The Mark of a Retail Giant

by

Lauren Roberts

When I began to do research for this column I was astounded to discover that the company my sisters and I called Monkey Ward in the 1960s is still alive. I thought it went to its grave around the time Nixon resigned. But . . . no, Montgomery Ward & Co., Incorporated is still around if only online. It is the ninth-largest U.S. retailer and the largest privately-held retailer in the country.

The store we casually derided as trashy actually led the way in new methods of retailing when it began in 1872, led by a visionary businessman named Aaron Montgomery Ward. He was born on February 17, 1844 in Chatham, New Jersey, to a large family. At age fourteen, he was apprenticed to a trade where he earned $0.05 cents per day at a cutting machine in a barrel stave factory and then at a sticking brick kiln for five cents more per day. He soon left the confines of those jobs, ended up in St. Joseph, Michigan, and went to work in a shoe store. He made a good salesman and was soon engaged as a traveling one for a general country store at six dollars per month plus board, at the time a considerable salary. His hard work paid off and he rose to the position of heard clerk and general manager. He was there for three years, at the end of which his salary was an astonishing one hundred dollars per month plus board.

In 1865, Ward relocated to Chicago and worked for the leading dry-goods house of Field Palmer Leiter, the forerunner of Marshall Field & Co. He stayed there for two years before moving to Wills, Greg & Co. During these jobs, which involved tedious train trips, hiring rigs at local stables, driving out to crossroads stores, and talking to rural proprietors and their customers, he conceived a new merchandising technique: direct mail sales to country people. Those who lived in rural areas, and there were many, often longed for city comforts and products, but were subject to victimization by monopolists who offered no guarantee of quality and were overcharged by the middlemen who brought the goods from city to countryside. It was a caveat emptor economy. Ward developed a plan for bypassing the intermediaries by buying goods at low cost for cash and delivering them directly to the consumers at their nearest railroad station.

Lack of capital was his only problem. None of his friends or acquaintances would join him. In fact, his idea was considered near lunacy. His initial start in late 1871 was unfortunately destroyed by the Great Chicago Fire, but he persevered with the help of two employees and a total capital of $1,600. By spring of 1872 the first mailing had gone out. Ward was deeply involved in it and initially wrote all the catalog copy. (Even later, when the business grew and the department heads wrote the merchandise descriptions, he still went over every line of copy to be certain it was accurate.) Orders were slow at first, and his two partners grew impatient. Ward bought them out. But he still experienced problems: some rural retailers even publicly burned his catalog.

At first the company kept its focus on the farmers. The partners advertised in publications like Prairie Farmer and told readers to query them with penny postcards if they wanted a catalog mailed to them. And the catalogs grew along with the business, The first one for spring 1874 had thirty-two pages, but by fall it had expanded to 100 pages.  By the end of that year, sales totaled more than $100,000. Though Ward sold sewing machines—it was his most popular product—he initially focused on farm equipment such as pumps, feed cutters, cane mills, corn shellers, threshers, saws, grinders, and engines. He used his buying power to bypass the manufacturers that had formed trusts to keep prices high, seeking out bargains in foreign markets and with small manufacturers who will willing to sell for less.

His best lucky break came when he was named the purchasing agent for the Illinois Grange, a farmers’ organization gave Ward access to their mailing lists and meetings and provided him with the opportunity to increase his sales. More growth meant the need for more money so in late 1873 Ward’s brother-in-law George Thorne, invested $500 into the firm and became an equal partner. It was a good one: Ward brought the inspiration, Thorne brought the practical managerial skills.

Customers were attracted by Ward’s unprecedented policy of “satisfaction or your money back,’ which had been added in 1875.  He carried three grades of merchandise: good, better, and best. He also counseled his customers to band together and split the fixed freight costs to their advantage.

The catalog soon became known as the “Wish Book,” which by 1883 had grown to more than 240 pages and 10,000 items. Ward’s incorporated in 1889, and by 1896  acquired its first serious competitor when Richard Warren Sears introduced his catalog. (Though there were other retailers, these two fought each other for dominance during most of the twentieth century.) In 1892, the Ward catalog had 568 pages and 8,000 illustrations; the company was growing quickly.

In 1893, the two partners turned over managing control to Thorne’s four sons, though Ward remained president. Sears was beginning to be a thorn in their side with their slogan, “We always undersell.,” but management believed they represented quality while Sears’ merchandise was inferior. They refused to compete for the bottom, instead trying to convince the public that cheaply-made goods were no bargain and also offered premiums as incentives to buy more. By 1904, two years after the issuance of this bookmark promoting the catalog, Wards was mailing three million catalogs, each weighing four pounds, to customers.

The U.S. Postal Service gave an inadvertent boost to the mail-order business with its initiation of a parcel post system in 1913. But even though they  benefited, the Thornes had trouble keeping profit levels high. They outspent Sears on advertising and branch warehouses, did not with few exceptions produce its own goods, and had fewer customers. Shortly after the deaths of the two founders—Aaron Ward died in 1913 (after spending forty-one years running it) and George Thorne in 1915—the Thornes sought new capital and new thinking. So they sold a majority stake in the group to a group fronted by two tobacco magnets—George Whelan of United Cigar Stores and James B. Duke—and financier J.P. Morgan, but the brothers continued to run the business until William C Thorne, the eldest, died in 1917 and was succeeded by Robert J. Thorne who retired due to ill health in 1920. At that point Ward’s bankers brought in their own president, Theordore Merseles, an engineer who had been vice-president of the National Cloak and Suit Company.

The post-war economy rebounded, and Merseles, who got back in contact with the farmers, found that the demand for medium-priced quality goods was high. Through 1926, he kept to mail order, but beginning in the late ‘20s he began an aggressive campaign to add retail outlets in towns with populations of 10,000 to 15,000. In 1928, Ward’s, using newly issued stock, had 244 stores, by 1929 it more than doubled that number to 531. These new stores were mostly the work of George Everitt, who replaced Merseles in 1927.

The stock market crash came in October 1929, though that year was a good overall one for Ward’s. But things deteriorated as the Great Depression gripped the nation tightly. All retailers suffered, and Ward’s even received a merger proposal from Sears. To save its investment in the store, J.P Morgan’s representative recruited a man named Sewell Avery, a man who had led United States Gypsum to “Depression-era profits.”  Avery did a lot—found cash-starved manufacturers to sell him goods cheaper than Sears could make them; paid employees less than  Sears was paying those it hired before the crash; recruited talented executives who had lost jobs with other retailer; promoted or fired Ward managers depending on their evaluations; closed poorly performing stores. These actions plus Franklin Roosevelt’s interventionist policy that jump-started the economy helped Ward’s return to profitability. He also instituted telephone orders, and in 1936 profits broke the $20 million mark. Montgomery Ward zoomed ahead of Sears and J.C. Penny, but it wasn’t without problems, primarily the federal Robinson-Patman Act that prevented large stores from getting better deals than small ones. He tried to get around this by selling house brands rather than name brands.

One of the most astonishing accomplishments came in 1939. An in-house copywriters wrote a booklet about a red-nosed reindeer named Rudolph, which they included in the (millions of) catalogs that were sent out.  But even Rudolph couldn’t save Avery from his biggest disaster. As the United States entered World War II, imports from Europe came to a standstill. Shortages and substitutions became the rule. And the government took even closer control of industry.

Avery fought both the government and unions. In November 1942, he argued with Roosevelt and the National War Labor Board over a closed shop for the United Mail Order, Warehouse, and Retail Employees Union. He refused to comply with the terms of three different collective bargaining agreements with the United Retail, Wholesale and Department Store Union hammered out between 1943 and 1944. In April 1944, after Sewell refused a second board order, Roosevelt called out the Army National Guard to seize the company’s main plant in Chicago. Sewell was physically carried out of his office on April 27, 1944 by National Guard troops and that image, made by Harry Hall for the Associated Press, became one of the most famous photographs ever. However, things were not over.

On May 9, the government returned Montgomery Ward to the management, but in December, labor problems struck again. The Congress of Industrial Organization (CIO) won an election in Ward's Chicago plant. Avery again refused a union shop. On December 28, 1944, the army seized Ward's Chicago catalog operations. The situation caused orders to pile up at the rate of 10,000 a day.

It wasn’t until President Truman ended the seizure in 1945 (and the U.S. Supreme Court ended Ward’s pending appeal as moot) that the battle ended.

Avery’s prediction of a post-war depression was unfulfilled. In fact, Ward’s became the third-largest department store chain. One interesting side note is that in 1946 the Grolier Club, a society of  bibliophiles in New York City, exhibited the Wards catalog alongside Webster’s Dictionary as one of the 100 American books chosen for their influence on American life and culture. The brand name was embedded in the national consciousness, and it was around this time that the unfortunate nickname we derisively used, Monkey Ward, became common.

Stock troubles plagued the company throughout the 1950s, but this formerly innovative company was also slow to respond to the post-war American shift of people to the suburbs. Its rivals established new outlets but Ward’s top executives believed the moves were too expensive and preferred to stick to their downtown and main street stores until the company had lost too much market share to compete with its rivals. Thus began the downward spiral that saw Ward’s demise begin with the 1954 attempted takeover by dissident stockholder Louis E. Wolfson who wanted to unseat Avery from his position. Thought he ultimately failed, it was only days after the stockholder’s meeting in April that Avery, now eighty-one years of age, resigned as chairman. Eventually a man named John Barr was appointed as president and chairman by the board.

But the store was sick. A comparison shows that Ward had 600 stores and 250 catalog offices compared to Sears 702 stores and 605 catalog offices. Ward’s store locations were also smaller and located in less populous areas. Sales at Ward’s were one-third that of Sears. Plus, J.C. Penny was rapidly moving upward. Barr tried his best: he brought back Ward alumni, closed unsuccessful stores, and concentrated on modernizing the rest. He also established an R&D department that utilized demographic information to predict new markets, began opening clusters of stores in key cities, upgraded packaging, and increased private brands. Between 1958 and 1960, Ward opened thirty new full-line stores. Still, the mail-order aspect was a mere shadow of its former self and Barr stopped building new stores when cash ran low. New management brought in thought up the idea of encircling growing metropolitan areas thus cutting the cost of advertising by spreading it out over multiple stores. Sometimes it worked, sometimes it didn’t. And in an interesting move, the store now looked to Sears for ideas. It cut the number of suppliers, increased private brands, established relationships with suppliers, and built loyalty with profitable customers. There were other things too—a merger with Container Corporation of America, a new chairman and president—and it helped but not for long.

The company was acquired by Mobil Oil in 1976, closed its catalog business in 1985, and began to renovate its remaining stores. In 1988, company management managed a leveraged buy-out, taking the firm private.

The 1980s and 1990s saw Montgomery Ward greatly expand their electronics presence with well-known brand names. It was poised to become one of the hottest retail chains in the country with a successful direct-marketing arm and even, briefly, a mail order business that it licensed to the catalog giant Fingerhut. Again, it didn’t last. By the mid-90s, margins were plunging—and not just for Ward’s but for its traditional rivals—as the low-priced competition that included Kmart, Target, and Wal-Mart—arrived on the scene.  They were hurt the most by them in their strongest lines, electronics and appliances.

In 1997, the company filed for Chapter 11 bankruptcy emerging in August 1999 as a wholly-owned subsidiary of GE Capital. More stores were closed and the company rebranded itself as “Wards.” The twenty-first century brought the end. On December 28, 2000, it announced it would close its stores and lay off its 37,000 employees. The subsequent liquidation was the largest retail bankruptcy liquidation in U.S. history at the time.

Then in June, 2004, an online retailer was created by Direct Marketing Services, Inc. (DMSI) with the purchased trademarks “Montgomery Ward” and “Wards.” (What, no Monkey Wards?) Though it uses the same name, it is not the original and does not honor obligations of the previous company such as gift cards and the lifetime guarantee, even though the president of the firm told an interviewer, “We’re rebuilding the brand, and we want to do it right.”

Just over four years later, DMSI went on the auction block and was purchased by Swiss Colony, which announced it planned to keep the Montgomery Ward catalog division open. Its website was launched on September 10, 2008. In that same year, Midwest Catalog Brands, Inc. acquired the Montgomery Ward and Wards brands, and then on September 1, 2010, its corporate name was changed to Montgomery Ward, Inc.

There’s some irony in the fact that Aaron Montgomery Ward, who created success with his mail order business by changing the way America shopped was killed off by its own success that others borrowed and made better. But the fact is that it began with him. It was an innovative and startling ideas that today is done less with physical catalogs and more with technology. But it was his idea that launched an industry that has influenced the lifestyles of not just millions of Americans but people around the globe.  The Grolier Club was right to include its catalog in their exhibition.

As for this little bookmark, it obviously carries the social sentiment of the day regarding “Negroes” and whites. They are carefully segregated, the facial features of the black children exaggerated in the manner of Jim Crow and crowded behind the fence that is sufficiently high to keep them separated from the white girl. The latter’s appearance gives the impression that she comes from a well-off family; her smile is huge and warm, and her hat and dress are clean and bright. The envy is obvious. It is typical of advertisements of the time, and for Montgomery Ward to use the strong nonverbal cues given in this would not have been unusual. In fact, it would have been exciting. Oooh, the new catalog!

Bookmark specifications: Montgomery Ward, Catalogue No. 71
Dimensions: 5 1/2 x 2
Material: Paper
Manufacturer: Montgomery Ward & Co.
Date: 1902
Acquired: eBay

Almost since her childhood days of Mother Goose, Lauren has been giving her opinion on books to anyone who will listen. That “talent” eventually took her out of magazine writing and into book reviewing in 2000 for an online review site where she cut her teeth (as well as a few authors). Stints as book editor for her local newspaper and contributing editor to Booklist and Bookmarks magazines has reinforced her belief that she has interesting things to say about books. Lauren shares her home with several significant others including three cats, nearly 1,300 bookmarks and approximately the same number of books that, whether previously read or not, constitute her to-be-read stack. She is a member of the National Books Critics Circle (NBCC) as well as a longtime book design judge for Publishers Marketing Association’s Benjamin Franklin Awards. Contact Lauren.