The United States of Amazon

Downtowns weren’t just places for business; they were also centers of community. 

Before Sears, people shopped in town centers. They bought whatever they needed, chatted with distant neighbors, packed the new supplies into buckboards and went home. 

Sears Roebuck customers perused catalogues, chose products, and mailed Sears some money, whereupon Sears mailed them the product. 

Cool, huh.

In the early 1880’s Richard Sears bought a shipment of watches and sold them via mail order. That went well, so he expanded into jewelry, then, in 1887, partnered with Alva Roebuck and opened up Sears Roebuck as a mail order firm. Recognizing that local stores had limited supplies of product, Sears had the novel idea of bypassing bricks and mortar and using catalogues as a marketing device and the Post Office for distribution.

The catalogue became known as the “Consumer’s bible”. By 1895 it had 532 pages. In 1906, they took the company public. 

In 1925, Sears Roebuck started selling kits through its catalogue for making houses. (Four are still standing in Atlantic City, NJ). Around the same time, Henry Ford started selling kits for making stripped down model A’s into small trucks. He shipped pre-cut wood for truck beds and sides to local train stations, where customers “picked them up” and assembled them – thus was born the “pickup truck”.

And you also thought Ikea was an original idea.

Sears Roebuck expanded into stores. They and other stores outgrew town centers, so they built “shopping centers” outside of towns.

Sears Roebuck grew into 400 stores. It launched Allstate Insurance, Dean Witter, and national brands, including Kenmore. By mid century, Sears was the largest retailer in the country.  

That’s when an architect named Victor Gruen decided that shopping centers had destroyed the sense of community once found in town centers. So he designed something called a “mall” – a place for, not just stores, but restaurants and community gathering places, too.  Many of these malls included Sears and other “anchor” stores (big retailers that would attract other stores).

Just as shopping centers destroyed town centers, malls destroyed shopping centers. 

Economists call it “creative destruction”.

Then, as the 20th century wound down, Sears started losing momentum. Walmart and Target overtook it. The retailers who owned Sears sold it to a financial investment company, which merged it with another falling retailer, K-mart.  And, because these finance guys knew little about retailing, the Sears/K-mart combination continued sputtering. 

Today the stock that sold for $195.18 in 2007 now sells for under $4 dollars. Sears/Kmart is on the edge of bankruptcy.

About the time Sears Roebuck started its downward slide, an entrepreneur named Jeff Bezos took Richard Sears’ original idea and modernized it. He, too, cut costs bypassing bricks and mortar. He substituted the Internet for the catalogue, kept the Post Office as a delivery system, and offered a list of products that grew to thousands of pages.

He named his new Sears incarnation Amazon, after the “largest river by discharge volume of water in the world”.

From 1994, when he began selling books below retail out of his garage, until recently, Amazon lost money. Nevertheless, investors poured money into the “new” way of retailing. 

Patience has its virtue:  today, Amazon “discharges” over 3 billion products worldwide, including 564 million in the US alone. It has 100 million Prime customers. In 2017, its revenue grew 31%. Its profit topped $3 billion. Its market capitalization is about $1 trillion. That’s just below the GDP of The United Kingdom, the sixth biggest economy in the world. 

Oh, and, at $123 billion, Bezos is now the richest man in history.  

“Good for him”, you might say. Maybe. Maybe not. 

Amazon is a prime example of the “creative destruction” of the industrial era by the digital era. As such it represents both hope and fear for the future.

It is a cloud computing giant, a retail giant, a smart home device manufacturer, a healthcare startup, a pharmacy, a delivery service, and a data gatherer and analyzer – and the list is growing. It now offers more products and delivers them more painlessly to more consumers than any retailer in history. It has re-invented retail.

But Amazon is also methodically destroying, not just town centers, shopping centers, and malls, but all competition. It is not just the Sears-Roebuck of today; it is becoming the sole market place to the world. And there is really nothing out there to challenge it.

Ready or not, until another “creative destructor” or a “trust buster” like Teddy Roosevelt comes along, welcome to “The United States of Amazon”.

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