The Story of Gibson's Discount Center
Part 1-In the Beginning
By Greg Riley
Before Wal-Mart, Target, K-Mart, and Amazon there was Gibson’s Discount Center, at it’s peak a chain of 684 discount stores primarily in the South, and South Central U.S. Its founder Herb Gibson was by turns, a street-car conductor, professional wrestler, barber, carnival barker, and eventually one of American’s most successful retailers heading up a $2,000,000,000 enterprise. Some claim he made countless ordinary people millionaires, and other’s whisper he was a world-class scoundrel.
I began working for a successful Gibson’s franchisee in Beaumont, Texas in 1978. Our little group had four stores, including two that were over 70,000 sq ft, which were considered monster-sized in their day. My early job stocking shelves at Gibson’s eventually led to a decades long career supplying merchandise to major retailers.
During the peak of the depression in early 1930’s Herbert “H.R.” Gibson was recovering from the demise of his small chain of barber shops and was left with $300 cash and a decent car. Before the crash of 1929 Gibson claims to have been worth $40,000. He made that money at .20 a shave, and .35 a haircut. He relocated to Little Rock, Arkansas in April 1932 and opened what Herb called a “specialty jobbing” business he named The Gibson Novelty Company.
His main business line seems to have been quickly morphed into beauty and barber supplies, and the company was renamed Gibson Products Company. He had recognized the people didn’t have much money, so his business offered small inexpensive sundry items such as hair-brushes, combs, Paulene’s hair oil, and the soon to be famous Gibson razor blades.
On December 25, 1933, Gibson married Belva Grace Acklin. An avid business person herself, she was fully involved in the new family business from its inception. The couple’s five children Herbert Jr, Gerald, Richard, Pauline, and Frances all eventually worked in the company, with two of their sons Herbert Jr. and Gerald becoming company executives.
It wasn’t long before Gibson had a number or salesman working for him covering small towns all over Arkansas, soon after Texas, and eventually most other parts of the south as well. These salesmen typically worked out of the trunk of their cars with most small items delivered on the spot. They would arrive in a town and blanket all of the local businesses, and an early version of what we now call B to B sales.
Quoting Gibson, “I started out buyin’ a few aspirin, shoelaces, razor blades, beauty items, and a few things like that. Of course there was plenty fellers looking for a job, so I had no trouble getting salesman. Before I knew it I was sellin' merchandise right ‘n left. That little old buildin' was a bee hive, and party soon was crammed full of merchandise. I had to have more space.” This “more space” by 1958 lead to 34 warehouses.
It wasn’t long after founding his company this that the banks stared failing, and Herb’s was totally bankrupt. Soon a national bank holiday was announced. Once again Gibson was pretty much wiped out. This time he had a building full of good sellable merchandise, a platoon of salesman, and most importantly he had developed good-will with his suppliers, some of which who would be with him for the next fifty-odd years.
Once he was full recovered from the banking debacle, Herb like always wanted bigger and better things. Before long he and his family had relocated to Dallas which was the business hub of the Southwest.
Eventually Herb built a warehouse and headquarters in the small town of Seagoville, Texas. Once there, things really took off for Herb and his Gibson’s Products Co. From 1932 until the late 1950’s things were generally good for Gibson and his wholesale business. By 1948 the Gibson Products Company, was manufacturing shoe polish, drugs, and lotion. Eventually that would include paint, paint brushes, razor blades, and numerous sundries.
About 1957 Herb noticed a decline in his business that became more and more pronounced. During those times he had no-doubt read about some of the newly minted “discount department stores” retailers such as E.J. Korvette on Long Island. Those first-generation hybrid big-box stores were just coming into their own as a retail force to be reckoned with.
The Korvette’s concept was to offer department store merchandise in a near-warehouse setting at a deep discount. Today this doesn’t seem like a radical concept, but at Korvette’s founding in 1948 this was very controversial. Up until that time manufacturers established a retail price, typically at a 70% gross margin. Mostly retailers sold products at full retail price with occasional discounts or sales.
The discount concept took the published manufactures price and reduced it by a standard amount every day, typically 20-25%. Many department store brands were very resistant to this pricing and merchandising concept, fearing the perceived value of their products would be lessened. Many of the early discount retailers took a smattering of department store merchandise and mixed with cheap goods including many manufacturers “seconds.” This also contributed to the fear that brand identities would be undercut.
Gibson’s had always done things a little differently. A jobber or wholesaler also worked on a discount from the MSRP. The wholesaler typically made 20%, and the retailer about 50%. Today many manufacturer’s prices are still based on the 50-20 concept. Gibson had always prospered just fine on that slim 20% margin. Gibson began considering an entirely different type of pricing structure. His idea was to take the most stripped-down manufacturer cost and mark it up a moderate amount typically between 25% and 40%. This is the same pricing structure major brick and mortar retailers like Wal-Mart and Target use today.
By this time Gibson had established “wholesale houses” in many different cities, and had long-standing relationship with many local retailers, some of which who would some become his franchisee’s.
He wondered what would happen if he opened his various wholesale houses to the public at similar margins? According to Gibson’s biography there had up until then been a Texas law preventing the public from buying wholesale. A retailer’s license was required to buy at such low prices. It seems that the law was changed or amended in the late 1950’s allowing Gibson to try a grand experiment.
One of his most successful wholesale houses was in what was called “the old Buick building” in Abilene, Texas. In March 1958 Gibson began making some changes so that merchandise could be shown in a more consumer friendly manner. In total the building was about 11,000 sq ft, and Gibson told his son and son-in-law to begin converting the building for retail operations.
They allocated about 3,000 sq ft of the space for retail, thinking they was ample space. Gibson had gone down to the Abilene Reporter-News and purchase a full page add for $160, which he thought a tremendous expense at the time. The store opened the day after the ad ran, and no one could have anticipated the response.
The ad said, “Mr. Consumer, for so many years we have been selling merchandise in this vicinity at wholesale prices. Today you can buy it at the same price we have been selling to the retail merchants.”
Quoting Gibson again, “Abilene had about 85,000 people at that time. I do believe everybody in town tried to come down to the store at the same time. Believe me—you couldn’t even park with half a mile of the place, and I had to park several blocks away myself.”
“People was walking over each other. You’ve never seen such a mad scramble as we had. Them people pounced on that merchandise like a duck on a June bug. I shook my head ‘n told my manager and my son that as quick as this storm is over to go the work knocking out the inside walls and let's turn this whole building into a retail selling space---all of it!”
He immediately called his Lubbock manager and told him to prepare to do the same thing. This time Herb was ready. He had rented an adjacent space and opened in Lubbock with a for-real discount store. While all of this was going on he was constantly checking Abilene like a mother hen. Many predicted this immediate success was some sort of flash-in-the-pan. However, day after day the crowds just kept coming and coming.
It wasn’t long before Gibson was making plans for his first brand-new from-the-ground-up discount store of a whopping 26,000 sq ft. Friends, family and business associates all told him had lost his mind, and he’d be bankrupt in nothing flat. Herb just kept checking the sales numbers which got bigger and bigger each day. Once again, when the store opened it was mobbed, and stayed mobbed day after day after day.
From that time on each new store was bigger and bigger. It wasn’t long before all of the Gibson’s Products Co. wholesale warehouses were either closed or converted to a brand new Gibson’s Discount Center. A number of Herb’s old wholesale customers wanted in on the act, and many became franchisees. before long the number of store opening was like the proverbial hockey stick.
From that one store in 1958, a short few years later there were over 700 Gibson’s Discount Centers from coast to coast and in Hawaii, and Guam too! For a time, things were fantastic for everyone involved, but significant new challenges were on the horizon.
Gibson’s supplied merchandise to their stores in two different manors. Regular turn items could be purchased on a weekly truck from the Gibson’s warehouse. But the major part of the concept was based on purchasing large quantities directly from the manufacturer to get the best possible pricing. This led to the establishing of the Gibson’s Trade Show.
This was basically like a big carnival where the company owned stores, and the franchisers gathered several times a year to make large pool purchase. Gibson's added a small percentage to all the purchases to cover administrative costs and make a small profit. This was in addition to the monthly franchise fee that was paid to the organization. In turn the manufacturers paid a booth rental to participate in the trade show.
For years this worked very well for all concerned. At some point Gibson decided that wasn’t enough. I’ve often speculated that despite the tremendous growth Gibson’s operation wasn’t particularly profitable. Soon Gibson began to demand that in addition to the markup he was adding, and the booth rental that they manufacture should pay him a percentage. Unfortunately, we would know call that a “kick-back” and it is at best quasi-legal. This also created issues with the appointed manufactures agents or representatives who are paid a commission on all products sold to a reseller. The only way to pay Gibson the cut he demanded was to either raise prices or cut the agents commission.
Before long franchisees, manufacturers, and agents were all up in arms with lawsuits being the predictable outcome. Gibson was soon sued by several his most important franchisees and the court cases and FTC complaints would linger for almost 15 years. At a time when the U.S. economy was facing unparalleled challenges, and new threats such as Wal-Mart were on the horizon Gibson’s was beginning to implode in a mess of recrimination and lawsuits.
By that time Herb Gibson was an old man of 82 years and his sons were minding the store so to speak. Years before a young Sam Walton had tried to obtain a meeting with Herb Gibson with the idea of obtaining a Gibson’s franchise. In one of the worst decisions in U.S. business history Gibson refused to even meet with Walton. Walton seethed over the snub and began making plans for his own discount store; Wal-Mart.
Herb Gibson was from NW Arkansas where Sam Walton was based with his five and ten cent stores. In fact, Herb was born in Berryville, Arkansas a short distance from Walton’s Bentonville, Arkansas base. Gibson had his own stores in Arkansas, including Berryville. Walton was seriously angry and Gibson and made it his mission to best Gibson’s in everything they did. Naturally Walton chose Berryville for his very first Wal-Mart store in 1962.
Over the years much has been made of how Sam Walton used a private plane as an important tool to expand Wal-Mart. Like many of his ideas Walton “borrowed” the idea from Herb Gibson who managed his burgeoning empire from a classy MU2 Turboprop airplane as early as 1965.
Trouble may have been on the distant horizon, but for the moment it seemed that Gibson’s could do no wrong. Between the opening of that first store in 1958 and 1969 the chain expanded at an explosive rate, with approximately 700 stores wearing the Gibson name in 1968. A bit of quick math shows that during that time an average of six Gibson’s stores a month opened.
On July 1, 1965 Gibson’s opened a retail behemoth in Abilene of 96,000 sq ft. A far cry from that first tiny little wholesale house, on the day is opened it was likely the largest discount store in the U.S. H.R. was on hand that day. At the close of the day, he reported $300,620.88 had been "sent to the bank." In 2018 dollars, that's $2.17 million.
An estimated 60,000 people visited the store the first day. Cars spilled out of the 500-space parking lot onto the many vacant lots surrounding the building. Traffic moved at a snail's despite the efforts of 10 policemen. Traffic was no problem for Belva and Mayor W. Lee Byrd, who arrived at the site via helicopter.
To promote the simultaneous opening of seven Dallas-area Gibson stores in 1966, Gibson and his associates shuttled among the stores in a fleet of six helicopters, a tactic that generated widespread publicity and again huge sales receipts.
So ‘ol Herb must have been feeling pretty darn cocky those first few years. Sales and store openings had expanded at a furious pace. Gibson was turning people away to become his franchisee’s. But major hurdles were on the horizon and soon Gibson would face some of the most challenging times in his career.