TOPICS > Economy

Gone Broke

July 8, 1997 at 12:00 AM EDT

Suffering a longtime business downswing, Montgomery Ward, once a retail giant, now must find a way to bring up its sagging profits after declaring bankruptcy. Paul Solman reports.

JIM LEHRER: What happened and what now for Montgomery Ward and to Paul Solman.

PAUL SOLMAN: Montgomery Ward & Company got its start selling dry goods by mail to rural Americans, who otherwise had to rely on expensive local stores.

The company was the brainchild of two men: Aaron Montgomery Ward and George Thorne. In 1872, they set up in Chicago and began sending out a single sheet catalogue, featuring 163 items. Before long they were selling everything from corn planters to windmills to underwear, Knickerbocker suits, and feather head gear.

The Ward catalogue was also the first to introduce the policy of satisfaction guaranteed, or your money back. Over the years you could trace the development of American consumer culture by looking at what Montgomery Ward was selling, the very latest cast iron furnace in 1929, the hot new Polaroid camera in the late 1940’s, the electric guitar onslaught of the 1960’s, and hawking the merchandise the very latest stars, Lauren Bacall and Gregory Peck, Ali McGraw and Dorothy Hammil.

However, back in 1926, Montgomery Ward had opened its first retail store in Plymouth, Indiana, and by 1985, stores so dominated the company’s business that the catalogue was discontinued.

Ever since, though, it’s been a rough road for the retailer, which now operates 400 stores in 43 states, but old stores in old locations, increased competition from specialty discounters, an over-reliance on consumer electronics all have led to major losses last year and this and the filing for Chapter 11 bankruptcy yesterday.

PAUL SOLMAN: Here with more are Nancy Koehn, who teaches business history at the Harvard Business School, and NewsHour essayist Jim Fisher of the “Kansas City Star.” Welcome to you both. Professor Koehn, how important was Montgomery Ward from a business history point of view?

NANCY KOEHN, Harvard University: It was tremendously important, Paul. I think from a business strategy point of view this is the Internet commerce, if you will, of the 19th century.

PAUL SOLMAN: Explain what you mean.

NANCY KOEHN: This is tying people to goods and services and together in a completely new way, crossing huge spacial boundaries, linking people like Laura Ingalls Wilder on the prairies of South Dakota with the Chicago and New York merchants and beautiful people, the gatekeepers of fashion. This is also making and moving those goods to those people.

PAUL SOLMAN: So you mean catalogue like Internet?

NANCY KOEHN: Catalogue like Internet with the corresponding changes in how people think about their lives and their material, and economic and even cultural possibilities.

PAUL SOLMAN: For example. I mean, what’s the difference in how you think about things like that if you get a catalogue?

NANCY KOEHN: Laura Ingalls Wilder from “Little House on the Prairie” fame sees her first sewing machine, first Singer sewing machine, in a Wards catalogue in the 1870’s, and suddenly her ideas about what kind of clothes she’ll wear, how quickly she’ll make them, where she’ll go in them are changed completely. Montgomery Ward’s, one of his first slogans was: We bring New York to your door. All right. So what’s he saying? He’s saying, I’ll bring you a piece of urban life to a whole range of places and people that had never gone before.

PAUL SOLMAN: Jim, give us a sense of Montgomery Ward. I know you don’t go back to Laura Ingalls Wilder, but what was it like for you growing up in the Midwest?

JIM FISHER, Kansas City Star: Well, I think Wards was–there was a funny thing on the radio this morning. One newscaster referred to it as Montgomery’s, which kind of made me laugh, because it was always Wards.

But my first refrigerator, my first bed sheets, my first bed, my first television was a Wards when I was a young man and starting out, I remember the one things Wards was known for in the early 60’s was people swore by their underwear. Now, that seemed like an odd thing to look at, but they were revered. I mean, you went to Wards. You went to Sears, but you went to Wards.

They kind of competed and went together. I think Sears pulled ahead out here a little bit, kind of a shocking thing now. The huge Montgomery Ward catalogue store in Kansas City, there was Wards and a Sears catalogue, and the Wards store is now a huge, white flea market. I mean, 10 stories or 9 stories on the Northeast side of Kansas City, and just a month ago the Sears catalogue store was imploded by wreckers, and it is no more. So I think you can see that what was a viable network as the Internet as almost disappeared. Now, there–excuse me–

PAUL SOLMAN: I’m sorry. I wanted to know why you swore by their underwear.

JIM FISHER: They lasted. I mean, they make good T-shirts and good shorts, and I had a good friend who was in the–he sold underwear for Wards, and some people said Penney’s was better, and I think Sears was a distant third, but people swore by Wards’ underwear.

PAUL SOLMAN: Was Wards really better, Professor Koehn?

NANCY KOEHN: I think it probably was, and a lot of it goes back to Montgomery Ward, himself, the sort of Sam Walton of 19th century retailing. He had to convince people that had never ordered anything from a one-page catalogue in 1872, much less a five hundred and fifty-four page, two pound book with three thousand, nine hundred items in 1893, that what they ordered–sight unseen in some sense–without feeling it or touching it or looking it over–was just as good as what they’d buy in their general store.

And one of the very interesting things he did, besides offering the first–in some sense–most credible, most widespread satisfaction guaranteed–kind of offering–he was dead serious about that–was to rate his own suppliers. So the early Montgomery Ward’s catalogues will say from Montgomery Ward I like this pair of underwear better than this pair, or don’t trust this piano, it goes out of tune quickly, or this tombstone will last the ages. So he ranked, even at the risk of incurring his suppliers’ anger, he ranked his products. And people believed him. He was a neighbor and a friend.

PAUL SOLMAN: Yes, Jim. You believed him? You believed the store, I guess?

JIM FISHER: Sears and Wards were believable, but oddly enough, I was thinking back today I haven’t been in a Wards store probably since the 1970’s and about the same for a Sears store. They just became inconvenient or the prices were a little too pricey. They became old. You had–I think what happened was as Sears and Wards–and let’s just use Wards–as they constricted–constricted as the rail lines constricted, although buses did deliver some later on–the farmer, which around the turn of the century was six out of every ten Americans, and that decreased, they became–they found their charges going up, and then there was the regional center, and for many years the Wards went along and you could still buy an udder bucket, which was a buck and a half. There were all kinds–

PAUL SOLMAN: Udder, u-d-d-e-r.

JIM FISHER: U-d-d-e-r. But I mean, as a kid, reading the Wards catalogue was–maybe helped me learn to read–but I think what happened was as the rural areas were abandoned by the regional centers and by the big cities like Kansas City, that a fellow named Walton stepped in and came back and some of the merchants in small town America were–they had higher overhead–they needed more money–Sam Walton came in and said I’ll take 6 percent. Now, that was a huge difference to the consumer.

PAUL SOLMAN: Is that, Professor Koehn, what has led to–brought Montgomery Ward to its knees, if you will, the discounters, the change from rural to urban America?

NANCY KOEHN: Those were absolutely important drivers, and there were some others as well. Right? There was the right of specialty retailing.

PAUL SOLMAN: Meaning what?

NANCY KOEHN: Category killers, stores like Circuit City, that just sell consumer electronics and sell it cheaper and more efficiently than Montgomery Ward’s can sell it.

PAUL SOLMAN: Category killers.

NANCY KOEHN: Category killers, meaning that if a certain–a certain retailer gets into the business, they will own the category, that product, that group of products. Home Depot is an example of a specialty retailer that now has a huge influence on where we buy home improvement tools, appliances, services, goods. So I think the rise of specialty retailers was very important. No one could see in 1970 that the landscape of retailing would gravitate away from the middle–Sears and Wards, which had owned that–that territory–to a much more variant, varied landscape, with income distribution the top end specialty retailers owning all kinds of small markets, boutiques, Donna Curan, the GAP.

PAUL SOLMAN: So lots of reasons.

NANCY KOEHN: Lots of different reasons.

PAUL SOLMAN: Now just a quick last question. Is this the end of the line for Wards?

NANCY KOEHN: That’s a complicated question.

PAUL SOLMAN: Just that we have only time for a very quick sort of verdict on it.

NANCY KOEHN: The co-chairman, Roger Gadoo, has said he is interested in getting back in touch with his ideal customers, target customer, women earning between thirty and fifty-five thousand dollars a year, time-pressed.

PAUL SOLMAN: And will he do it?

NANCY KOEHN: A whole lot of other retailers want those pocket books and that attention.

PAUL SOLMAN: Jim, would you be said if Montgomery Ward was gone?

JIM FISHER: No more than if Sears did. I mean, I never go to them anymore, or–I think the sad thing is one last thing–

PAUL SOLMAN: No, we actually have–one last thing for the next time because we’re out of time.

JIM FISHER: Thank you.

PAUL SOLMAN: Okay. Thanks very much, Jim. Thank you very much, Professor Koehn.