Tuesday, September 06, 2011

THE FIRST LARGE USA CHAIN STORE

How a Grocer Bagged Profits
At its peak, the chain had nearly 16,000 stores. Critics charged it with competing unfairly by offering too-low prices.


The Great A&P and the Struggle for Small Business in America
By Marc Levinson 
(Hill & Wang, 358 pages, $27.95)

By PATRICK COOKE
'Big Business Now Sweeps Retail Trade," declared the headline in the New York Times, with the subhead: "Huge Corporations, Serving the Nation Through Country-Wide Chains, Are Displacing the Neighborhood Store." No, this screamer did not appear in yesterday's paper; nor was it a call to arms against the latest Wal-Mart or Kmart. The story ran in 1928, and according to Marc Levinson's admirably researched history, "The Great A&P and the Struggle for Small Business in America," there is no better example of the long-running conflict between corporate retailers and mom-and-pop stores than the tale of the Atlantic & Pacific. (click below to read more)

Mr. Levinson, whose last book was a study of how the shipping container changed the world economy, begins his chronicle in the teeming precincts of lower Manhattan in the early 1800s. George Francis Gilman, a merchant with a flair for self-promotion, decided to abandon his ghastly profession of tanning hides for the more genteel business of selling tea. His Great American Tea Co. opened shops in New York City, and he publicized them to the hilt. At one point he took out a newspaper ad thanking the police for restoring order in his crowded stores.
Into Gilman's orbit came a sober Mainer, George H. Hartford, and together they expanded the Great American brand. When the transcontinental railroad drove home its golden spike in 1869, the men changed the company's name to the Great Atlantic & Pacific Tea Co., leaving the public with the impression of a company with a nationwide reach. Reality soon matched myth, and by 1884 the Great A&P had opened stores as far away as Kansas City and Atlanta. New products, such as sugar and baking powder, expanded its product line, turning a tea merchant into a grocer.
Mr. Levinson's history centers on the two Hartford sons who followed their father into the business. They would spend their entire working lives at the company being known simply as "Mr. George" and "Mr. John." Thoughtful and studious, Mr. George's idea of excitement was a good jigsaw puzzle; Mr. John, somewhat more outgoing, liked the horses but also a daily lunch of milk and crackers. Together the brothers, neither of whom had finished high school, built what would be, for 40 years, the largest retail outlet in the world.
The brothers' business philosophy was simple, writes Mr. Levinson: "If the company keeps its costs down and prices low, more shoppers would come through its doors, producing more profits than if it kept prices high." The more stores they could open, the greater the take.
But the Hartfords had a public-relations problem. Since the nation's earliest days, small family stores had served as community anchors. There were thousands across the country. Mom and pop knew every customer who came through their door; they extended credit to families down on their luck. If low-priced chains drove out such stores, what would happen to small-town America?
In fact, many mom-and-pop operations were inefficiently and incompetently run. A&P might be coldly corporate by comparison, but it offered consumers far more variety and fresher, better-quality goods at less cost to the family budget. But it didn't seem to matter: By 1912, chain retailing had become a political issue, Mr. Levinson says, one that would nag A&P for the next 50 years. The critics' persistent charge was that A&P's prices were too low. Because the chains were so much bigger, they could offer special deals to wholesalers. They could also build their own bakeries and canneries, options unavailable to the independents.
New Dealers and other politicians, like Texas Rep. Wright Patman, would spend their careers in Washington attempting to punish the chains for their "unfair" advantages by forcing them to close stores or taxing them out of town. "We, the American people, want no part of monopolistic dictatorship in . . . American business," Patman declared in a radio broadcast. "Think of Hitler. Think of Stalin. Think of Mussolini."
A&P, eventually offering thousands of items in close to 16,000 stores, had a different outlook. "In A&P's view," Mr. Levinson writes, "its aggressive efforts to cut purchasing costs, narrow its own margins, and reduce consumer prices in order to build business were exactly what a company was supposed to do in a competitive economy."
Nevertheless, by 1937 more than half the states had imposed chain-store taxes, many based on the number of stores owned. A&P responded by replacing small stores with large supermarkets, a shift that only made matters worse for mom and pop. Legislators persisted in trying to rescue consumers even when the public didn't want to be saved: A 1949 Gallup poll showed that twice as many people sided with A&P's position as with the government's. No business so popular could be easily reined in, and the chain continued to thrive.
"The Great A&P and the Struggle for Small Business in America" provides the details of this history with readable concision. The parts dealing with antitrust law and labor relations may be a little dense to readers without a business degree, but overall Mr. Levinson writes engagingly, and he exhibits no overt political brief. Anyone with a common-sense grasp of business practices will find the author's points clearly and fairly presented.
And anyone who spent his childhood being pushed in a shopping cart down A&P aisles brimming with Ann Page products and Eight O'Clock Coffee will find the last parts of Mr. Levinson's chronicle rather wistful. With Mr. George's and Mr. John's deaths in the 1950s, and the errors of a blundering new management team, the Great Atlantic & Pacific stores began to grow dark and dingy, and many were shut down. By the late 1970s it was not uncommon to pass by a suburban A&P boarded up and adrift on a vast ocean of free parking. A sad state for a once-great retail giant, but then again, what a spot for a Costco!
Mr. Cooke is a writer in Pelham, N.Y.

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