This morning was one of those moments when several threads came together for me, providing a small insight into the shape of the world in which we live.
It’s related to a moment of revelation I experienced in about 1996. I was attending one of a series of monthly meetings that our then-new publisher, Fred Mott, had instituted to brief employees in general about the state of the business side of the newspaper. I was probably sitting there trying not to let my eyes glaze over too obviously when he said something that cut through. Something that should have been obvious, but was not until that moment.
He observed — I forget exactly how he said it, but this was what I got out of it — that Walmart had shifted the ground upon which the business model of newspapers had been built. The key element was “everyday low prices.” Everyone knew that Walmart was the place to get the lowest prices available locally on anything they sold. And they sold everything. If everyone knows that you have low prices every day — and not now and then, in the form of sales events — you have nothing to communicate, on a regular basis, through advertising.
To show how that affected but one of the newspaper industry’s key advertising constituencies… people were used to reading about all the grocery stores’ specials — which changed if not day to day, then at least week to week — in the newspaper. But what’s the point in that if you can get all those same groceries — same brands and everything — cheaper at Walmart? And every day. So beyond some general branding, which it does mainly through television, reminding people of said everyday low prices, what does Walmart have to communicate? There is no news to pass on. That gives it yet another competitive advantage over those regular advertisers, because it saves the ad costs. To try to compete, those advertisers cut back on their ad budgets, and so forth.
And since Walmart sells practically everything a mass market wants, there is no retailing area unaffected. Department stores, appliance stores, clothing stores — everybody is competing against an adversary that doesn’t have to advertise to the extent that they traditionally had done.
That was just a piece of what was strangling newspapers, but a significant piece. Hence the expense cutbacks and hiring freezes that were already a monotonous part of newspaper life. The next year, Fred made me his editorial page editor, and shortly thereafter, as a measure of his confidence in me and his perception of the importance of the editorial mission, I was able to grow my department by one FTE. That was it. From then on, every budget year was an exercise in doing it with less. And less. And less. Until, two publishers later, it was decided to do without me.
But where did Walmart come from?
I got to thinking about that this morning. I was reading, in the WSJ, an oped piece about Eugene Ferkauf, who recently died at the age of 91.
In the postwar years, he pioneered discounting through his chain of stores called E.J. Korvette. This required challenging the “fair trade” price-fixing laws then in place in many states:
Retail price-fixing in the United States—often packaged for popular consumption as “fair-trade” laws—was a Depression-era concoction. Launched in California in 1931, it was quickly copied by state legislatures across the country. These statutes were premised on the idea that manufacturers retain a legal interest in the price of their products even after actual ownership has moved downstream to retailers. The laws were written so that once a single retailer in a fair-trade state agreed to observe the manufacturer’s proposed retail price list, it would in effect impose those prices on all other retailers in the state.
Conceived as a means of protecting small, independent merchants against predatory chains, fair-trade laws were pushed through state houses by legislators beholden to the influential retail chambers of commerce. The big manufacturers, especially appliance makers like GE, Westinghouse, RCA and Motorola, usually lent tacit support. It was easier for them to deal with a multitude of small customers through their wholesalers than to directly confront retailers big enough to muscle them for price concessions and promotional allowances…
I had never heard of E.J. Korvette stores, but I got to thinking, when was the first time I experienced discount store shopping? I realized that it was when we moved to New Orleans in 1965, after having lived in South America since late 1962. One of the elements of modern American culture that made an impression on me that year was the local Woolco store, a short drive from my home.
Anybody remember Woolco? They went out of business for good in the 80s, but this one was thriving in 1965.
I looked it up on Wiki, and found that Woolco was founded in 1962. This made me curious, and I looked to see when Kmart was founded. 1962. When did the first Walmart open? As it happens, 1962.
Then there was this passage in the oped piece this morning about Ferkauf:
In the end, the demise of fair-trade laws didn’t help E.J. Korvette. Ventures into high-end audio, home furnishings, soft goods and even supermarkets made E.J. Korvette considerably bigger but also shakier financially. In July 1962, Ferkauf was on the cover of Time magazine, hailed as the PiedPiper of the new consumer-centered retailing. Four years later he was ejected from his company, which by 1980 went into final bankruptcy. Ferkauf’s legacy, though, was secure. He had finally killed off legally protected price fixing.
Something about that year. A cusp of sorts. A changing of the guard, as retailing pivoted.
In his awesome book The Catalog of Cool (and if you can lay hands on a copy, you should buy it — although you may want to go the used route, since Amazon prices new copies at $127 and more), Gene Sculatti published an essay titled “The Last Good Year.” An excerpt:
Sixty-two seems, in retrospect, a year when the singular naivete of the spanking new decade was at its guileless height, with only the vaguest, most indistinct hints of the agonies and ecstasies to come marring the fresh-scrubbed, if slightly sallow complexion of the times. On the first day of that year, the Federal Reserve raised the maximum interest on savings accounts to 4 percent while “The Twist” was sweeping the nation. A month later “Duke of Earl” was topping the charts, and John Glenn was orbiting the good, green globe. That spring Wilt Chamberlain set the NBA record by scoring 100 points in a single game and West Side Story won the Oscar for Best Picture. The Seattle World’s Fair opened, followed five weeks later by the deployment of five thousand U.S. troops in Thailand. Dick Van Dyke and The Defenders won Emmys, and Adolph Eichman got his neck stretched. By that summer, the Supreme Court had banned prayer in public school, Algeria went indy, and Marilyn Monroe died of an overdose…
No mention of a major shift in retailing, though, as I recall.
One last tidbit, which you may consider to be unrelated…
Recently, I picked up several old paperbacks for 50 cents each at Heroes and Dragons on Bush River Road. One of them was The Ipcress File, which is what originally turned me on to spy fiction. You may recall the 1965 film, with Michael Caine — who expressed the cooler, hipper side of the 60s, as opposed to the mass-production James Bond.
In it is a passage in which the protagonist has a conversation with an American Army general who points out that the essential difference between the United States and Europe was this: A European develops a ballpoint pen, and sells it for a couple of quid and makes a modest living from it. An American, he said, invents the same thing and sells it for 5 cents a pop and becomes a millionaire.
Where am I going with this? Well, The Ipcress File was first published in 1962.
