Selling in the New Marketplace

Sources

Toward Mass Distribution. With the spread of the railroads, shipments of goods began crisscrossing the country more swiftly, in larger volumes, and on steadier schedules than ever before—a development that rapidly worked structural commercial change. Mass distribution, in short, accompanied the rise of mass production; the new landscape of railroads, factories, and industrial cities grew a new commercial network of distributors, department stores, and mail-order houses. It was a far-reaching transformation, and it would take decades longer to complete, but it was well underway by the end of the 1870s. Already the nascent outlines of a modern consumer economy were growing clear.

Pre-Railroad. In the early nineteenthth century, few Americans were plugged into anything like a consumer-goods economy. Most clothing was made in family households, and products such as tools, shoes, furniture, and even firearms were usually made by local craftspeople and acquired by means of barter or book credit. Those goods that came from beyond the village or surrounding countryside typically came by way of traveling peddlers or through country stores. Keeping a country store during this period meant stocking a general assortment of goods, accepting farmers’ crops and produce in payment, and extending long credits to local customers to get them through harvest times. It also required making annual buying trips to a commercial entrepot like New York City, Philadelphia, or Baltimore, to stock up for each coming year.

Wholesaling. The railroads undid this world in several stages. The first stage of change happened behind the counter, in the wholesaling of goods. As manufactured goods began to flow out of American factories, a new group of middlemen—“jobbers”—positioned themselves to buy them up in bulk and distribute them to country stores. The jobbers first infiltrated the northern and middle Atlantic states, then developed midwestern territories as rail connections hooked hinterlands into cities such as Cincinnati, Saint Louis, and above all Chicago. By 1866 Chicago, at the railroad hub of the Midwest, had fifty-nine jobbers handling sales of more than $1 million. After the war, Southern systems proliferated along much the same lines, networking the country stores that were then forming (in the wake of the dismantling of the plantations) as the region’s rural commercial nodes. With the coming of the wholesalers, storekeepers left off their annual buying trips; now the jobbers dispatched traveling salesmen to them, men called “drummers,” who carried trunks full of samples and catalogues, and telegraphed a storekeeper’s orders into the home office. The largest of the jobbers was A. T. Stewart, who by 1870 had amassed a business with sales of $50 million ($42 million wholesale, $8 million retail) and a workforce of two thousand drummers, clerks, managers, and other employees.

Department Stores. Meanwhile, in urban areas, denser market concentrations permitted even more direct connections between manufacturers and customers. Here innovation happened at the retail level, in the form of the department store. Rowland H. Macy was an important early example. His early career was checkered: four times he started stores; four times he went under, the last failure (in Haverhill, Massachusetts) forcing him into bankruptcy. But when he moved his efforts to New York City, the largest urban market in the country, Macy’s fortunes turned. He set up his fifth store in 1858 on Sixth Avenue near Fourteenth Street, and business quickly thrived. Like other successful department stores, Macy’s sold a widening assortment of goods at low prices, maintaining low profit margins and counting on high volume to make profits. It also sold its products at set prices, clearly labeled on affixed tags; earlier retail establishments had tended to set prices in negotiations with customers, but for the department stores, where dozens or even hundreds of clerks handled customers’

purchases, uniform price systems became the rule. Macy’s operated on a cash-only basis, both in its sales and its stock purchases, enabling the company to more easily weather the economy’s periodic financial panics. By 1870 the store was stocking an impressive array of goods—including dry goods, men’s hosiery and ties, linens and towels, costume jewelry, silver, and clocks—and was doing more than $1 million worth of business.

Merchandise. The department stores depended on their urban locations to concentrate client bases. But their impact was ultimately felt beyond the cities, for they prefigured an even wider dispersal of mass retailing via the mail-order houses and the chain stores such as Woolworth’s that emerged later in the nineteenth century. The department stores represented not just new kinds of commercial establishments, but new patterns of selling and of buying—indeed, new concepts of consumer goods as store merchandise, arrayed in windows and advertisements, priced and tagged. Department stores competed in creating lavish displays and environments that stimulated customers’ appetites. Wanamakers, for example, Philadelphia’s grandest department store, erected a huge silk tent in the center of the store and created within it a luxurious, carpeted, and chandeliered ballroom setting where ladies could shop for evening gowns.

MARGARET GETCHELL

One of the key figures in Macy’s early years was Margaret Getchell, who rose to become a central manager and, very possibly, one of the first woman business executives in America. Originally a schoolteacher, she came into the company (she was Macy’s cousin) as a cashier and was quickly promoted to the position of bookkeeper. As her management potential became clear, Macy elevated her again in 1866, to the job of superintendent, which put her in a position directly under his own in the store’s managerial hierarchy. Three years later, she married Abiel LaForge, a salesman with the company. Initially after marrying she kept her position at the company, working alongside her husband, running the store while he focused on merchandising. But when the couple had their first child, Getchell’s status within the company shifted: while LaForge became a partner in the firm, Getchell gave up her job as superintendent. She continued sporadically to assist in managing the store; for one three-month period while Macy and LaForge traveled to Europe on a buying trip she ran operations single-handedly (and pregnant with her third child). But she received only token presents from Macy for this work. Executive business responsibilities remained the domain of men during this period, even when women displayed unmistakable managerial competence.

Source: Bruce Levine and others, Who Built America?, 2 volumes (New York: Pantheon, 1989, 1992).

Brand Names and Packaging. It was during this period that trademarks and brand names appeared and quickly began to be a critical part of doing business on a national scale. One early manufacturer to adopt these techniques was the Smith Brothers, who concocted cough drops at their factory in Poughkeepsie, New York, and shipped them to general stores and drugstores nationwide. Finding in the late 1860s that competitors were releasing imitations under names such as “Schmitt Brothers” and “Smythe Brothers,” the Smiths responded by registering their portraits as a trademark and emblazoning the images on the glass bowls in which the cough drops were sold. But this measure still left the company vulnerable to unscrupulous retailers who filled the bowls with cheaper imitations, so in 1872 Smith Brothers began packaging their cough drops in “factory-filled” boxes, each bearing the company’s trademark. (Smith Brothers employed families in Poughkeepsie to fill the boxes, each with sixteen cough drops; every evening a wagon would drop off five-gallon cans of cough drops and stacks of boxes, and pick up the boxes that had been filled the previous day.) The first cough drops to be marketed, Smith Brothers joined a growing number of factory-packaged, trademarked products on store shelves.

Mail Order: Montgomery Ward. The man who devised the nation’s first mail-order company had experienced business at each step in the commercial chain on the path to market. As a young man Aaron Montgomery Ward ran a general store in Saint Joseph, Michigan, then worked for Field, Palmer, and Leiter, Chicago’s largest wholesale dry-goods house, then traveled as a drummer for another jobber based in Saint Louis. He thus developed a working sense of both how goods moved through the modern economy and how they were received by customers in the countryside. At some point in his early career, Ward conceived of a new way of marketing goods that cut out the jobber and the country store, namely, doing business by connecting directly with customers through the mails. It was a radical stroke, and it fit neatly with the spirit of the times: just as Ward opened his business in 1872, rural, agrarian hostility toward “parasitic middlemen” such as jobbers and grain warehouse men was driving farmers to organize marketing and purchasing cooperatives of their own. Ward started off with one partner, capital of only $2,400, and a “catalogue” that consisted of a single sheet listing 163 items. Within a few years, the purchasing agencies of the National Grange endorsed the company and began placing orders. Ward emblazoned the endorsement, advertising his firm as “THE ORIGINAL WHOLESALE GRANGE SUPPLY HOUSE” and vowing to sell to “Patrons of Husbandry, Farmers and Mechanics at Wholesale Prices.” His prices were low, and business boomed. Within two years the catalogue had grown to eight pages; two years after that it was 150 pages and illustrated with woodcut engravings. By the end of the 1880s the company was doing more than $1 million worth of business a year.

THE GRANGERS

Farmers adjusted uneasily to being enmeshed in distant markets. Tensions flared over railroad and grain elevator rates, grain price fluctations, banks and interest rates. Agrarian politics grew especially heated in the decades following the Civil War, when falling grain prices and deflationary pressures squeezed farmers who had to repay loans with currency that was worth substantially more than it had been when they borrowed it. Late in 1867, these impulses found organized political expression in the Patrons of Husbandry, a secret association organizing in Washington, D.C. The Grangers, as they were popularly known, quickly grew in numbers and spread across the agricultural heartland. A Farmers’ Convention held in Springfield, Illinois, adopted typical resolutions, including a denouncement of “all chartered monopolies” and a call for legislation “fixing reasonable maximum rates” for railroad freights and passengers. In the same vein, the Declaration of Purpose of the National Grange in 1874 advocated cooperative marketing and purchasing ventures among farmers, the elimination of the middlemen who seemed to stand between farmers and their ultimate customers, and the establishment of agricultural and technical colleges. Meanwhile, calls for state regulation of railroad and warehouse rates first came to fruition in Illinois in 1871, followed by Wisconsin and Iowa several years later. Intrastate railroad regulation proved ineffective, however, and by the 1880s the agrarians were turning their attention to Congress.

Sources

William Cronon, Nature’s Metropolis: Chicago and the Great West (New York: Norton, 1991);

Robert Hendrickson, The Grand Emporiums: The Illustrated History of America’s Great Department Stores (New York: Stein &Day, 1979);

Glenn Porter and Harold C. Livesay, Merchants and Manufacturers: Studies in the Changing Structure of Nineteenth-Century Marketing (Baltimore: Johns Hopkins University Press, 1971).