Amazon 2018 and 1893 Sears; A Surprising Amount in Common

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I am currently reading "Capitalism in America: A History" by Alan Greenspan and Adrian Wooldridge. I am finding it very interesting, particularly in terms of how many things that I thought were new but are really not. One case in point is the rise of Amazon as seen in perspective to the rise of the Sears Catalog.

Sears and Montgomery Ward invented the mail-order business. Prior to their innovation, people in rural areas were unable to find most goods unless they were willing to travel a great distance. Small town stores had little in the way of available goods. 

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I checked and in 1880, a whopping 72 percent of the population lived in rural areas (today that percentage is the reverse). Therefore, rural consumers comprised a vast, dramatically underserved market. 

Richard Sears figured all of this out while working for Western Union as a telegraph master. By having access to the telegraph he was able to see what products people were buying and at what prices. He used that knowledge to figure out what people wanted and the prices at which he could sell them.

Sears rapidly moved to an, for the time, unfathomable scale. Here is how Greenspan and Wooldridge put it:

In 1902 Sears was fulfilling 100,000 orders a day, selected from a catalogue that ran to 1,162 pages. This demanded a huge machinery of storage, delivery and coordination, which in turn demanded an ever-larger investment of capital. 

In 1906, Sears…took the company public and opened a $5 million mail-order plant in Chicago, the largest business building in the world, featuring an assembly line for customer orders.

"Miles of railroad tracks run lengthwise through and round this building for the receiving, moving and forwarding of merchandise" boasted the Sears catalog. "Elevators, mechanical conveyors, endless chains, moving sidewalks, gravity chutes, apparatus and conveyers, pneumatic tubes, and every known mechanical appliance…are to be utilized here in our great works"

Similar to Amazon, Sears was not restricted to the four walls of a physical store. Rather they could use what later became known as "long-tail" theory to carry a phenomenal number of items, 1162 pages worth.

They were also moving unheard of numbers of orders. The US population in 1900 was approximately 1/5th of what it is today. That 100,000 orders a day would be 500,000 today.

The facility Sears built, "the largest business building in the world" makes me think of Amazon with its numerous distribution centers and its current contest to locate a new headquarters.

And Sears, like Amazon today, used state of the art equipment (pneumatic tubes, moving sidewalks, etc.) to move products through its system. 

Therefore, isn't it ironic that Amazon has just issued its first ink on paper catalog? As we witness the demise of Sears, let's not forget that at one time it was the latest and the greatest. 

 

One thought

  1. Interesting that Sears also used customer data to find out what people were buying and at what price. Information was important to businesses even before the “information age” – although privacy issues were probably nonexistent.

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