Sears, Richard W.

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Richard W. Sears

American merchant Richard W. Sears (1863–1914) possessed one of his era's shrewdest business minds. As the founder of the Sears, Roebuck & Company mail-order powerhouse, Sears revolutionized retail ing in a rapidly expanding, increasingly prosperous nation.

"Sears had a deep, intuitive feel for the commercial needs and aspirations of the people of rural America," noted American Heritage writer John Steele Gordon, "and a genius for writing catalogue and advertising copy that awakened those needs and aspirations."

Early Business Experience

Sears was born on December 7, 1863, in Stewartville, Minnesota. His parents were of English heritage, and his father was a successful wagonmaker who entered into a stock farm venture that failed. After his father died, the teenage Sears was obligated to support his mother and sisters and went to work in the offices of the Minneapolis and St. Louis Railroad in Minneapolis. He worked as a telegraph operator, and then trained to become a station agent.

Relocating to a small burg called Redwood Falls, Sears ran its railroad station and slept in a loft there as well, a berth he got in exchange for keeping the station clean. He supplemented his income by dealing in coal and lumber and by contracting with local Native American communities to ship their venison. In his spare time, he studied the catalogs that came through, comparing the wholesale prices of the merchandise listed on the bills of lading for train freight with the retail prices in the catalogs, and concluded that there was profit to be made in mail-order businesses.

One day in 1886, Redwood Falls's jeweler declined to accept a shipment of watches that arrived at the station. Instead of returning them to the manufacturer, Sears asked for and was given permission to sell them. He then sent out letters to other station agents along the line offering them for sale at $14, two dollars more than what he had paid. The watches had a suggested retail price of $25 and sold quickly. Station agents asked for more, and Sears's first mailorder company was born. He contracted with the watch-maker for more and took out advertisements in St. Paul newspapers.

After earning $5,000 during his first year in business—a small fortune at the time—he quit his railroad job to devote himself full time to his new business. The R. W. Sears Watch Company catalog started to offer a wider array of jewelry and then silverware, and he decided that relocating to Chicago, a transportation hub, would help keep his shipping costs low. When some of the watches began to come back needing repairs, Sears hired Alvah C. Roebuck, a self-taught watchmaker who had grown up on an Indiana farm.

Bored with Banking

After just three years in operation, Sears decided to sell his mail-order business, and the transaction netted him several thousand dollars. For a time, he ran a bank in rural Iowa but found that he missed the livelier merchandising business. Heading back to Minneapolis, Sears teamed with Roebuck again and put the latter's name on the company. By 1893 both had returned to Chicago and the second venture was thriving under its new name, the Sears, Roe-buck and Company.

Sears and Roebuck printed and distributed a free catalog that offered an array of goods, from saddles and guns to baby carriages and blankets. Sears wrote all of its ad copy, but he lacked the organizational skills to keep the company from being constantly inundated with orders—sometimes for goods that were not yet available for shipping. At times, he burned piles of order slips when things became too backed up. He and Roebuck often worked seven days a week, putting in 16-hour days.

Fed up, Roebuck sold his interest around 1894, and Sears scrambled for a new partner with solid managerial experience. He found Aaron Nusbaum, the owner of a pneumatic-tube company who paid a sales call on Sears one day. Sears offered him a partnership, and Nusbaum sold his company to buy into Sears' mail-order firm; he also brought his brother-in-law, Julius Rosenwald, with him. Rosenwald owned a successful Chicago menswear business that had wholesaled suits to Sears and knew the company had vast profit potential.

Earned Enmity of Shopkeepers

Sears' company began a heady period of growth in the late 1890s. Its "audience was rural America, millions of thrifty consumers whose only shopping outlet was the general store, where selection was spares and price markups usually horrendous," wrote Eugene Carlson in the Wall Street Journal. The cover of the 1897 Sears catalog urged customers to take it to their local merchants and compare the prices. Inside, its pages offered a vast array of goods, from firearms and ammunition to hats, books and even large-ticket items like pianos that could be purchased on an installment plan. Sears "knew how to talk to flinty, skeptical rural America," noted a Fortune profile. "He wrote copy for his catalogue as if he were looking a farmer right in the eye."

Despite his poor managerial skills, Sears had an excellent sense for marketing in addition to his writing talents. The few years he had spent in Iowa as a banker had given him insight into his target customer, and Sears courted German and Swedish immigrants in the Plains states by including ordering instructions in their languages. In another one of his innovative schemes, called the "Iowazation" project, Sears asked his best customers in the state to distribute 24 catalogs among their friends and neighbors; in return, they earned a small percentage of the resulting sales. The program proved so successful that it was used in other states as well.

Within a few years, the Sears catalog was so popular that envious local merchants sometimes paid youngsters to collect them for burning. In other parts of the country, the company was forced to send the catalogs out in brown wrappers, since many local general stores that were losing sales to Sears served as the post offices. Volume sales kept merchandise prices in the catalog low, and a reassuring money-back guarantee won over customers. Sears had copied the "satisfaction guaranteed" idea from the Montgomery Ward catalog, which was already a success by the time he started his company. But Sears'catalog soon surpassed Ward's, and the pair engaged in an intense business rivalry for many years.

Capitalized on Boom Years

When Sears teamed with Nusbaum and Rosenwald in 1895, his company was selling $500,000 worth of goods annually; five years later, salesr hit $11 million. Sears had found a huge, untapped consumer market in rural America. Some 853,000 Sears catalogs went out in 1900, at a time when the U.S. population of 76 million was classified as three-fifths rural. The catalogs that boasted "We sell everything" were eagerly awaited by households in the rapidly expanding Midwest and West. The women's fashions pages were torn out and taken to small-town dressmakers or copied at home on one of the several models of sewing machines the catalogs sold; customers could even build new homes from kits the catalog offered for sale. The success of the company was helped by fortuitous timing; railroads were expanding across the United States, which helped move freight along more quickly, and the Rural Free Delivery Act, which went into effect in 1896, guaranteed the catalogs would be delivered to every single American home, no matter how remote.

The three partners did not get along well, however. "Nusbaum was a burr under both Rosenwald's and Sears's saddles as a fence sitter who would defer to their decisions but say 'I told you so' if things went wrong," wrote Daniel A. Wren and Ronald G. Greenwood in their book Management Innovators, a chapter of which was reprinted in a 1998 issue of the Journal of Leadership Studies. Sears eventually delivered an ultimatum: either the brothers-in-law buy out his share of the company, or he and Rosenwald would buy Nusbaum's share. This forced Rosenwald to choose between his family and the company, and he chose the company. Nusbaum was bought out in 1901 for $1.25 million, a massive return on his original investment of $37,500.

Sold Shares in a Huff

By 1906 the Sears catalog enterprise moved into a new Chicago headquarters that made it the largest single-business space in the world at three million square feet. The company was receiving about 20,000 orders daily from its catalog and even boasted the world's first automatic envelope-opening machine; during the leadup to Christmas, about 100,000 orders arrived each day. It was the largest mail-order business in the world.

Rosenwald possessed the managerial genius that helped Sears' marketing vision attain success. He devised a color-coding for order processing and even set up a type of assembly line that enabled them to be filled quickly. An unknown carmaker from Detroit, Henry Ford, visited the Sears headquarters to see the idea in operation and later used it in his first factory. An order could be filled in just 15 minutes from the moment the envelope was opened, but the problem came from orders that had to be filled from multiple departments. Rosenwald created a system under which a department would be fined if it did not fill an order in the targeted time frame.

Sears' lack of business acumen brought his own severance with the company. A 1907 depression caused sales to decline from $49 million in 1906 to $47 million, and Sears argued that the 1908 advertising budget should be increased. Rosenwald resisted, believing it more prudent to reign in expenses during the economic slump, and so Sears sold his shares for $10 million to Goldman, Sachs, the Wall Street investment banking firm, in 1909. He was given a seat on its board but attended only one meeting.

Sears retired to his farm in the countryside north of Chicago and died in Waukesha, Wisconsin on September 28, 1914. To his wife, Minneapolis native Anna Lydia Meckstroth, and four children he left an estate valued at $25 million. Under Rosenwald and successors, the company that bore Sears' name well into the twenty-first century continued to thrive. It opened its first store in 1925, and the catalog continued to be a staple in American homes until the 1970s.

Sears was buried in an opulent crypt in Chicago's Rosehill Cemetery, where legend has it that near his grave a man in a top hat can be seen walking toward the burial site of Montgomery Ward, Sears' archrival.