Roebuck Opens Its First Retail Outlet Sears Summary

  • Last updated on November 10, 2022

The opening of retail stores catapulted Sears into the position of the largest retail chain in the United States.

Summary of Event

In 1925, Robert E. Wood, then vice president of Sears, Roebuck and Company, was responsible for the company’s entering retailing. In 1906, Richard W. Sears wrote that his company did little business in cities and that he believed that cities were not the company’s territory. Nineteen years later, Wood proved that cities were part of Sears territory. [kw]Sears, Roebuck Opens Its First Retail Outlet (1925) [kw]Roebuck Opens Its First Retail Outlet, Sears, (1925) [kw]Retail Outlet, Sears, Roebuck Opens Its First (1925) Sears, Roebuck and Company Retailing;Sears, Roebuck [g]United States;1925: Sears, Roebuck Opens Its First Retail Outlet[06260] [c]Trade and commerce;1925: Sears, Roebuck Opens Its First Retail Outlet[06260] [c]Organizations and institutions;1925: Sears, Roebuck Opens Its First Retail Outlet[06260] Sears, Richard W. Roebuck, Alvah C. Wood, Robert E. Rosenwald, Julius

In the 1800’s, the population of the United States was widely scattered, with many living in isolated areas. When Sears established his mail-order business, agriculture was a principal source of wealth and income. Sears’s success was based largely on his understanding of the American farmer.

In the 1920’s, the complexion of the United States was changing. With cars and modern roads, rural customers were no longer limited to shopping by catalog, as they had with Sears. They could drive to towns, where growing retail chains offered more and better merchandise. In 1914, about 24,000 chain stores were operating in the United States; by 1920, more than 150,000 were in business. In 1900, the rural population outnumbered the urban population; by 1920, the situation was reversed. Wood believed that city people were not good catalog customers, as they shopped in city stores. Unless Sears opened stores, it faced a shrinking market. Wood experimented with one store, located in the company’s Chicago mail-order plant, and it was an immediate success.

The principal credit for the stature and growth of Sears goes to three executives: founder Richard W. Sears, Julius Rosenwald, and Robert E. Wood. Sears was born in Minnesota in 1863. He was working for the Minneapolis and St. Louis Railroad when the turning point in his life came, in 1886. A local jeweler refused to accept a shipment of watches, and Sears made a deal with the shipper for the watches. In six months, Sears made enough money selling the watches to start the R. W. Sears Watch Company. He advertised for a watchmaker and hired Alvah C. Roebuck, a tall, thin, nonaggressive man. Sears expanded into jewelry sales and published the first Sears catalog in 1887, offering his famous money-back guarantee. Sears was adept at describing the shape of a young nation’s material dreams; it was said that he could sell a breath of air.

In 1895, Julius Rosenwald, a clothing supplier for Sears, invested in the company. He was to become known as the architect of Sears. Rosenwald was convinced that the mail-order business could have a profitable future only if Sears would refrain from using daring promotional campaigns and operate in a more businesslike manner. In 1924, Rosenwald hired Wood, who was then the merchandising vice president at Montgomery Ward and had been a brigadier general in World War I. In 1928, Wood became president of Sears. Under Wood’s leadership, the company entered a prolonged period of growth and profitability.

As early as 1920, Wood realized that the only way to reach a broader mass market in rapidly urbanizing America was through a system of retail stores. Within several months of joining Sears, he used the mail-order business as a base for retailing and opened the first Sears retail store in the company’s Chicago mail-order plant. Before the year was out, he opened 7 more outlets. By the end of 1927, he had 27 stores in operation, and by 1932 there were 324. In 1931, the volume of retail store sales surpassed that of catalog sales.

All but one of the first stores were in relatively large cities but situated outside established downtown shopping areas to take advantage of lower land values, taxes, and rents. Each store also had ample parking. Eventually Sears moved into smaller towns that could not support full-line stores, prompting the question of which departments to stock. Gradually a classification system of A, B, and C stores emerged as Sears balanced stock with town size and clearly defined the stores’ public image. As a town’s population grew, service at its Sears store was upgraded to the next level.

Sears buying began to change in the late 1920’s. Some mail-order merchandise already was being sold under Sears trade names. With the opening of retail stores, volume increased in these lines, which included the labels of Kenmore and Craftsman.

Catalog sales desks were installed in retail stores, allowing customers to purchase items not on display. In the 1930’s, telephone sales offices were established. Eventually, catalog sales offices were opened in towns too small to support retail stores.

The integration of mail-order and retail operations was not always smooth. Wood believed that only by combining the two operations would the company realize economies of scale, and therefore savings. Mail-order branches served jobbing functions for the retail stores, receiving bulk shipments and distributing goods to stores. Mail-order branches ran the stores in their area, using them to unload unsold merchandise. As mail-order buyers were not accustomed to buying for city populations, which differed from the largely rural catalog customers, many buying mistakes occurred. Retail executives wanted separation from mail-order departments.

In time, retail stores were given more autonomy to meet the individual needs of their territories. Stores were allowed to have their own buyers and department managers, people who had the management and product expertise needed for the urban retail environment. This began the decentralization of Sears.

Store planning also emerged. Early stores were built as quickly as possible. In 1932, Sears established a store planning and display department. Previously, merchandise had been fit into buildings; now, buildings were built around merchandise. The Glendale, California, store, which opened in 1935, used this concept. Space requirements for different product lines, customer flow, and width of aisles were considered in the planning of store space.

Promotion of personnel from within became common practice at Sears. This was considered the best way to serve the company’s needs and essential for long-term survival.

Although Wood had begun with little experience in retailing, by 1935 his vision and learning experience from the catalog business had solidly established Sears in meeting the needs of a changing United States. By the time of his retirement in 1954, sales had risen from $200 million in 1924 to $3 billion. Sears had become the largest general merchandise distributor in the world and one of the nation’s largest employers.

Significance

The establishment of Sears retail stores is important not only because of the company’s size but also because of its methods. For years, the firm was the most successful retailer in the United States. One immediate impact of the opening of Sears retail stores was the opening of Montgomery Ward Montgomery Ward stores. Although initially opposed to the idea, Ward’s president in 1926 established “display stores” to exhibit goods carried in Montgomery Ward catalogs. Customers quickly insisted on buying the goods immediately rather than waiting for delivery. Ward opened stores across the country in response. In comparison with Sears, Montgomery Ward opened smaller stores in smaller towns but opened more of them. The orientation of Sears to larger cities and Ward to smaller ones continued.

The longer-term impacts of the Sears venture into retail stores came from the type of organization built by Wood and its influences on communities and other retailers. Sears provided merchandise for a rapidly urbanizing mass market. It developed a buying strategy that integrated mass production with mass distribution. Finally, it fashioned a uniquely effective body of policies in organization (such as decentralization), personnel and employee relations (such as promotion from within and excellent benefits), and public responsibility. By the 1960’s, Sears was a superpower referred to as the “colossus of American retailing.”

During the time of the early store openings, national demographic shifts were dramatic. People were moving from farms to cities; they had rising personal incomes, increased education, increased leisure, and increased rates of home ownership, and many were moving up the social scale. Information was transferred more quickly and new ideas were accepted more readily. Advertising was increasingly important in generating consumer preferences. All of these factors resulted in changing needs and diversified tastes.

Wood was one of the first to see clearly the changes in American life symbolized by the completion of highways and the increasing numbers of automobiles. The Sears practice of locating stores outside major downtown shopping areas was based on the ease of transportation the automobile represented. Other retailers, including large department stores, rushed to establish branches outside downtown areas. After World War II, the rapid development of suburban shopping centers Shopping centers Suburbs;shopping centers radically changed urban America. The automobile also spurred growth areas for Sears. Wood drew up specifications for an improved tire and contracted with Goodyear to make it. The tire was marketed under the Allstate brand, which Sears subsequently applied to other automobile supplies and automobile insurance.

The merchandise mix at Sears stores was different from that of the typical department store of the times, which carried food, clothing, household necessities, and some luxuries, with women as the prime customers. The Sears mail-order business served the needs of farms and farm families, as did the Sears retail stores. Sears promoted shopping as a family affair. Merchandise reflected the trend toward families owning their own homes. Home maintenance and repairs increased, generating a need for paint, building materials, and other supplies that Sears met through its stock. Wood fashioned Sears to respond to the changes occurring in the United States. The necessities of life as well as luxuries were brought to the mass population instead of only to the elite, strengthening local economies. Wood was one of the first business leaders to think of social responsibility in terms of customers, employees, stockholders, and sources of merchandise supply.

As Sears grew, the importance of the company’s ability to influence public policy became evident, as small business attempted to restrict the growth of large chains. Sears strengthened its markets, made influential friends, and gained a broad base of public support. One example involves the banking industry, which was affected by the presence of Sears stores. Initially, Sears used local banks only for short-term deposit of daily receipts, which were then transferred to a central location. This transfer of business angered local banks. Sears could see that goodwill, especially from the banking industry, an influential political force, was important in combating the antichain movements under way in the 1920’s. Instead of borrowing from a few large banks, Sears began sharing loan activity with local small banks. Sears managers became integral parts of their communities, unlike the “absentee owners” of the other chains. As they sat on boards and became community leaders, it was hard for local businessmen to turn against them in the fight against the chains.

A Sears outlet often was the largest store in a community. It could attract customers from a wide trading area, benefiting other nearby merchants. This lessened hostility toward the growing company. From the beginning, Sears supported activities to improve local economies and the national economy. Rosenwald helped strengthen the agricultural economy, for example, by offering grants to train farmers in efficient practices. Sears grants became an integral part of national agriculture policy.

In 1927, Sears established a public relations department that became involved in addressing social needs. As the population of the American South expanded and the agriculture of the area suffered, Sears encouraged its suppliers to expand to the South, to strengthen the region’s economy. In addition, Sears supported 4-H clubs and contests to encourage agricultural efforts beyond the problematic one-crop formula in the South. The company tailored similar agriculture programs to the needs of different parts of the country, including the needs of future homemakers as well as future farmers. Sears also created a scholarship program that became an important component of the company’s public activities. Such social programs left a lasting imprint on American life and earned Sears a unique place among American businesses. Wood’s legacy to Sears and to business as a whole was his demonstration that human and economic values are not necessarily in conflict. He created a corporate policy based on human and democratic values that may well be unique in American business history. Sears, Roebuck and Company Retailing;Sears, Roebuck

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Asher, Louise E., and Edith Heal. Send No Money. Chicago: Argus Books, 1942. Asher worked with Richard Sears as general manager in a period that witnessed the transition of Sears, Roebuck into a firmly established catalog business. This book is Asher’s attempt to set the record straight regarding the early days of Sears. Includes prophecies of changes to come.
  • citation-type="booksimple"

    xlink:type="simple">Cohen, David L. The Good Old Days. New York: Simon & Schuster, 1940. A history of American home life, morals, and manners as seen through Sears, Roebuck catalogs from 1905 to 1935. Discusses the “largest store in the world” and includes copies of letters from customers.
  • citation-type="booksimple"

    xlink:type="simple">Emmet, Boris, and John E. Jeuck. Catalogues and Counters. Chicago: University of Chicago Press, 1950. In-depth work presents the history of Sears in great detail, describing how the company’s managers met internal problems and adjusted their business approach to meet the demands raised by external developments.
  • citation-type="booksimple"

    xlink:type="simple">Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Penguin, 1987. Analysis of the Sears corporation in the late twentieth century against the background of the glory years of Sears.
  • citation-type="booksimple"

    xlink:type="simple">Mahoney, Tom, and Leonard Sloane. The Great Merchants. Rev. ed. New York: Harper & Row, 1974. Detailed accounts of twenty-six American retail institutions and the merchants who built them. Includes discussion of the largest department store, specialty shop, mail-order house, variety chain, apparel chain, and drugstore.
  • citation-type="booksimple"

    xlink:type="simple">Martinez, Arthur C. The Hard Road to the Softer Side: Lessons from the Transformation of Sears. New York: Crown Business Books, 2001. Account of a troubled period in Sears history near the end of the twentieth century, as related by the executive who is credited with saving the company.
  • citation-type="booksimple"

    xlink:type="simple">Michman, Ronald D., and Alan J. Greco. Retailing Triumphs and Blunders. Westport, Conn.: Quorum Books, 1995. Describes how retailers of various kinds have responded to changes in U.S. society and the marketplace. Includes discussion of Sears and other department stores.
  • citation-type="booksimple"

    xlink:type="simple">Werner, Morris R. Julius Rosenwald: The Life of a Practical Humanitarian. New York: Harper & Brothers, 1939. Describes Rosenwald’s philanthropic activities in an era of laissez-faire economics, when social consciousness was new. Presents an account of the changes occurring at Sears and Rosenwald’s ability to lead the company profitably into the future.
  • citation-type="booksimple"

    xlink:type="simple">Worthy, James. Shaping an American Institution: Robert E. Wood and Sears, Roebuck. Urbana: University of Illinois Press, 1984. History of Sears under the leadership of Wood and others, written by a former employee of the company. Presents analyses of policies and strategies, including decentralization and reliance on individual initiative. Many accounts of events come from observation and personal documentation.

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