Monday, July 2, 2012

J.C. Penney, King of the Soft Goods


Reaching its silver anniversary in 1927, the J.C. Penney Company found many reasons to celebrate. The amount of Penney stores had more than doubled since 1920 to more than 750 locations “in practically every State in the Union” according to the New York Times (close to it - 45 of the then 48 states), and annual sales of nearly $116 million.  

By this time the founder himself, James Cash Penney, had largely turned over leadership of the company to others while he vigorously pursued various philanthropic interests, most importantly a program to enhance America’s agricultural production. A farm boy at heart, Penney donated millions towards the development of dairy cattle herds, soil improvement initiatives and crop science, particularly in the South.  An October 10, 1929 article in the Atlanta Constitution summed it up as follows: “In his breadth of vision, unselfishness of purpose and devotion to the upbuilding of our agricultural interests, Mr. Penney is doing a work which stamps him as one of America’s outstanding citizens”.    
Two weeks after the article appeared, though, came the great Wall Street crash - the prelude to years of hard times for many American individuals and institutions. J.C. Penney the company weathered the depression reasonably well, although it would be five years before it again reached the lofty peak of its 1929 sales of $209 million. For J.C. Penney the man, however, those years were devastating. 

As it happened, Penney literally “gave away” his personal fortune during the 20’s and early 30’s, funding the various farm interests and other good causes to the tune of millions, with little awareness of the increasing gravity of the country’s (and his own personal) economic situation. In 1931, Penney’s lawyers advised him he was “virtually broke”, a story recounted in author Bill Hare’s “Celebration of Fools: An Inside Look at the Rise and Fall of JCPenney”, a rattling read. A number of top Penney managers, in an effort led by Penney president Earl Sams, pooled money to buy the founder a new set of shares in own namesake company, and for the first time in years the company paid him a salary. These were the first steps towards setting Penney, “an incalculable asset to the company that (he) founded and built”, as Hare wrote (in Sams’ voice), back on his feet. “After three years he would cease taking the salary, and by 1940, when the company declared a dividend of $5 per share, he owned 51,000 of them. But the going was rough at first.”
This incident also sparked a much-publicized spiritual awakening in the despondent Penney’s life, which occurred during a visit to the famed Battle Creek (Michigan) Sanitarium, founded by John Harvey Kellogg (brother of W.K. Kellogg, the cereal king). Mary Elizabeth Curry, in her fine book Creating An American Institution: The Merchandising Genius of J.C. Penney, tells the story of one early morning when Penney walked the halls of the sanitarium and overheard a chapel service where an old hymn called “God will take care of you” was being sung. Penney joined the service, “and asked God to help him, and what occurred next was so personally dramatic he liked to call if a miracle. He felt as though a heavy burden, all his fears and worries, had immediately lifted from his shoulders”, Curry writes. Penney himself wrote numerous books and gave hundreds of talks on the subject in the ensuing decades, alongside and as part of his emissary work for the company. Penney was by no means the only “famous businessman - preacher” of his time, but certainly among the best known. Such a combination is relatively rare in high profile business today.

As if the economic conditions of the 1930’s weren’t difficult enough, the Penney Company faced another hurdle in the form of the brewing “Anti-Chain Store” movement. As early as the mid-20’s there were rumblings in the press about the “So-Called Menace of Chain Stores”, as a December 1926 New York Times article phrased it. The company generally offered a “low-key response” to such challenges, according to Mary Elizabeth Curry, preferring to “emphasize service and values for customers”. “It isn’t the purpose and it isn’t the desire for our organization or to destroy the independent merchant. Our job is to serve well a community through our plan of economic distribution”, Curry quotes a Penney executive from 1930.
Push came to shove a few years later with the advent of the Patman Bill, a proposed piece of legislation that would have literally taxed many chain store operations out of existence. Faced with this, the company was forced to take a much stronger tack, and it was Penney’s chairman, Earl C. Sams, who took the lead in the matter, testifying before Congress in 1940.  He laid out Penney’s case against the bill in five main points, as quoted in the landmark book “Chain Stores in America 1859-1950” by Godfrey M. Lebhar: “1) It would destroy the Penney company or any similar company. 2) It would destroy the finest field of opportunity that has ever existed in retailing for the young ambitious man born without family means. 3) It would add to the cost of living for every American family of limited means and would lower the American standard of living. 4) It would deal a staggering blow to the entire economic life of this country and would be especially destructive of the smaller cities and towns for the benefit of larger cities. 5) It would hurt and tax this entire nation for the protection and enrichment of a small minority of self-interested middlemen and of another small minority group of ill-advised marginal retailers.”

Beyond that, Sams attempted to debunk the theory “that chain stores were ruining the smaller communities”. The real culprit, he maintained, was the proliferation of quality, paved roadways that now enabled Americans to travel far afield to shop – no longer were they captive to the ‘local town square’ for the necessities of life. On the contrary, the chain stores had indeed served “as a check on the drying up of towns and small cities” (Godfrey’s words) because according to Sams, “(they) have brought  to these small centers the same values, the same crisp new styles, and the same modern stores that were available in the bigger cities. And the customers know it.” As it turned out, the arguments put forth by Sams and others did much to swing public opinion to the chains’ side. On June 17, 1940, Patman’s “chain store death sentence” bill “suffered the death sentence itself”, Godfrey wrote, when it was killed in committee, never to reach the House floor for a vote.
While J.C. Penney was known (and would continue to be for some time) as a “small town chain” despite its impressive sales and burgeoning store count, there were a growing number of exceptions to the “small town” aspect. In 1931, the company opened its largest store to date in Seattle, a new building on the former site of the Bon Marché flagship department store. (Some years later, Penney’s San Francisco unit would claim the distinction of largest store.) Around this time Penney opened other large stores in key Western cities, including Oakland, Ogden (Utah), Salt Lake City and Reno, all of which “(did) a large volume of business”, as the New York Times put it at the time.

From the mid-30’s to the mid-50’s Penney sales volume, from stores large and small, ballooned from $225 million to over $1.3 billion. An interesting side note, related in a September 1950 Fortune magazine article entitled “Penney’s, King of the Soft Goods”, was the way Penney store managers shared in the company’s good fortune, no pun intended. (Granted, they shouldered a great deal of responsibility, including all hiring, training, advertising decisions and ordering of all products stocked – no merchandise was “pushed” on a Penney store by the home office in those days.) The rewards were substantial, however - “A good manager in a fairly large store can make fancy money” (“fancy” meaning 1/3 of the store’s after-tax net –yikes!), the article said, citing the example of the aforementioned Seattle store’s manager who pulled $125,000 in one year. The plan was later modified to allow assistant managers and other key employees to share in the pie. Still, a good many managers earned $30 to 50,000 a year, and nearly a third (of then 1,600 store managers) raked in at least $15,000 annually – fancy money indeed when nice houses could be had in most corners of America for well below ten grand. 
By 1950 J.C. Penney was a solid third place in America’s department store sweepstakes, behind the mighty Sears, Roebuck & Co. and the faltering yet still formidable Montgomery Ward. One of the keys to continued growth, the Fortune magazine article surmised, was increased presence in the Eastern half of the country. Up to that time, Penney was still thought of as a Western retailer (with “a Penney store in practically town above 5,000 and many smaller ones”) despite recent inroads into some key Eastern and Midwestern markets. “In the East, nobody knows a damn thing about the Penney Co.”, one manager was quoted as saying.  To be sure, building up the Penney reputation to the same level it enjoyed in the West would take time, with rough going in a number of markets. In Camden, New Jersey for example, Penney went head-to-head with Gimbels, Strawbridge & Clothier and Lit Brothers, “(whose) heavy advertising pull(ed) customers away from Penney’s, not toward it”. And in Cincinnati, where Penney opened a stunning new store in 1948, fierce competition from Shillito’s and others kept the store in the red for nearly two years after opening, a most unusual occurrence for Penney.

Over time, Eastern Penney store managers, many of whom started with the company in its native West, would adapt to the unique needs of their new markets.  The article cites the Camden store manager, for example, who began with Penney in Spokane, Washington, transferring to Milwaukee then to Quincy, Illinois before landing at the helm in Camden, a market where a constant barrage of advertising was necessary to drive sales, a situation he hadn’t experienced in his earlier tours of duty.
The manager of the Springfield, Massachusetts unit worked in Penney’s San Francisco flagship store, moving to Santa Barbara before traversing the country to run the Springfield store. New England customers, as a rule, were very different from those in California. “In buying curtains a California customer wants to know first how wide the ruffle is, how full it is, and what the colors are; the Springfield customer asks whether the organdy (a type of fabric often used in curtains) is permanently finished, how securely the ruffles are sewed on and how long it will last”. Another cited example concerned towels, then as now one of Penney’s strongest product lines. Whereas bath towels typically outsold face towels 2 to 1 “presumably because a bath towel can serve either purpose”, in the Springfield store the opposite was true. The manager was undecided as to “whether the frugal New Englanders use face towels after they bathe, or whether they are just trying out Penney face towels before shooting the moon and buying the larger size.” (They also tended to say “ayuh” when responding affirmatively to questions, a point the article curiously omits.)

In any event, Americans were buying more face towels, bath towels, washcloths and all manner of other linens from their local J.C. Penney store than anywhere else, in addition to clothes for the whole family. “King of the Soft Goods”, indeed, but big changes lie ahead.
The first four photos above appear by courtesy of the J.C. Penney Archives at the DeGolyer Library at Southern Methodist University, the last is from an original slide in my collection. From the 1950’s, the following locations are depicted: Stockton, Long Beach and Glendale, California, followed by Rockwood, Tennessee (apparently a much older store, refaced) and Albuquerque, New Mexico, with a very nice hat tip to the area’s traditional adobe architecture. Note the gas stations represented in the picture – a Phillips 66 sign right next door, with a Conoco station across the street from it. Across the street from the Penney store itself, reflected in the store windows, is what appears to be a “Teague” Texaco. If you have a free week this summer, you can read about those and more here.      

16 comments:

  1. Timely -- there was just a rally in the town of San Fernando, CA yesterday to attempt to save the J.C. Penney store there (probably too little, too late). Flickr photo (not mine) of the store

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  2. Interesting about Cincinnati--it was one of the last markets where they opened full-line mall stores and they never had many dry goods stores there.

    Penney definitely knew how to make use of shopping center development to move into metro areas, along with selective use of mainstreet locations. They had significant penetration of Cleveland, Atlanta and DC among other places by the mid-50s. Judging from their early post-WWII locations, I'd imagine that they developed strategic partnerships with early shopping center developers like DeBartolo and Visconsi, Jacobs, Visconsi.

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  3. Replies
    1. Tom - I don't frequently use jargon on the site, and when I do I usually make a point to explain it. My apologies!

      "Soft goods" and "hard goods" are retail terms that have been in use for a long time to describe lines of merchandise. "Soft goods" include linens, towels, clothes, etc., while "Hard goods" include furniture, appliances, automotive, etc.

      Unlike Sears and Wards, Penneys was almost strictly a soft goods retailer until the early 60's, when they added hard goods to broaden their appeal.

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  4. A small part of JC's legacy still lives on...

    http://en.wikipedia.org/wiki/Penney_Farms

    It's quite a pleasant little community, though it probably only has a couple of decades left before Jacksonville's tentacles engulf it.

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  5. the albuquerque store is not next to a phillips 66, rather that sign is indicating the historic route 66 which went thru albuquerque.

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  6. So glad to see another article on Penneys, one of my favorite retailers. Informative as always! I wonder how much buying out of other stores Penneys did. Here in Springfield, MO, in the 1930s I guess, Penney's moved to a building on the square formerly occupied by a local dry-goods company (a department store that still called itself a dry-goods company, really) called Rep's. Rep doesn't seem to have gone out of business; Louis Rep seems to have always been a successful businessman, and I wonder if he just sold out to Penneys, which took over its old spot. I think Penneys was in town before it moved onto the square. At any rate, Penneys was on the square from the 30s through 1970, when it moved to the mall. It is still in THAT spot 42 years later.

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  7. How many downtown JC Penneys are still open, I wonder? It's one of the last survivors of pre-suburban retail (though of course most of them have moved out to the mall).

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  8. boy, am i embarrassed about my prior comment--i blew up the picture, and it is a phillips 66 station.

    oops

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  9. Gosh, I'm 50 but I don't remember when JCPenney was a "small town" thing. It's so ironic how now you can only find this same company's stores in urban malls. In the 1973 movie American Graffiti (which was SET in 1962, and was a tribute to 50's culture, which didn't yet seem like ancient history), you can see a store like one in these pictures with the pre-Dixie Square "Penneys" vertical signs. Interestingly, 1973 was right around the same time the modern JCPenney identity was being rolled out. Still could this have been a case of brand placement in a movie? I think JCPenney must have paid Universal a large sum to appear so prominently in both The Blues Brothers and Back To The Future. A "House of Fabrics" store is also visible in American Graffiti. I have to wonder whether this location, and possibly the whole chain, actually existed in 1962 or if this was a case of a then-new (in 1973) retailer paying for placement. House of Fabrics, along with Cloth World (a chain recently covered in a Publix entry on this blog), were both bought and rebranded by Jo-Ann Fabrics in the late 80's. I'm thinking the House of Fabrics in American Graffiti was a fake storefront for the movie, since the store looked awfully small even for a 70's fabric store. But maybe they were willing to make downtown stores tiny. I should add that both Jo-Ann Fabrics and PLCB Wine & Spirits stores (once officially, and still colloquially known as "State Store") have long been fixtures of Pennsylvania shopping centers, but around 2005, both companies started opening long-overdue new stores and upgrading their 60's/70's relics. For the consumer, this is good news, but it's bittersweet for us nostalgic people. I have a question: does anyone remember when exactly the "State Store" name changed to "Wine & Spirits"? Why people still use the old name in conversation is beyond me. I also don't get why "Penneys" hasn't been replaced by "JCPenney" in people's memory after 40 years! Maybe the reason these retail companies have so much trouble is because their identity marketing shows no strategy. Seems awkward to me how JCPenney used both "J.C. Penney Co." and "Penneys" on the same stores at the same time.

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  10. Dave - as always, an excellent post with great historical background. What really caught my eye was the store to the left of Penney's Rockwood, TN store - the Easy Way "Helpy Selfy." If only that would have caught on! "Honey, do you need anything from the Helpy Selfy?"

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  11. The Penney's seen in AMERICAN GRAFFITI was in downtown San Rafael, CA. The store closed in the 80's (IIRC) and was annexed by next-door Macy's. That Macy's was closed in 1996 when Macy's bought The Emporium, in favor of the larger Terra Linda Northgate mall store.

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  12. Just trying to be helpful...albeit two years later..I am a different "Anonymous" from Taos, NM...the pic is of the JC Penney that was in Taos...my Uncles owned the Phillips 66 next to it. Looking at the street sign, the direction is headed south to Santa Fe...east was to Raton. Great pictures! Thank you for sharing. Taosena : )

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