load of antifreeze in July. H.R. took out a full-page ad in the newspaper claiming that the snow was right around the corner, and then ran radio ads the day of the sale made to sound like weather reports. Keep in mind this was Abilene, Texas in July.

It was repeated over and over that snow was coming and everybody should run out and buy antifreeze. Well this is a part of the country where during the winter months people did need a lot of antifreeze, and they did run out and bought the entire stock pile within a couple of days. Herbie won his bet with the salesman, but he didn't sell much antifreeze the rest of the year.

Another problem was Gibson would force such large amounts of low-margin promotional merchandise to the stores. Huge sales would be ballyhooed on radio, TV, and primarily the newspapers hawking some unbelievable deal that you had to snap up RIGHT NOW! And people did come to the stores and stock up…then they wouldn't need a gizmo or whizbang for weeks, months, or sometimes ever again. During the economic havoc of the 1970's budget-constrained consumers stopped responding to carnival baker style tactics.

On one day alone Herb opened 7 stores in Dallas and he and wife Belva and various company executives shuttled between the store openings in a helicopter. Herb made sure that all of this was duly reported in the press with TV news cameras present at several locations. On another occasion a Dallas Cowboys game was planned to be blacked out on local tv. Herbs solution was to buy all the remaining tickets to the game and offer them to company employees and suppliers. This meant that the game was shown live on local TV. At one time, the Gibson's store in Great Bend, Kansas had what was called "The Biggest Outdoor Sign in Kansas."

He really loved being a big shot with the manufacturers. He would go to some of the big national trade shows in New York and make a big show of buying "carloads," which were literally rail-car loads of merchandise. This was a pattern from early in his career. After he moved his wholesaling business to Dallas in the 1930's he borrowed money and bought a train-car load of hair-oil. This was for his famous "Pauline's hair oil." One can only imagine how long it took him to sell a tanker car of hair oil, but I'm sure he got it cheap.

In order to support his rapidly expanding stores Gibson had to get in several other businesses to support his own business needs. Before long he owned a paint manufacturing business, a record (music) wholesaling business, import business, a large-scale printing operation, a fleet of trucks and trailers, and a dizzying number of other related support enterprises.

Not long ago I spoke to a banker who have been hired by a Gibson's group of franchisees to see why they were selling so much product but not really making any money. It didn't take long until the store group hired the banker as a full-time controller and financial trouble shooter. What he discovered was kind of shocking. Although merchandise was flying off the shelves at a dizzying rate, much of it was at a very low margin and some of it almost no margin. is certainly not a recipe for retail success with its many fixed and variable costs, which in the case of Gibson's were quite high. At the very minimum one must cover costs and then add some margin for overhead profit and all the other things that go in the running a successful business.

In 1974 Gibson commissioned a book, This man Gibson. Unsurprisingly it was all about Gibson. In fact, some background information for this piece came from that book which is been out of print for many years. It was required that all Gibson's stores carry and sell copies of this book I eventually bought one off the Gibson's markdown table in 1982 for twenty-five cents, a harsh but apt metaphor for what was the beginning of a fall as dizzying as the initial rise.

Eventually all the Gibson children ran groups of stores, or worked as company executives. And many long time Gibson associates and former customers became almost instant paper millionaires. In 1972, Gibson transferred ownership of the company to sons Herbert Jr. "Herbie" and Gerald. By 1978 (the peak,) Gibson's had 684 stores across the United States and in Guam.

The reasons for Gibson's decline were…complicated. The lawsuits had dragged on for years, but many franchisee's feeling slighted and taken advantage of. Wal-Mart was entering a phase of rapid expansion right into the heart of Gibson's home territory of the South. Wal-Mart also had the advantage of owning all their stores which enabled them to dictate exactly how things were done enabling them to offer a consistency from store to store that the hodgepodge of Gibson's company owned, and franchised stores couldn't. Most significant, Herb was now an old man in his 80's with no further direct involvement in the company he founded.

Shopping malls in the 1970's had also become a ever multiplying force with untold millions of square feet of new retail place coming online. Big-box stores like  J.C. Penney, Montgomery-Wards, Toys 'R Us, Sears, and many others entered the market and proliferated. Malls were places where shopping was more pleasurable than the bare bones Gibson's stores featuring benches, fountains, food and entertainment. You could shop, eat, and be entertained. No Gibson's store could ever deliver that sort of shopping experience. Next came the category killers such as Home Depot, and Staples as well as giant grocery stores and eventually Hypermarkets and Wal-Mart Supercenters.

The economy in the 1970's was challenging for all businesses with multiple national fuel shortages, rampant inflation, and government ineptitude, leading to staggering bank interest rates. This was especially hard on Gibson's stores which depended on moving huge volumes of low-margin goods, which was a very cash-flow intensive business. Gibson's also had a very primitive distribution system largely based on the way Herbie had always distributed to his previous wholesales houses since the 1930's.

Sam Walton who had taken his little company public in 1970 and was listed on the NYSE in 1972, on the other hand was investing heavily in technology, and distribution and scientific methods to determine optimal store locations. In the early 1980's Wal-Mart introduced one of the first POS (Point-of-sale) in the retail arena. Wal-Mart also began adopting the modular merchandising concept, which meant that the home office published a sort of schematic showing just how the merchandise was to be laid out in a consistent and scientific fashion from store to store.

Gibson's had no such system POS or merchandising system, so each store was free to lay out the merchandise as they saw fit. Some did a fantastic job, but many literally dumped the merchandise on the shelves like Herbie did way back in 1958. The result was that Wal-Mart stores were clean, well ordered, and consistently full of staple merchandise. Literally no two Gibson's stores were ever alike. Many had been built from scratch according to a standardized blueprint, but even those were merchandised according to the whims of store personnel.  Many others were in converted buildings of every conceivable shape, size, in whatever location that was available at the time.

Gibson's tried several "hail-Mary's" to try and stem the tide, such as opening the brand-new and state of the art "Co-Op Warehouse" in Seagoville during the early 1980's. At that same time wily 'ol Sam Walton had one final truck up his sleeve to give Herbie and Gibson's the final payback, which we'll get to in part 4. This cleared the decks for Wal-Mart to dominate the discount business in the southern U.S. from which sprung an expansion of the Wal-Mart through the 1990's that even Herb couldn't have imagined.

Ironically, Herb Gibson and Sam Walton didn't die that many years apart. Herb died in 1986 at 86 years of age, and Walton died in 1992 at age 74. Although Walton's children had peripheral management of the company via board positions and ownership of large blocks of stock, none ever served as CEO. Instead Walton had a handpicked team of seasoned executives to continue his vision.

 

Seemingly small decisions often have monumental consequences. Gibson transferred ownership and management of the company to two his sons in 1972. I've heard anecdotal tales that claim he was forced to do so in a bid to stop his ongoing legal wars.  It's interesting to speculate what might have happened had Gibson and Walton gone into business together in some capacity in 1961, and had Gibson instead transferred management to a professional manager in 1972, perhaps Walton himself.

Gibson's was sold in June 1984 to a company headed by Gary Chaffin. Chaffin sold the company in 1992, and it filed for Chapter 11 bankruptcy in 1996. Chaffin repurchased the company in 1999, which by this time was headquartered in Dodge City, Kansas. In November 2002, Gibson's announced it would close the chain's 17 remaining stores thus ending an almost twenty-year death spiral. Two stores continue to operate independently under the Gibson's name, in Kerrville, and Weatherford, Texas.

In chapter three we'll discuss Herb's personal live, and in chapter 4 complete the story of Gibson's Discount Centers by describing the stores, what it was like to work there, the huge Gibson Trade Shows, and in my case the place I met my wife of over thirty years.

READ PART 1 HERE: The Story of Gibsons

READ PART 2 HERE: This Man Gibson