The Great A&P and the Struggle for Small Business in America Read online

  The storekeeper’s foremost task was to wait on customers. A grocer named Clarence Saunders had opened the country’s first self-service food store, Piggly Wiggly, in Memphis in 1916, but the concept had not spread widely by the early 1920s. Most stores were designed with counters in front of the shelves to keep customers (and their children) away from the food. The shopper would say what she needed, and the shopkeeper would pick each item from the shelves: two eggs, a can of beans, a box of soap powder. A “long arm,” a wire loop at the end of a pole, stood ready to reach cans and boxes on the topmost shelves. Should the customer require coffee beans, the storekeeper would grind them while she waited. If she wanted vinegar, he would pump the desired amount from a barrel into a glass bottle.

  Many housewives phoned in their orders rather than coming to the store, despite the warnings of advice columnists that ordering by phone could result in high prices and inferior merchandise. Whether the order was taken in person or by phone, assembling it was only part of the transaction. Mom-and-pop stores almost always provided delivery to the customer’s home or apartment. Often, delivery was the after-school job of the owner’s children. For a woman trying to maneuver young children up several flights of stairs to their apartment, having a teenager carry the purchases was a godsend, and she was willing to pay higher prices for the added service. At some stores, more than three-quarters of all sales required delivery. But while delivery was “free” to the customer, it was far from free to the merchant, who had to buy a bicycle or a truck and, in some cases, pay a deliveryman. The average cost of providing home delivery in 1923 came to 1.2 percent of a store’s total sales, an amount equal to two-thirds of a typical store’s profit.6

  Collecting payment was perhaps the most unpleasant of the grocer’s tasks. Even amid the general prosperity of the 1920s, many working families were living hand to mouth, and in the last few days before payday they often ran short of cash. Retailers in working-class neighborhoods had the choice of offering credit or seeing even fewer customers walk through the door. About half of all food stores, and the vast majority of stores not owned by chains, extended credit to their customers, usually on the basis of nothing more than a name and an address. In the 1920s, perhaps one-third of all sales, and a majority of sales involving meat, generated a handwritten entry in a credit ledger rather than a cash payment. In the poorest neighborhoods, credit commonly accounted for 70 or 80 percent of grocers’ sales. “You’d ask them for money to pay and then they wouldn’t come into the store no more,” recalled the daughter of a Washington grocer. Often enough, the customer moved away, leaving an unpaid balance, or pleaded hardship to keep the credit line open. “If we learn that a man has lost his job, or has illness in the family, or meets with other reverses, we do not even send out a bill. We forget it,” one Boston grocer explained. Stores offering credit typically charged higher prices to cover the inevitable credit losses, driving cash-paying customers to chain stores that offered no credit but lower prices.7

  To later generations, an independent grocery came to seem vaguely romantic: a self-employed proprietor might carry unique products, local brands, or healthier foods than the mass retailer with a standardized selection. In reality, though, few of the independent grocers of the 1920s were selling tropical fruits, fine cheeses, and homemade salads. A small shop might stock as few as 450 items, of which sugar was easily the most important. The shopper—usually the woman of the house—might have to visit several different stores each day to procure her family’s food, selecting from each shop’s bare-bones product assortment in austere, ill-lit surroundings. In return for the convenience of personal service by familiar merchants who would sell on credit, she paid prices that were very high, relative to wages. The average urban family spent fully one-third of its budget on food.8

  That large outlay bought distressingly poor nutrition. Although most people consumed plenty of calories, the average diet was short on nutrients such as calcium, vitamin A, and thiamine. Lack of refrigeration made it hard for retailers to keep milk, poultry, and produce fresh, so such products were frequently unavailable at the grocery store even for those who could afford them. Quality was often dubious. To keep otherwise unsalable merchandise from going to waste, Katzman’s grocery store on Q Street in Washington recycled old or crumbled cookies into “grab bags” that sold for a penny apiece. At Rockmoor Grocery in Miami, the meat locker, chilled by hundred-pound blocks of ice, could not maintain a temperature far below fifty degrees, and ground beef, made daily from leftover beef trimmings, typically had a rancid taste. “While the bacteria count must have been quite high, most people then thought the taste was just characteristic of hamburger,” one of the store’s owners recalled.9

  A large proportion of urban grocers were immigrants. For many of them, limited command of English posed a barrier to advancement in the wider world, but knowledge of Czech or Yiddish was an advantage in selling groceries to their fellow immigrants. In big cities, family ties and mutual-aid groups helped immigrants get a start. In Washington, D.C., for example, an aspiring Jewish grocer able to raise $100 in cash could turn to the Society of Mutual Benefits, which would lend $500 at 6 percent interest if the borrower could convince two members of the society to co-sign the loan; the borrower was to bring a $10 payment to the Jewish Community Center on Sixteenth Street Northwest every Thursday night. The society also provided advice about buying stores. A well-drawn contract would typically include a provision stipulating the sales volume claimed by the seller and requiring the seller to work in the business for a specified amount of time. If the store did not achieve the sales the seller claimed it to have, the buyer could back out of the deal.10

  Immigrant grocers assumed an important role in explaining the ways of America to their customers. Their customers reciprocated with ethnic loyalty: when a Chicago social worker surveyed ninety immigrant families, seventy-four said they purchased all their food from grocers who spoke their language. Even where immigrants were fewer, as in Portsmouth, food stores customarily catered to particular ethnic groups. The Abbotts’ customer base in Portsmouth was largely of Irish heritage; the Jews living nearby were more likely to shop at Liberson’s Market; and the Italians favored Pento’s. Czech grocers populated the Czech neighborhoods of Omaha, Nebraska, and Mexican grocers were common in Texas. Negro shopkeepers, who owned only one in fifty food stores, served almost exclusively an African-American clientele.11

  In its twelve or fourteen hours of daily operation, the average grocery store generated precious little business. There was a limited supply of customers, and scant opportunity to attract more. Independent stores rarely promoted themselves beyond the occasional preprinted wall calendar. Their prices usually were not low enough to be a selling point, and in any event they lacked the money to advertise: during 1929, the average grocery store spent only $750 on all operating costs other than rent and payroll. The typical store served a few dozen families who lived within easy walking distance, and almost no one else. As the son of a Polish grocer in Chicago recalled, “If my dad had fifty customers, that’s all he had, fifty. If he got fifty-one one day, it would be an odd thing.”12

  The combination of few customers and little stock had an inevitable consequence: meager revenue. The first academic studies, starting in 1918, reported an average store’s sales to be in the range of $50,000–$60,000 per year, but experts agreed that the average was greatly inflated because the owners of smaller stores rarely responded to surveys. “Many grocery stores with small sales volume do not keep their records in such shape that they readily can fill out a classified profit and loss statement,” a 1923 Harvard Business School study determined. A more realistic estimate came from the Census Bureau, whose first national survey, in 1929, revealed that more than one-fourth of food retailers had annual sales of less than $5,000. After paying for merchandise, rent, and operating expenses, the owner of such a store would have shown a profit of no more than a couple hundred dollars. He would have earned more as an employee in
someone else’s food store than as an entrepreneur.13

  The average food store therefore had a very short life expectancy. In Fort Wayne, Indiana, one out of every four grocery stores went out of business in the average year during the 1920s. In Pittsburgh, nearly half of new grocery stores ceased business within a year, and two-thirds were gone within three years. In Buffalo, the rate of exit was even higher; of every hundred grocery stores started between 1918 and 1928, eighty-five closed within five years. Although some stores survived for decades, they were the exceptions, not the rule; after three decades behind the counter, a grocer on the North Side of Chicago was able to boast, “Now my grocery store is the oldest on the street.” In Portsmouth, the Abbotts’ Little Corner Store lasted until Bertha’s retirement, in 1951, only because Walter took a job with the town government, providing a regular income to supplement the pittance Bertha earned selling groceries.14

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  The mom-and-pop store was the final link in a long and tortuous food supply chain. A storekeeper with an annual turnover of $20,000, or even $40,000, was too small to gain the attention of the farmers, grain traders, food processors, and importers further up the chain. The grocer’s ability to do business depended entirely upon his relationships with wholesalers.

  The United States had 13,618 wholesale distributors of groceries in 1929. Of these, about a third carried a broad line of merchandise sometimes bought directly from manufacturers, sometimes from independent manufacturers’ agents, sometimes from commissioned brokers who represented many manufacturers, sometimes from other wholesale merchants. Typically, they would try to purchase by the railcar load, to save money on freight, and then hold the goods in their own warehouses until a customer was ready to buy. Alongside the full-line wholesalers were several thousand specialists who handled a single category of merchandise, such as produce or delicatessen meats, that was too perishable for the general-line wholesalers to stock. The biggest wholesalers were independent, family-owned businesses that in many cases had been around for decades, but many smaller firms came and went: although thirty-six grocery wholesalers started up in Seattle during the 1920s, only eighteen wholesalers were operating there in 1930, two fewer than a decade earlier. The established wholesalers, especially in the big cities, had sales territories stretching far into the hinterlands: two-thirds of the general-line wholesalers in Chicago did business more than five hundred miles away.15

  A wholesaler such as Corbin Sons & Company, located a few blocks north of the Chicago Loop, sent out hefty weekly circulars to keep grocers apprised of prices and market intelligence. “Broom corn is scarce and the price is tremendously high,” Corbin’s Weekly Salesman cautioned in 1923, advising grocers to stock up on brooms ahead of a price rise. Havana Sparks stogies were on sale at $1.95 per hundred; selling the cigars at the recommended price of three for ten cents would allow wide margin for profit. Sugar, to be bagged by the grocer, could be had in limited quantities at $8.70 per hundred pounds. Epsom salts, egg crates, and No. 9 corks for vinegar bottles all were available, often in very small lots. Many grocers preferred to buy that way, urged on by widely sold advice manuals that instructed grocers to forgo volume discounts in order to minimize the amount of money tied up in inventory and the risk of holding unsold goods. But stocking only enough goods for a few days’ sales created risks of its own. Popular items like canned pineapple and tuna fish were to be had only sporadically. A retailer who failed to buy enough when the wholesaler had them available might end up without the goods his customers demanded.16

  Corbin’s had no shortage of competition. Chicago was home to 366 general grocery wholesalers in 1926, and hundreds of other wholesale firms specialized in meats, vegetables, or candy. Every day, thousands of wholesalers’ salesmen fanned out from the Loop, competing for orders from the seventeen thousand food stores within the city limits and tens of thousands more in the country beyond. An astute shopkeeper could figure out how to play one against the other. Often enough, the decisive factor in choosing a wholesaler was credit, not price. For a perpetually cash-strapped retail grocer, a wholesaler willing to defer payment for thirty or sixty days was a godsend.17

  Most grocery stores, though, were too small to interest big wholesalers with far-flung businesses. Instead, they often dealt with jobbers, wholesalers dealing in relatively modest quantities. Jobbers sometimes bought directly from manufacturers, sometimes from wholesalers, but they usually dealt in a limited number of items and held little inventory themselves. Critically, jobbers usually offered delivery, allowing the retailer to place his order by telephone without a time-consuming trip to the warehouse or the central produce market. Jobbers rendered themselves invaluable with intelligence on price trends and product availability and advice on displaying products. Most jobbers extended credit, which small retailers desperately needed, but they thereby exposed themselves to major financial risks. Goldman Brothers Wholesale Fruits and Produce in Breckenridge, Texas, ordinarily extended one week’s credit, collecting payment for the previous week’s delivery when it brought the next order. When the local oil boom went bust in 1921, the oil-town grocers vanished overnight, and their unpaid bills brought the wholesaler down as well.18

  Each jobber carried a limited line, so independent grocers needed to do business with several jobbers to obtain all the different products they wished to sell. Since they had neither the storage space nor the cash to buy in large quantities, they might see each jobber several times a week. Competitive pressure forced jobbers to render such expensive service. “It is not uncommon to see three or four large trucks of that many wholesale or jobbing firms standing before a single small retail store,” the Federal Trade Commission observed in 1919. “The cost of these individual delivery systems … is a large item to be figured into the wholesale prices.”19

  The wholesalers and jobbers, in turn, procured much of their merchandise from some 60,000 manufacturing plants around the country: 25,095 bakeries, 3,738 butter plants, 723 factories making pickles and preserves, 348 soap works, and so on. Some food processors were extremely large. The meat packer Swift & Company booked $800 million of sales in 1921, more than any other company in America, and the National Biscuit Company sold cookies coast-to-coast. Most food manufacturers, however, were mom-and-pop enterprises: the average cannery had a mere twenty workers, the average cheese plant no employees save the proprietor. To find buyers for their goods, these small firms used a bewildering array of brokers, each of whom earned a commission on every sale to a wholesale buyer. Some fruits and vegetables were marketed through sizable cooperatives such as the California Fruit Growers Exchange, which could move large quantities to market quickly. Most produce, however, was sold by individual farmers to small-town dealers who in turn sold to bigger dealers in nearby cities, creating a lengthy and circuitous route before perishable merchandise finally reached the retail store.20

  Motortrucks were used within cities, but the only practical way to move food long distances in the early 1920s was by train. Shipment of canned or packaged foods by big manufacturers was relatively efficient, because major wholesalers bought entire boxcar loads and had rail sidings alongside their warehouses. When a big-city wholesaler sent a smaller lot to a small-town wholesaler or retailer, however, the freight cost could be high. Moving fresh produce was a nightmare. In Chicago, jobbers or wholesalers used horse-drawn wagons to collect incoming loads at rail yards, because the unloading platforms were too narrow for motortrucks. The freight from eighty thousand carloads a year was then drayed through downtown to the wholesale market on South Water Street. The market buildings lacked refrigeration, forcing wholesalers to sell their fruits and vegetables quickly lest they spoil. In New York City, which had no central produce market, each railroad operated its own terminal. Apples packed in barrels arrived on the New York Central, while apples in boxes came on the Erie. “The result,” reported an astonished congressional committee, “is that the buyer desiring to purchase apples packed in the two types of packaging
secures his supplies at two different docks some distance apart. If the same buyer desires certain other fruits or vegetables he must go to still other docks.”21

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  The rapid spread of chain food stores threatened the livelihood of everyone who worked in the food industry. Before World War I, chain grocery stores were limited mainly to the Northeast and Midwest, and the larger chains collectively owned only a couple thousand stores. The Hartfords’ aggressive expansion changed that picture. By 1923, Great Atlantic & Pacific alone had 9,236 outlets. Other companies, such as Kroger, Grand Union, and American Stores, could not open stores as quickly as A&P, so they raced to catch up by consolidating small chains into larger ones. The bigger chains had marked advantages over small chains and independent grocers. They could command volume discounts when buying from manufacturers. They could employ modern management techniques: Great Atlantic & Pacific turned its stock ten times in 1921, compared with seven times for the average grocery store, so it required much less working capital and storage space per dollar of sales. And the chains were willing to accept narrower margins than the independents: a chain could sacrifice a penny’s profit on each dollar of sales and hope to make up the difference with higher volume, but for a store owner selling $30,000 of groceries a year, a narrower margin might seriously squeeze the family budget.22

  Independent grocers and their wholesale suppliers generally fared well before and during World War I. Food prices were persistently high, and profit margins were wide. But as peace brought sharply lower food prices in 1920 and 1921, retail grocers’ profits slumped badly, and grocery wholesalers booked losses. The downturn affected chains as well as independent stores; A&P’s expenses as a share of sales soared from 15 percent in 1919 to 18 percent in 1920. But the hard-pressed independent merchants knew where to lay the blame for their plight. In 1922, the National Association of Retail Grocers debated whether there should be a limit on the number of chain stores in any community. That same year, Missouri wholesalers and retailers organized the Association Opposed to Branch Stores and urged the state legislature to tax chain stores out of existence. These efforts fell short, but many more would follow.23