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Sears, Roebuck & Co…. The Facebook of 1924

When Sears, the Facebook of its era, launched its IPO it Sold Preferred Shares at $97.50. That’s more than $2,000 today.

Even people who don’t play the market thought about buying stock in Facebook’s initial public offering of shares. One hundred six years ago, Sears was its era’s version of a hot tech company. Like Facebook, Apple or Amazon, it wasn’t just a corporation–it  was a revolution. “the catalog was the internet of the day“, said James Schrager, a University of Chicago business professor. “Sears was Amazon“.  The young Chicago mail-order company selling its shares at more than $2,000 in todays dollars wasn’t for the common man. But the purchase of even one share would have been lucrative. Counting from 1924, when Sears entered the Dow Jones index, to 1996, and adjusting for stock splits, the Wall Street Journal calculated Sears shares soared 434,552 percent. The skyrocketing value was rivaled only by the young Midwesterner who founded it.

Sears retired in 1908 with a fortune estimated at $25 million. He died in 1914 more than a decade before the company he founded opened a single store.

Richard W. Sears was hailed in his Chicago Tribune obituary as a man “whose career typified the romance of Amercian business“. Mix the youthful risk-taking of Facebook’s Mark Zuckerberg and the marketing instincts of Apple’s Steve Jobs– that was Sears. It started in 1886, when Sears was a railroad station agent in backwoods Minnesota, wrote historians Boris Emmet and John Jeuck in “Catalogs and Counters: A History of  Sears, Roebuck & Company“.

A shipment of gold watches arrived for a local jeweler, who refused them. The rebuffed wholesaler told the 22-year-old Sears he could have the watches for $12 apiece. he said yes, pivoted, and offered them to agents along the line for $14. With that type of watch retailing for $25, there was room for the agents to profit, and Sears pocketed $2 for every one he sold.

Within six months he had made $5,000, and his watch business started to outstrip his railroad salary. “The tail had begun to wag the dog“, he said in a 1906 Tribune article. Sears moved to Chicago, set up at Dearborn and Randolph streets, and hired a watchmaker “thin to emaciation“, Alvah Roebuck. Their watch company grew rapidly into a general mail-order company that used high volumes to enable low prices.

It was a recipe perfect for the time, when millions of rural Americans were disgruntled with their general stores. A barrel of flour in 1899 was $3.47 wholesale, according to the company, but $7-plus at a country store. Sears, Roebuck used comforting ads to overcome farmers’ fears. “Don’t be afraid  that you will make a mistake“, read one catalog. “We receive hundreds of orders every day from young and old who never before sent away for goods“.  The company adopted a money-back guarantee and “send no money” became a famed tag line. Richard Sears delighted in writing his own ad copy and, typical of the time, often pushed the envelope. One offer advertised a sofa and chairs–“beautiful plush for 95 cents“. (By comparison, a John M. Smyth ad in a 1906 Tribune offered a single chair for $1.50.) Only when Sears furniture arrived did the customer discover it was for dolls. Later, Sears would tone down the ads and was said to have concluded, “Honesty is the best policy. I know because I’ve tried it both ways“.

By 1905, Sears’ sales had surged past $39 million, passing Montgomery Ward, the Chicago company that had invented the mass mail-order catalog. Sears needed more capital to grow. Julius Rosenwald, who had joined Sears as a partner, asked old banker friend Henry Goldman for a loan, according to Rosenwald’s grandson and biographer, Peter Ascoli. Goldman suggested an IPO instead, leading to Sears, Roebuck’s sale of its stock in 1906. It aimed to raise $40 million, which proved crucial for surviving the Panic of 1907. For Goldman, co-managing the Sears IPO is still touted as a landmark for his bank, Goldman Sachs.

Only the rich could afford to buy stock in 1906, but Americans’ disposable incomes was growing, and the company took full advantage. Its catalog the “consumers bible”, made available everything from sewing machines to Encyclopedia Britannica to ready-to-assemble houses. “The story is the coming of the middle class“, Schrager said, “and the desire of the middle class to have more things“.

Sears retired in 1908 with a fortune estimated at $25 million. He died in 1914 more than a decade before the company he founded opened a single store. Sears leapt into the retail store business in 1925, as rural customers moved to the cities. A December 1924 Tribune, in announcing Sears’ branching out into brick and mortar stores, made note that “several mail-order houses have considered” such a move, “but heretofore they have confined themselves to their own method of merchandising“. Sears promoted the new store at Homan Avenue and Arthington Street in the Homan Square/Lawndale area as “easy to shop for men” with a “whole square block of free parking“.

The first Sears store on State Street between Van Buren Street and Congress Parkway opened to great fanfare in March 1932. By  1950, Sears had 650 stores nationwide, including eight major department stores in Chicago and stores in Joliet, Waukegan and Gary, according to the Tribune.  By the mid-1950s, Sears would be international, with stores in Mexico, Venezuela, Cuba, Colombia, Peru and Brazil.

Sears opened mall stores after World War II as customers headed for suburbia, teaming with Marshall Field to build the Oakbrook Shopping center, which opened in 1962. “Rosenwald and others had an uncanny ability to see which way things were going to go“, said Ascoli, who lives in Hyde Park, blocks from the University of Chicago’s Rosenwald Hall. By the 1970s, Sears was still the No. 1 retailer but Wal-Mart and others were on the horizon. Today Sears Holdings is No. 10 and its CEO acknowledged recently that “you change or you die”.

Sears still will probably have fared better than a company like Amazon when all is said and done, said Schrager, who likes to ask his students why Sears built the Sears Tower, which opened in 1973. “Because they could“. he said. “They were unbelievably successful. I don’t know if Amazon is ever going to build the tallest building in the world“.

Footnote to this nostalgic article which ran in the May 11, 2012 Chicago Tribune is that when Sears decided to consolidate all their employees in one location and moved them to a Chicago suburb, the Sears Tower was renamed the Willis Tower after their largest tenant. Another interesting factoid. Sears many years ago started their own radio station which quickly became one of Chicago’s major succesful radio stations with the call letters WLS, which stood for WORLDS LARGEST STORE.

Another true story on a start up company with very little capital chose Mail-Order, as a way to build their business and whose founders became MAIL ORDER MILLIONAIRES. Can it still be done today? One of the largest and most successful On-Line companies still sells only by Mail-Order. Any guesses as to their identity……AMAZON! And speaking of Amazon if you have the desire to start a business of your own, a business you can run from anywhere in the world and one that has little cash requirements, you can get started by ordering a copy of my book HOW TO BECOME A MAIL ORDER MILLIONAIRE from Amazon. Cost is only $39.95 plus s&h, or as a reader of my blog, save $10  and order direct from the publisher. Send check or money order for $29.95 plus $3.50 (total $33.45) to SUPERIOR PRESS 333 N. Michigan Avenue, Suite 1032, Chicago, Il 60601 Book is sold on a money-back guarantee of satisfaction.

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