Big Guys Always Win
Once upon a time, towns in America were served by local merchants who ran small retail establishments. These small businesses gave great personal service. The owners of these small shops knew their customers by name. They knew your wife or husband’s name. They knew the names and ages of your children. They supported town activities. They hired their employees from the towns where they resided and spent their money locally, boosting their hometown economies.
Furthermore, the profit margins of these small retailers were relatively slim. These “mom and pop” stores applied a modest but fair mark-up over their costs. Few of them got rich; but they did exactly what their friends and neighbors did; they eked out a living.
Then, everything changed. The big retailers invaded the space of the small town merchant. They offered a larger inventory of goods and services. The local merchant just didn’t have the capital to stock such a large inventory. The big retailer’s costs were so much lower and their efficiency was so much greater, the town folk could now buy their products as cheaply as the local retailer.
At first the local retailers weren’t worried. They believed that despite their limited inventory and higher prices, the level of service they provided and the loyalty of their friends and neighbors would compensate. They were wrong. Satisfied with the money-back guarantee, local citizens flocked to the alter of the big retailer. Literally thousands of small retailers went out of business over a thirty-year period. Hundreds of thousands of employees were affected. In the end the customers cared not so much about small town service and the export of jobs, as they cared for larger product selection and low prices. It was the ruination of America.
Or was it?
I’m not talking about Wal-Mart or Target, or Best Buy, or Home Depot. I’m not even talking about this century. I’m talking about Aaron Montgomery Ward and Richard Sears. Aaron Montgomery Ward opened his Chicago mail order business in the fall of 1871. Richard Sears, a railroad freight agent in North Redwood, Minnesota began selling watches via mail order in 1886, re-establishing his firm in Chicago four years later. Due to the establishment of the railroads, Sears and Ward took advantage of rural free delivery along with their famous no risk customer satisfaction policy. Their catalog, which was mailed to virtually every farm and home in the United States, offered everything except live animals and fresh fruits and vegetables. Sears even sold an entire one-family house. The guarantee was simple. The Sears catalog said, “Tell us what you want in your own way, written in any language, no matter whether good or poor writing, and the goods will promptly be sent to you.” “Send no money.” “All goods will be sent express C.O.D., to be examined at the express office in the presence of the agent.”
Like today’s Wal-Mart, Sears and Wards were the essence of efficiency. A German visitor, observing the Sears’ operation exclaimed that the business operated with “the greatest efficiency I have ever seen.” Indeed it was true. “Beginning at 9:00 a.m. sharp, an average of thirty-five thousand orders a day was sent through an eighteen-mile-long system of copper tubing to the desks of thousands of clerks working nonstop at typewriters. By four that afternoon all orders were filled and sent to waiting baggage trains, their long locomotives lined up in the company’s rail yard, stacks smoking, eight and nine abreast, as if poised for a race. At a signal, they steamed out to all corners of America.”*
In this manner, Sears and Wards drove out hundreds of thousands of small country stores between 1871 and 1900. But unlike Wal-Mart and other big box retailers of today, the Montgomery Ward Catalog made no apologies. In an article in Ward’s catalog it was written: “Mail-order has solved the problem (of the tyranny) by the country merchants and released (the farmer) from serfdom. He can now buy his supplies as cheaply as the country merchant, and by the mail can annihilate the distance between himself and the great centers of trade.”
The lesson is simple. Efficiency wins, at all times and in all circumstances. It wins because the standard of living of the average man is elevated above what existed under prior circumstances. The times, they are a changing….or are they?
* City of the Century. Donald L. Miller. Copyright 1996. Simon & Schuster ISBN 0-684-83138-4