Business Ethics from the 19th Century to Today by David George Surdam

Author:David George Surdam
Language: eng
Format: epub
ISBN: 9783030371692
Publisher: Springer International Publishing

Catering to the Lower-Income Groups

Frank W. Woolworth remembered the callous and humiliating treatment he received at the hands of a supercilious salesman, who disdained the young Woolworth’s scruffy appearance. Woolworth harbored ambitions of becoming a clerk in the local store and eventually of owning his own store. He vowed to treat all customers with respect and dignity. Woolworth also wanted to cater to working-class and less-prosperous customers; he searched for bargains on moderate quality goods that he bought in bulk and sold at low prices (a strategy that Walmart would exercise decades later).

Woolworth worked for a local retailer. One of the retailer’s friends had bought some merchandise and advertised it for five cents for each item. He was able to lure in customers, who eventually moved toward the more expensive items. Woolworth, though, was fascinated by the nickel price aspect. Why not an entire store of five-cent merchandise? Woolworth believed that such a store, with a low markup and five-cent prices would create enough sales volume to earn the retailer a steady profit. Customers could browse the merchandise that was open for inspection, instead of in counters or on shelves behind counters. Sales would be cash only. Woolworth took the one-price policy another step. All of his merchandise was initially five cents; later he introduced ten-cent items, too (becoming a five and dime). Woolworth was familiar with the alternative pricing strategy, where retailers rarely marked prices on goods. Clerks memorized prices or were prompted by “complicated price codes.” Often there were two prices listed; the higher price was quoted first, and, if the customer balked, the clerk retreated to the second, “rock-bottom” price (Plunkett-Powell [1999] 2001, 26, 32, 36–38).11

Woolworth was so successful that he achieved an accolade accorded to successful entrepreneurs: the entry of imitators. On the other hand, “unfriendly” competitors co-opted Woolworth’s idea and, sometimes, his name in opening their stores. One of Woolworth’s cousins, Herbert Woolworth trained with F.W. and went off on his own. Herbert imitated Frank Woolworth’s stores and used the “Woolworth” name to get the public to think he was F.W. The original Woolworth felt aggrieved at this blatant betrayal. Despite such shenanigans, Woolworth surmounted such challenges (Plunkett-Powell [1999] 2001, 72–73, 76).

The dime store chains contested the lower end of the market. F.W. Woolworth and other pioneers quickly dominated this market, and later entrants into the dime store market rarely succeeded. At first, regular department stores and other observers viewed the dime stores as the “poor person’s department store.” But as the dime store chains began siphoning business, rivals of other types of retail stores started whining that the five-and-dime stores were competing unfairly. These stores were accused of driving out small retailers in towns, thereby ending the dream of retail ownership that had encouraged many Americans of limited capital.

The critics argued that once the small retailers were forced out, the five-and-dime stores could become local monopolies and gouge the local customers; the descendants of such critics use similar arguments against Walmart and other large discount retailers.

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