Aaron Montgomery WardMontgomery Ward & Company

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GENERAL MERCHANDISE RETAILING IN AMERICA:

1850-1980

This is the story of a great business rivalry – the century-long struggle for retailing leadership between Montgomery Ward and Sears, Roe-buck. The Setting

Up to the 1850’s retailing in American con-sisted of peddlers, general stores, and spe-cialty shops. The rural areas of 18th century America were regularly visited by peddlers who carried their wares on their backs or on

the backs of their pack animals. In the near-est small town, the American farmer could find a variety of high-priced merchandise at the general store. And in the larger towns and cities, Americans could shop at a variety of specialized shops or at temporary open-air stalls manned by the urban cousins of the rural peddlers.

The situation cried for newer, more efficient distribution methods. That cry was answered first in the large cities where there emerged a new concept of retailing – the department store.

Department Stores

The early department stores grew out of small, dry goods stores, most of them found-ed by people of humble beginnings.

The first department store in the world was established by Aristide Boucicaut in Paris, France. Boucicaut called his store the Bon Marche, meaning cheap or a bargain. His original store was a small shop selling piece goods, but by the early 1850’s his store had grown and assumed the characteristics of a true department store.

In the United States, the leading claimant to having founded America’s first depart-ment store is Alexander T. Stewart. This Irish-man immigrated to the United States at the age of 20 after having been trained for the ministry. He taught school for two years. While teaching he loaned a small sum of money to a friend who wanted to start a small dry goods store. The friend went bankrupt and A.T. Stewart was stuck with the store. Stewart decided to try his hand at retailing. He liked it

and was good at it. Between 1823 and 1848 his business grew. In 1848 he built a large dry goods store for women. Dubbed the Marble Dry Goods Palace, this departmentalized monster is viewed by some as the nation’s first department store. In 1862 Stewart erect-ed a larger store, catering to both men and women. Called the Cast Iron Palace, this store contained 8 floors of 2½ acres each. It employed over 2,000 people and offered a wide variety of hard goods and soft goods. It was definitely a true department store.

A second claimant to the title of founder of America’s first department store is Rowland Hussey Macy. Born in New England, Macy became a seaman aboard a whaling ship at the age of 15. He returned to land and founded six unsuccessful small retail business-es. In 1858 at the age of 36 he arrived in New York for his seventh try at retailing. He be-lieved that out of his failures he had learned what was needed to succeed. And history proved him right. His business expanded rap-idly, new departments were added, and by 1866 the store employed 200 employees.

The department store concept made it possible for the middle class in the cities to obtain better merchandise at a lower price than had previously been possible. Volume purchases of merchandise reduced the cost per unit paid by the department store; and volume sales, stimulated by heavy advertis-ing, a fixed price policy, and a money back guarantee; made it possible to pass those low costs on to the customer while still mak-ing a good profit.

Around the country, other merchants fol-lowed the examples of Stewart and Macy.

In Philadelphia, an ex-secretary of the local YMCA founded a small men’s clothing store in 1861. The man’s name was John Wanna-maker. His business gradually expanded until in 1876 he opened the historic Grand Depot, alleged to be, “the largest space in the world devoted to retail selling on a single floor.”

Wannamaker was an innovative merchant who claims many firsts in American retailing. Among his credit are the first white sale, the first restaurant on a department store’s prem-ises, the first use of pneumatic tubes, and the first health and recreation facilities for em-ployees. In 1896 Wannamaker bought A.T. Stewart’s Cast Iron Palace in New York. When he died in 1824, Wannamaker was regarded by many as the greatest American retailer of his generation.

In Salt Lake City, Utah, Mormon leader

Brigham Young conceived of the idea of a department store owned by the community. The result was the Zion’s Cooperative Mer-cantile Institution, which opened its doors in 1869 and which also had a legitimate claim to be the first true department store in Amer-ica.

In Chicago, traveling wholesale dry good salesman Marshall Field worked hard, slept in the company warehouse to save money, and with a partner established a depart-ment store in 1868. Field placed great faith in maintaining a “tone” to the store that would set it apart. His motto, “give the lady what she wants” sought to capture that tone. For himself and his employees, he preached the positive mental attitude philosophy. He sum-marized it with this famous list of 12 things to remember as we go about our work:

In Atlanta, Georgia, a Jewish emigrant from Hungary gave up his job as a traveling peddler, borrowed $500 and started a retail dry goods store in 1867. Morris Rich added “southern hospitality” to the basic depart-ment store ingredients of the Yankees. Within a decade, Rich’s was emerging not only as a full-fledged department store but also as a prominent Atlanta philanthropic institution.

The experience of Morris Rich is one of many examples of the American economic

system providing opportunities for dispos-sessed European Jews to make successes of themselves. Among other Jewish emigrants who did so was Adam Gimbel, who started as a pack peddler, then founded a small store in Vincennes, Indiana, and finally start-ed what became the famous Gimbels De-partment Store in New York City.

1. The value of time 7. The influence of example. 2. The success of perseverance. 8. The obligation of duty. 3. The pleasure of working. 9. The wisdom of economy. 4. The dignity of simplicity. 10. The virtue of patience. 5. The worth of character. 11. The improvement of talent. 6. The power of kindness. 12. The joy of originating.

Aaron Montgomery Ward

While lower cost distribution entered Amer-ican cities with the arrival of department stores, rural America continued to suffer the higher costs of small stores and peddling. But the developments in the cities caused many retailers to wonder how similar low costs could be achieved for the countryside.

The first man to find and implement an answer was Aaron Montgomery Ward. Ward had experience as a clerk in several whole-sale establishments and at Marshall Field and Company in Chicago. Out of this experience grew a conviction that mail order was the answer for the countryside. Catalogs describ-

ing the available merchandise could be sent to farm families; the farmers could send their orders by mail, and the merchandise they or-dered could be mailed to them. In this way, Ward could eliminate the costs of several middlemen and the cost savings could be passed on to the rural customer.

In 1871 Ward drew down his accumulated savings to purchase a batch of goods at wholesale. But before he could mail his ad-vertisement to farm customers, the Great Fire struck Chicago and destroyed the building where Ward had stored his merchandise.

Chagrined, but not defeated, Ward

worked and saved for one more year. Then with his savings and the investments of two partners, he once again bought merchan-dise at wholesale prices, printed a one-page price list and sent it to Midwestern farmers.

The business was not an overnight success. Orders arrived slowly – too slowly for Ward’s partners. In 1873 they sold their shares in the business to Ward and expressed their doubts that he would survive. A frustrated Aaron Montgomery Ward carefully evaluated the situation. Since his merchandise was of high quality and his prices were low, he conclud-ed that his problem was that of establishing credibility in the eyes of his farm customers. And so Ward began to attend meetings of a large farmers’ organization known as the National Grange of the Patrons of Husband-ry. At those meetings, he promoted his busi-ness and, on at least one occasion, made a special offer to entertain Grange order-takers in Chicago if the local Grange could obtain $300 worth of orders. This strategy worked. Orders from the farmers’ clubs and the Granges fueled a sharp expansion in orders and in 1874 Ward decided to devote himself to the business on a full-time basis.

In 1875 Ward introduced a new sales tool,

the money-back guarantee. This tool had already been used by the new department stores in the big cities, but Ward was the first to use it in the national mail order business.

Ward’s original price list of 1872 contained 163 items. By 1875 he was mailing his cus-tomers a thick catalog listing 3,899 items. The business continued to grow and prosper, and new products were regularly added to the catalog. But the basic business philos-ophy of quality merchandise at low prices, backed by a money-back guarantee did not change.

In 1893 Aaron Montgomery Ward sold his controlling interest in the business to his broth-er-in-law, George Thorne. Ward could look back with satisfaction on his accomplish-ments. The mail order business which he had founded, had brought low-cost distribution to rural areas that had previously been isolated.

But Ward was not looking backward. He was too busy leading one of the nation’s early environmentalist crusades. Ward had become convinced that Chicago’s lakefront should be transformed into a beautiful public park, available to all citizens. At that time the lakefront area served as a dumping ground for trash and a home for penniless tramps. Ward’s proposals were not warmly received by the public. He ended up spending 20 years of his time and a substantial amount of his personal fortune waging the battle to clean up the lakefront. Eventually, howev-er, he won over the opposition. Today, Chi-cago’s lakefront park stands as a tribute to Ward’s vision.

ConclusionMontgomery Ward died in 1913, at the age of 69. His wife Elizabeth bequeathed a large portion of the estate to Northwestern University and other educational institutions.

The Montgomery Ward catalog’s place in history was assured when the Grolier Club, a society of bibliophiles in New York, exhibited it in 1946 alongside Webster’s dictionary as one of the hundred books with the most influence on life and culture of the American people.

Despite the collapse of its catalog business and bricks-and-mortar department stores in 2001,

Montgomery Ward & Co. as an online retailer still adheres to the once unheard philosophy of “satisfaction guaranteed”.

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