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Montgomery Ward and Co.

MONTGOMERY WARD AND CO.


Montgomery Ward and Co., Incorporated had its origins in the 1860s, when young Chicago native Aaron Montgomery Ward saw that he could undercut rural retailers by selling directly to farmers through mail orders and by delivering via the railroad. After a false start in October 1871, when the Great Chicago Fire destroyed his inventory, Ward and two partners sent out their first mailing in the spring of 1872. This was the world's first general merchandise mail-order catalog.

Orders trickled in and Ward soon bought out his partners, who were discouraged by the slow pace of business. Late in 1872 he got a break. The Illinois Grange, a farmers' organization, named Ward its purchasing agent. This gave Ward access to Grange mailing lists and meetings, and greater credibility with farmers. He began subtitling Montgomery Ward price lists with the phrase Original Grange Supply House.

As the business grew Ward needed more capital and more help. Late in 1873 his brother-in-law, George Thorne, put five hundred dollars into the firm and became an equal partner. The two men made an effective team. While Ward had the inspiration for the business, George Thorne was a practical day-to-day manager.

Montgomery Ward's primary customers were farmers who needed new industrial tools and farming equipment that were expensive or hard to find outside of cities. In these early years, his best-selling product was the sewing machine, and the catalog was filled with pumps, feed cutters, cane mills, corn shellers, threshers, saws, grinders, and engines.

As postal rates fell Montgomery Ward stepped up advertising in newly popular magazines. Through publications such as the Prairie Farmer he told farmers to query him for catalogs with penny postcards. The spring catalog for 1874 had 32 pages. That fall it was expanded to 100 pages. By the end of 1874 sales topped $100,000.

Increased sales of $300,000 in 1875 allowed Montgomery Ward to increase service. A satisfaction-guaranteed-or-your-money-back policy was instituted in 1875, and the catalogs began rating merchandise as good, better, or best. Montgomery Ward also counseled customers to band together and split fixed freight costs.

During the 1880s competition in the form of major department stores began to enter the catalog field. Jordan Marsh and Co., John Wanamaker, Sears Roebuck and Company, and Carson, Pirie, Scott and Co. all began or resumed mail-order operations. However, Montgomery Ward was still the biggest and most popular. Its 240-page 1883 catalog listed 10,000 items. In 1884 Ward bought the Farmer's Voice weekly newspaper to use as an advertising vehicle. In 1886 William C. Thorne, George Thorne's eldest son, increased the size and circulation of the catalog, leading to a boom in orders. By 1888 Montgomery Ward's sales reached $1.8 million. To cap off the decade Aaron Ward and George Thorne turned their partnership into a corporation in 1889.

In 1900 Montgomery Ward built a new office headquarters at Michigan Boulevard and Madison Street in Chicago. Sales that year were $8.7 million, trailing behind Sears's $10 million as competition between the two Chicago firms grew more intense.

The U.S. Postal Service's initiation of a parcel post system in 1913 gave mail-order business a boost. Montgomery Ward made $3.4 million on 1915 sales of $49 million as a boom period began. But in September 1920 a financial panic hit, and prices began to fall. Sales dropped to two-thirds of their 1919 level. Losses for 1920 totaled $10 million.

By 1922 the economy rebounded. The retail market was beginning to displace the mail-order system as the automobile changed the way people in the United States shopped. Montgomery Ward somewhat belatedly entered the retail sector in 1926. That year the company opened its first freestanding retail store in Plymouth, Indiana. The success of this store and the continuing weakness of the mail-order sector led Montgomery Ward to announce that it would open stores in rural towns with populations of 10,000 to 15,000. Ward had 531 stores operating by the end of 1929, but the stock market crash in October of that year, followed by the Great Depression (19291939) curtailed further expansion plans and led to the closure of 147 poorly performing stores.

The early years of the Depression were difficult for Montgomery Ward but by 1934 the company turned the corner and returned to profitability. That year the company also began taking telephone orders. In 1939 Montgomery Ward made a public relations coup when a Ward copywriter wrote a booklet about a little red-nosed reindeer named Rudolph, which became a Christmas classic. The booklet was included in millions of catalogs.

From the 1950s onward Montgomery Ward was in an almost constant struggle for survival. By the mid-1950s Montgomery Ward had already fallen well behind Sears Roebuck, whose sales were three times greater. Traditional retailers such as Montgomery Ward and Sears Roebuck also saw competition grow fiercer with the entrance of discount chains such as Wal-Mart into the marketplace. Ownership of the flagging retailer eventually fell into the hands of Mobil Corporation in 1976. Twelve years later, however, the largest management-led leveraged buyout in U.S. history at the time ($3.8 billion) transformed Montgomery Ward into a privately held company. Declining profitability led the company to file for Chapter 11 bankruptcy protection in mid-1997 and placed its future in serious doubt.

See also: Chain Store, Department Store, Mail-Order House, Retail Industry, Sears Roebuck and Company


FURTHER READING

Balu, Rekha. "Crunch Time at Montgomery Ward." Crain's Chicago Business, March 17, 1997.

Hoge, Cecil C., Sr. The First Hundred Years Are the Toughest: What We Can Learn from the Century of Competition between Sears and Wards. Berkeley, CA: Ten Speed Press, 1988.

Latham, Frank Brown. A Century of Serving Consumers: The Story of Montgomery Ward, 18721972. Chicago: Montgomery Ward and Co., Incorporated, 1972.

Morrell, Lisa. "Ward's Is Changing Everything Well, Almost: Bright Strategy Faces Huge Obstacles." Crain's Chicago Business, February 1, 1999.

Steinhauer, Jennifer. "Ward, Down and Struggling, Plans to Follow Revived Rivals." New York Times, May 3, 1997.

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