Sears, Roebuck and Company
Along with his partner A.C. Roebuck, Richard Warren Sears founded the first large-scale mail-order business and one of the world's largest retail stores. The company's extensive catalog eventually became a fixture in American homes and changed the way people shopped. It also helped foster the growth of the mail-order industry worldwide.
Richard Sears was born on December 7, 1863, in Stewartville, Minnesota. He was the son of Eliza A. Benton and James Warren Sears, a successful wagonmaker. When Richard was 15, his father lost his substantial fortune in a stock farm venture; he died two years later. Young Richard then took a job in the general offices of the Minneapolis and St. Paul Railroad to help support his widowed mother and his sisters.
Once he had qualified as a station agent, Sears asked to be transferred to a smaller town in the belief that he could do better there financially than in the big city. Eventually he was made station agent in Redwood Falls, Minnesota. There he took advantage of whatever selling opportunities came his way, using his experience with railroad shipping and telegraph communications to develop his idea for a mail-order business.
In 1895, Sears married Anna Lydia Mechstroth of Minneapolis. They had two daughters and two sons. Sears retired from business in 1909 and lived his remaining years on his farm north of Chicago. He died on September 28, 1914.
The man who was known as the "P.T. Barnum of merchandising" had a humble and unremarkable start in business. As a railroad station agent in a small Minnesota town, he lived modestly, sleeping in a loft right at the station and doing chores to pay for his room and board. Since his official duties were not all that time consuming, Sears soon began to look for other ways to make money after working hours. He ended up selling coal and lumber and also shipped venison purchased from Indian tribes.
In 1886, an unexpected opportunity came his way when a jeweler in town refused to accept a shipment of watches on which no rail freight charges had been paid. Rather than having the railroad pay to return the shipment, Sears obtained permission to dispose of the watches himself. He then offered them to other station agents for $14 each, pointing out that they could resell the watches for a tidy profit. The strategy worked, and before long Sears was buying more watches to sustain a flourishing business. Within just a few months after he began advertising in St. Paul, he quit his railroad job and set up a mail-order business in Minneapolis that he named the R.W. Sears Watch Company.
Offering goods by mail rather than in a retail store had the advantage of low operating costs. Sears had no employees and was able to rent a small office for just $10 a month. His desk was a kitchen table, and he sat on a chair he had bought for 50 cents. But the shabby surroundings did not discourage the energetic young entrepreneur. Hoping to expand his market, Sears advertised his watches in national magazines and newspapers. With low costs and growing customer base, he made enough money in his first year to move to Chicago and publish a catalog of his goods.
Once in Chicago, Sears hired Alvah C. Roebuck to fix watches that had been returned to the company for adjustments or repairs. Soon the men became business partners and started handling jewelry as well as watches. A master salesman, Sears developed a number of notable advertising and promotional schemes, including the popular and lucrative "club plan." According to the rules of the club, 38 men paid a dollar a week into a pool and chose a winner each week by lot. Thus, at the end of 38 weeks, each man in the club had his own new watch. Such strategies boosted revenues so much that by 1889, Sears sold the business for $70,000 and moved to Iowa to become a banker.
Sears soon grew bored with country life, however, and before long he had started a new mail-order business featuring watches and jewelry. Because he had agreed not to compete in the same business in the Chicago market for a period of three years after selling his company, he established his new enterprise in Minneapolis. Once again he hired Roebuck, and this time he dubbed the product of their partnership A.C. Roebuck and Company. In 1893, Sears moved the business to Chicago and renamed it Sears, Roebuck and Company.
Once established in Chicago, the company grew rapidly. The first edition of the Sears catalog published in the mid-1880s had included a list of only 25 watches. By 1892, however, it had expanded to 140 pages and offered "everything from wagons to baby carriages, shotguns to saddles." Sales soared to nearly $280,000. A mere two years later, the catalog contained 507 pages worth of merchandise that average Americans could afford. Orders poured in steadily, and the customer base continued to grow. By 1900, the number of Sears catalogs in circulation reached 853,000.
Sears was the architect of numerous innovative selling strategies that contributed to his company's development. In addition to his club plan, for instance, he came up with what was known as the "Iowazation" project. This famous undertaking had the company ask each of its best customers in Iowa to distribute two dozen Sears catalogs. These customers would then receive premiums based on the amount of merchandise ordered by those to whom they had distributed the catalogs. The scheme proved to be spectacularly successful and ended up being used in other states, too.
Such tremendous growth led to problems, however. While Sears was a brilliant marketer (he wrote all of the catalog material), he lacked solid organizational and management skills. He frequently offered merchandise in the catalog that he did not have available for shipment, and after the orders came in he had to scramble to find the means to fill them. Workdays were frequently 16 hours long; the partners themselves toiled seven days a week. Fulfilling orders accurately and efficiently also posed a challenge. One customer wrote, "For heaven's sake, quit sending me sewing machines. Every time I go to the station I find another one. You have shipped me five already." Exhausted by the strain of dealing with these concerns, Roebuck sold his interest in the company to Sears in 1895 for $25,000.
With his partner out of the picture, Sears badly needed a manager. He eventually found one in Aaron Nussbaum, who bought into the company with his brother-in-law, Julius Rosenwald. By 1895, Sears, Roebuck was grossing almost $800,000 a year. Five years later, that figure had shot up to $11 million, surpassing sales at Montgomery Ward, a mail-order company that had been founded back in 1872. In 1901, Sears and Rosenwald bought out Nussbaum, who didn't get along with Sears, for $1.25 million.
According to John Steele Gordon in an article published in American Heritage, it was Rosenwald, not Sears, who transformed Sears, Roebuck "from a shapeless, inefficient, rapidly expanding corporate mess into the retailing titan of much of the twentieth century." He streamlined the system by which orders were processed, employing a color-coding scheme to track them and an assembly-line method of filling them. These efficient new techniques enabled the company to meet the challenge of handling an ever-increasing number of orders. By 1906, for example, Sears, Roebuck was averaging 20,000 orders a day. During the Christmas season, that jumped to 100,000 orders a day. That year, the company moved into a brand-new facility with more than 3 million square feet of floor space. At the time, it was the largest business building in the world.
In 1909, Sears resigned as president of the company he had founded. His health was poor, and many of his extravagant promotional schemes had begun to run into opposition from his fellow executives, including Rosenwald. Retiring to his farm north of Chicago, he turned the company over to his partner. At the time of his death in 1914, Sears left behind an estate of $25 million and an enduring legacy of success in the highly competitive world of retailing.
Social and Economic Impact
Richard Sears had a genius for marketing and exploited new technologies to reach customers nationwide via mail-order. At first he targeted rural areas, where people had few retail options and appreciated the convenience of being able to shop from their homes. He made use of the telegraph as well as the mails for ordering and communicating and relied on the country's expanding rail freight system to deliver goods quickly. Passage of the Rural Free Delivery Act made servicing remote farms and villages even easier and less expensive.
However, the rapid growth of the mail-order business dominated by Sears, Roebuck had a negative impact on smaller retailers. Unable to compete with both the industry giant and its main competitor, Montgomery Ward, some merchants angrily began referring to the company as "Rears and Soreback" or "Shears and Rawbuck." They steadily lost customers to Sears' lower prices, wider selection, and aggressive promotional campaigns. But as residents of rural areas found themselves able to purchase the kinds of goods that had once been available only in big cities, they came to feel a greater sense of social connection with the rest of the country.
Skyrocketing sales could not be maintained without sound business practices, however. Sears offered fixed prices and money-back guarantees as well as a liberal adjustment policy. These standards assured customers that they would be treated fairly and that Sears, Roebuck merchandise was of good quality. Such practices eventually forced other retailers to improve their relations with customers or risk losing them to Sears, Roebuck.
Chronology: Richard Sears
1880: Went to work for Minneapolis and St. Paul Railroad.
1886: Founded R.W. Sears Watch Company.
1889: Founded A.C. Roebuck and Company.
1893: Moved business to Chicago and renamed it Sears, Roebuck and Company.
1895: Julius Rosenwald joined company as manager.
1900: Distributed more than 850,000 Sears mail-order catalogs.
1905: Implemented "Iowazation" project to boost sales in rural areas.
1909: Retired to farm north of Chicago.
Sears' ability to understand and communicate with his customers was perhaps his most remarkable quality. According to an essay in Webster's American Biographies, his catalog copy "was liberally sprinkled with adjectives and was 'folksy' enough to be readable as popular fare." Gordon noted that "Sears had a deep, intuitive feel for the commercial needs and aspirations of the people of rural America, and a genius for writing catalog and advertising copy that awakened those needs and aspirations." To be sure, sometimes his descriptions exaggerated the facts, which occasionally led to customer dissatisfaction and merchandise returns. (On that subject, Sears is reported to have said that "honesty is the best policy; I know because I've tried it both ways.") By 1970, the Sears catalog boasted a circulation of 50 million, making it the second most popular publication in U.S. homes after the Bible.
So profound was Sears, Roebuck's influence in America that Senator Gene Talmadge was once prompted to joke that the typical Georgia farmer had only three friends in the world—Jesus, Sears, Roebuck, and Senator Talmadge himself. And President Franklin D. Roosevelt humorously suggested the best way to prove America's superiority to the Soviet Union would be to bomb the country with Sears catalogs.
Although it ceased its catalog operations in 1993, Sears continues to be a leading retailer in the United States. It had begun experimenting with the idea of opening stores in 1925 to attract urban customers. These proved to be so successful that retail sales surpassed catalog sales by 1931, with the stores capturing a little over 53 percent of $180 million in total sales. By 1979, Sears posted sales of nearly $24 billion, making it at that time the largest retail company in America as well as one of the largest retailers in Canada. According to 1997 figures, Sears had more than 800 department stores across the United States and large-scale operations overseas. While company headquarters are now located in suburban Chicago rather than in the city itself, downtown is home to the impressive Sears Tower. At 110 stories, it is one of the tallest buildings in the world and a fitting testament to an entrepreneur who revolutionized the American retail business.
Sources of Information
Contact at: Sears, Roebuck and Company
3333 Beverly Rd.
Hoffman Estates, IL 60179
Business Phone: (847)286-2500
Emmett, Boris, and John E. Jeuck. Catalogues and Counter: A History of Sears, Roebuck and Company. Chicago: University of Chicago Press, 1950.
Gordon, John Steele. "No Respect: A Rule of Thumb on Executives' Salaries—They Aren't Overpaid If There'd Be No Company Without Them." American Heritage, September 1993.
Littell, Robert. "The Great American Salesman." Fortune, February 1932.
Weil, Gordon L. Sears Roebuck U.S.A. New York: Stein and Day, 1977.
"Sears, Richard." Business Leader Profiles for Students. . Encyclopedia.com. (November 17, 2018). https://www.encyclopedia.com/education/economics-magazines/sears-richard
"Sears, Richard." Business Leader Profiles for Students. . Retrieved November 17, 2018 from Encyclopedia.com: https://www.encyclopedia.com/education/economics-magazines/sears-richard
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