"Why Woolworth Had to Die"

Don Pelton often has chided PARD for espousing an outdated and nostalgic economic model in their desire for a downtown retail district that has no connection to modern economic reality. This article from American Heritage shows that system, as represented by Woolworth, began to die off in 1970. It is also worth noting that as all-powerful as PARD makes Wal-Mart appear, that company too will end up in the dustbin of history. Retailing is a constantly evolving and mercilessly competitive enterprise. But we, the customer, always benefit from that.

Ten years ago today, on July 17, 1997, F. W. Woolworth announced that it was closing the last 400 of its “five-and-ten-cent” stores, laying off 9,200 workers and drawing to a close 117 years as the flagship retailer of downtown America. “Woolworth was 100 years ago what Wal-Mart is today,” the historian Robert Sobel pointed out to The New York Times. It had once seemed to be a store that would last forever.

Frank Woolworth opened his first dry-goods store in 1879, in Utica, New York. His first sale was a five-cent shovel—the most expensive item he had. Later that year he opened a larger store in Lancaster, Pennsylvania, and with business booming, in 1880 he raised his price ceiling to ten cents, thus ushering the term “five-and-ten” into the American lexicon. In 1910 the Woolworth lunch counter made its debut, at the 14th Street store in Manhattan, and in 1912 the fast-growing business subsumed five competing chains to build an empire of 596 stores nationwide, with $53 million in annual sales (equal to $1.1 billion today).

Woolworth, who died a very rich man in 1919, wasn’t the only entrepreneur to build a retail empire as America urbanized and gained wealth. By the turn of the century, with work hours on the decline and real wages rising, millions of ordinary people were patronizing not only Woolworth but also department stores such as Macy’s and Filene’s, where they could find a wide variety of goods at low prices. Even farm families remote from cities and towns came to rely on the stores. Rural free delivery and parcel post, two services introduced in 1896 and 1913 respectively, enabled anyone to purchase by mail order.

But fundamentally, the rise of chain stores like Woolworth took place in cities. On the eve of the Civil War, less than 20 percent of Americans qualified as “urban,” a category that then included all persons living in towns with a population of at least 2,500. By 1920 more than half of all Americans lived in towns or cities, and the number of people living in cities of at least 8,000 had jumped from 6.2 million to 54.3 million. In this new environment, Woolworth became an anchor of the downtown business district.

It didn’t happen overnight, though. As late as 1930, working-class city dwellers still did most of their shopping at corner groceries and mom-and-pop stores, where they often were allowed generous credit. A survey in 1926 revealed that chains accounted for 53 percent of grocery stores in the upscale Oak Park suburb of Chicago but just one percent of stores in the working-class towns of Joliet and Gary. The Depression changed all that, as mom-and-pops found it harder to extend credit and customers found the lower prices at chains like Woolworth impossible to resist. A survey in 1939 showed that 91 percent of lower-income shoppers were now paying cash for their purchases, having evidently abandoned the old neighborhood store for the cheaper, cash-only chains. Woolworth was a prime beneficiary.

Yet even as the downtown chains spread, the groundwork was being laid for their slow but steady death. In the 1950s and 1960s America’s suburban population grew by more than 40 million, led out of the cities by cheap, quality housing and a massive federal highway construction program. By 2000, shortly after Woolworth boarded up its last stores, an outright majority of Americans were suburbanites. Firms like Woolworth had trouble adapting their cut-rate downtown model to the new suburban shopping centers that sprang up around the country. The company stuck to an updated version of the old five-and-ten even as postwar affluence brought a higher standard of living to many of its customers. So it couldn’t compete with new outlets designed for the shopping centers and malls, like Kmart, Target and Wal-Mart, all three of which came into being in 1962 and offered more household goods at bargain prices. By 1970 those “big-box” budget retailers, to be joined later by new discount franchises like Toys “R” Us, Circuit City, T. J. Maxx, Office Depot, and Best Buy, outsold traditional department stores as well as five-and-tens and rang a final death knell for the downtown business districts that Woolworth had long dominated.

In 1993 Woolworth retrenched, closing 1,000 of its stores. The company shifted resources to its more competitive franchises, like Foot Locker and Champs Sports, and gave the Smithsonian its most valuable piece of memorabilia, the lunch counter where four black students in Greensboro, North Carolina, had staged a landmark civil rights sit-in in 1960. The writing was on the wall. “Closing of the Woolworth stores is long overdue,” a retail consultant remarked in 1997. “Today’s Woolworth store was just not viable.” By then, the company was losing as much as $31.5 million per quarter.

Several weeks after its 1997 announcement, Woolworth auctioned off all its display cases, store fixtures, soda fountains, and furniture. It was the end of an era.

Technorati Tags: wal-mart walmart