More About Strawbridge

As noted two posts ago, Philadelphia's Strawbridge & Clothier was one of America's most successful, innovative, and responsive department stores, and remained so under family ownership for more than 130 years. But eventually the cost of staying competitive in the field -- and in the discount field as well with its Clover division -- got too big, and the family sold out. (Beyond my expertise is how the cost of keeping up with vast national chains like Federated and May requires more capital than smaller companies could access based on their lesser cash flow.)

Like any mature business, Strawbridge faced challenges to its continuance every year. A couple are similar to the challenges newspapers have faced and are facing. Strawbridge's responses worked for a while, and while the company disappeared, many of its locations still are successful department stores under the Macy's name, so it's not that the business model of the store was bad, just the business model of the company.

As Alfred Lief notes in "Family Business," after World War II price competition increased, "resulting from improved production in many lines. Theoretically, lower levels were good for business because they were good for the public, ushering in better values; and from a financial standpoint it could mean lower capital requirements." This isn't quite the disruptive change of the Internet, but it touches on the same issue. Cheaper costs should be good for business because they allow you to lower your price and spend less on capital, so for a newspaper the need to not buy presses or paper should be good for it and its customers. "But too much of a good thing was always unhealthy." Get to a point where there's too much competition with too little capital investment needed, and established business founders. It can do nothing else. It can't make the past go away.

More important was that sales volume at the giant downtown store -- which had been expanded in the 1930s to handle its tremendous and growing business -- was now falling off. (Read: The massive pressrooms built during the height of classified and insert growth in the 1990s.) Disruptive change -- the postwar suburban push -- had made people less inclined to take a longer drive or train trip to go shopping. Yes, Strawbridge and Wanamakers might have better merchandise than was found at E.J. Korvette or Shoppers Fair -- but was it that much better to make the trip worthwhile, except for special occasions such as Christmas shopping or buying a party dress? Sort of like only buying a newspaper when your team wins the World Series. But while you can run a bridal shop on special occasions, you can't run a department store.

So Strawbridge went to the suburbs, opening stores throughout the Philadelphia area. This is somewhat the same as metro newspapers' response to suburbanization -- creating Neighbors sections. It was different in that Neighbors was more of a boutique than a branch. But the point was usually the same -- to try to follow one's customers' out to the suburbs and keep them from going to suburban rivals there.

Because department stores were department stores, those rivals were seen as -- other department stores. While department stores recognized that their customers increasingly were going to Kmart, they apparently thought it was only because a major department store wasn't close enough. Thus, when Strawbridge's was the motive force behind opening Cherry Hill Mall in 1962 as the prototype (Correction: Off by one -- see comments) for all of today's enclosed malls, the aim was to not re-create downtown Philadelphia with its (now down to) four department stores. As Lied writes, Strawbridge "proposed Bambergers of Newark as an acceptable neighbor... This development prompted Wanamakers and Gimbels to make a defensive move. They paired off the next year in a shopping center at Moorestown, New Jersey, about five miles east."

In the short run, this was fine, and Cherry Hill -- which eventually grew to include a Penney's as well -- was one of the marvels of the age and remains one of the East Coast's most important shopping destinations, with a Crate & Barrel, a Nordstrom, and a Container Store joining Macy's and Penney's. While it and similar stores in Springfield, King of Prussia, and elsewhere kept Strawbridge's going, they didn't address the discounter problem. This Strawbridge did, of course, with the Clover division, just as the Dayton Co. of Minneapolis did with Target. Eventually, of course, Dayton Hudson sold off its department stores and just kept Target. Would Strawbridge's have eventually just become Clover? Probably not, because it didn't have the resources to compete with national companies in either venue.

Strawbridge's recognized what was happening, as noted by these sentences bringing to mind the multiplatform moves (internal and external) of newspapers: "The future business of Strawbridge & Clothier would be carried on and directed in mutiple locations. In order to be able to run a multi-store operation, the organization would have to be restructured." In the short run, Strawbridge's did well. In the long run, though, its days were numbered.

What did Strawbridge's in was that it was competing with national chains (May Co., Federated, and Macy's at the end in department stores, Walmart and Target in discounters) that could outdo it when size and breadth were the issue, and competing with an incredible multiplicity of small stores that could outdo it in the personal service it once offered but could no longer afford because it was having to cut costs to compete with the national chains.

But could it have transformed itself into a surviving boutique organization? Doubtful. The "Strawbridge" name stood for a classy department store, just as the same of, say, the Omaha World-Herald stands for a newspaper. To make it stand for a small jewelry boutique -- doubtful. Loyalists would be miffed, and jewelry buyers would not care. They might still totally go to Jared.

So the problem for newspapers may be that in the end, there's not much you can do if your world falls apart. That's less hopeful than I usually try to be, but it wasn't bad management or resisting the customers that put an end to Strawbridge & Clothier. Strawbridge just didn't fit into the world anymore. That doesn't mean that there still aren't department stores, just as changes in communication don't mean that there won't be newspapers. But perhaps they will be print editions of the New York Times and Wall Street Journal for those who are willing to pay for them -- produced in ways that spread the overhead around nationally -- and a bunch of weeklies or local replacements as news boutiques, with the Internet as Walmart. The thing is that in the end, that doesn't matter that much for the consumer, who may even be happier with the arrangement. Whom it matters for, other than the people who lose their jobs, is those who remember how great it was to shop at a store like Strawbridge & Clothier, and feel a loss in their lives.

Someone Must Pay

Earl Wilkinson of the International Newsmedia Marketing Association, his blog published in the New Jersey Press Association's newsletter, InPrint:

"What would happen if our local newspaper went out of business? ... My pat answer is that hypothetically, bloggers and nonprofit Web sites would rise up and take over the role of the local newspaper. Eventually, amateurs would become professionals, a Web site would emerge as the leader, a business model would revolve around their audience, and the ecosystem would return to equilibrium....

"How did E&P really die?" Of course, it's been resurrected, but still. "Like newspapers, its classifieds shifted to free online sources. Like newspapers, there was an overreliance on a certain advertising category.... Like newspapers, it gave away far too much for free on its Website. Like newspapers, its coverage became too broad for its resources.

"The E&P story should serve as a sober warning for newspapers on several levels:

"First, influence is great, but it rarely pays the bills.

"Second, to create value for content there must be the perception of scarcity. Don't give it away.

"Third, don't try to build audience by being all things to all people...."

Doug Page writes in February's News & Tech:

"The Internet forces yet another dismal economic model on newspaper Web sites: perfect competition.

"In this scenario, many players produce the same product -- as consumers see it -- which, because of this abundance, lowers the price and, more importantly, gives Internet users an incredible advantage: the substitution effect.

"And keep this in mind: The substitute need not be perfect.

"'The comparative advantage that newspapers have is professional reporting,' said Bruce Bueno de Mesquita, a New York University game theory specialist. 'They have the ability to take information, digest it and inform better than an amateur can.

'But that doesn't mean anyone will pay for it.'...

"The smartest Internet strategy may come from a publisher whose embrace of the Internet is more like a weak squeeze.

"Former USA Today Publisher Cathie Black, now leading Hearst Magazines, maintains only skeletal Web sites for her titles.

"As the New York Times quoted her last year, Ms. Black wants this: 'I want 1.6 million women to go to the newsstand and every month to buy Cosmo....'

"If you listen to what Black is saying, you'll know what's really important: The print edition is the only thing that cannot be substituted; the only thing that makes any newspaper unique; and the only thing that assures an advertiser that their message is displayed."

Of course, any new-media theorist will simply dismiss all this as: "They're so stupid!" But it's really up to the owners of newspapers. Most journalists don't think in terms of workable business models; indeed, a workable business model often seems to be the enemy of journalism, in the same way that doctors don't really want to run businesses, which is why their offices are so often an operational mess. So publishers and chairmen have to take the lead.

They can act boldly for print, as Walter Hussman in Little Rock has done; or they can act boldly for online, as in Ann Arbor; or they can say: "Well, I don't know, if I do something, there might be a downside." Since most newspaper publishers and prospective publishers who came out of the 1990s and early 2000s got their jobs for keeping profits churning while avoiding any substantive risk, I suspect Earl's projection of the future -- current big media swept away, replaced by new big media -- will happen, much more than a future in which the independent citizen-entrepreneur-journalist model prevails. Permanent revolution didn't work for Mao, so why should it work in the news business?

Department Store Building of the Week, Vol. 29

Bowman's Department Store, at 314 Market St., was one of Harrisburg's two downtown department stores. It and Pomeroy's, the larger store, were located nearly adjacent to each other on Market Street, up which commerce had moved when it outgrew all being on Market Square on Second Street. You can't see it in this photo, but there is a large "B" on the front of the building.

Pomeroy's building is gone (it was where the new tall building is at the top of the photo), as is the main Pomeroy store in Reading, but the Bowman building still is there. There originally were Bowman brothers. One, Samuel, split off and kept the branch store in Carlisle, which also was known as Bowman's but for most of its career was run by Albert Watson, who was not a Bowman but bought the store and kept the name. John Bowman ended up with the Harrisburg store, which went down through his family -- sons William and Harry (yes, perhaps the Bowmans inspired Prince Charles), and descendants Russell Charles and John Delaney.

Bowman's from the 1950s opened suburban stores, such as one at the east end of Harrisburg near the end of Market Street, as well as expanding to other cities. In the mid-1950s it purchased Bittner's Department Store in Sunbury, Pa., and created a division called Bowman's Sunbury Inc., which not only ran a small department store in Danville, Pa., but also had a suburban branch in Sunbury -- impressive in a town of about 15,000 people. The branch bore the wonderful 1950s name "Bowman's Fashionalia." In the late 1960s, the chain picked up the S.S. Weiss Inc. store in Pottsville as well. But like most independent department stores, it became noncompetitive when the enclosed malls opened -- Harrisburg became a target of the large Philadelphia stores, such as Wanamakers and Gimbels, and while the Allied Stores-owned Pomeroy's could soldier on, the writing was on the wall for Bowman's.

In some ways, stores such as Bowman's, Wasson's in Indianapolis, and the Interstate chain of myriad Grand Leaders and Stillman's paid the price for being too quick with suburban stores -- they opened branches long before their rivals, in an effort to compete with discount stores in a car-oriented America, but then were already committed to locations and strategy before it became apparent that enclosed regional megamalls were the shopping location of choice in the 1970s and 1980s. In Indianapolis, Wasson's Eastgate-Eagledale-Meadows branch system looked OK even with there not being a Wasson's store at upscale Glendale, but when Lafayette Square, the city's first enclosed mall, opened a mile from Eagledale, it was over. (Newspapers, of course, were, despite the rap, early and enthusiastic in their attempts to make use of the Internet -- but their portal-based strategy did not adapt well to links and search. You can get to the party too early.)

Reviewing an AdAge

I picked up the May 4 issue of Advertising Age because of its story on the death of Portfolio magazine. AdAge, like NewsTech (formerly Newspapers & Technology), is always a blessed antidote to read, because its concern is things involving the exchange of money and not the Future of Journalism. Therefore, while it does its share of endless theorizing, it is more of a voice that sees things as they are and says why, less of seeing things that are not and saying why not. You need both, but lord, do we have a lot of the second these days.

The story on Portfolio was blessedly free of any references to "no new print product will ever be developed," "no one will ever read print again," "how stupid Newhouse was to invest in print," etc. AdAge's take: Took too long to roll out, content was at variance with the times. But magazines are not the main interest of TTPB. Pay attention to these stories:

"Newspapers Build Digital Portfolios": While everyone is talking about print editions sucking air, newspaper companies are finally putting their money into digital companies and applications that are actually digital companies and applications, instead of simply "newspapers on the Web," which, as we now know, don't work very well. The story reminds us that "Myth: newspapers stuck their heads in the sand and just hoped the internet would go away. Reality: Newspapers took some of the biggest, earliest swings on the web, most turned out to be misses, and then got steamrolled by Google just like everyone else." Of classified, it notes: "The newspaper business is crippled -- along with broadcast TV and radio -- and frankly, doesn't have the firepower to make huge digital investments beyond attempting to keep what revenue it has left from walking out the door. Part of that is attempting to keep at least some classified revenue that left for the web. Ironically, this is where newspapers have had some digital success." What this has to do with journalism, of course, is yet to be seen -- but if it were to put newspaper companies on a more solid and widespread financial footing -- but of course, it might lead them to abandon journalism altogether. At any rate, this is a story you won't read on most discussions about the Future of Newspapers.

I can't find this one online, but its headline is "How Personality Can Predict Media Usage," culled from a study by a company called Mindset Media. This could all be hooey, but the company alleges that it knows what type of people read newspapers: Optimists, dynamic people, and leaders. "Essentially what you're seeing here is, what TV doesn't have, newspapers do," said Mindset's John Durant. The least-likely to read newspapers: "Bravado fives," who "can be stubborn and show a willingness to be sharp-tongued." Take this study on its own terms: Would that mean bloggers are the least likely to read newspapers? (Heck, would it mean journalists are among the least likely to read newspapers? This could shed new light on our self-loathing articles about the newspaper business.)

For those who point out an attribute of digital -- its ability to produce reams of data -- columnist Jonathan Salem Baskin writes, "Digital stuff is alluring and frightening, and we've been dared to embrace it by a Greek Chorus of enablers who incessantly yell, 'Do it faster and more often, or you'll be out of a job.' Lots of the successes promoted as cases to emulate are nothing more than self-fulfilling prophecies for selling digital services." The point: Never forget that everyone has a dog in the hunt.

Finally, read this column by Simon Dumenco and you may never see the "triumph of social media" in the same light again. As he notes: Twitter "still lacks a revenue model and just burns through more venture capital every time a new user signs up." Other nuggets: "Susan Boyle has been on what I called the "Google Dole" -- her fame fueled in a nonsensically nonprofit manner by Google's YouTube unit, which hemorrhages cash serving up too much video with nowhere near enough advertising support." And: "Getting million of new users in the Third World, it turns out, really sucks, because Facebook will never really be able to meaningfully monetize those eyeballs. It's tons of cash out (bandwidth, data storage, personnel) with little hope of cash in."

He builds himself to a crescendo here: "Weirdly, some of the management at these companies don't even seem to be trying that hard to make money -- a consequence, perhaps, of still being awash in millions of dollars of VC money. ... You've got to admit that at some level the boys at Facebook, YouTube and Twitter are actively choosing to redistribute the wealth. They're taking money from venture capitalists and deploying it so that millions of people far beyond Silicon Valley can get something for nothing. Entertainment, information, and self-marketing opportunities, mostly. And, oh yeah, a sense of 'connectedness' -- cyber companionship -- which makes this particular era of VC-wealth distribution all the more ... touching. (Let's all be friends -- on someone else's dime! Let's all be perpetually jacked into the hyper-insta-now global hivemind of human consciousness -- for free!)" Gee, sounds like "let's give everyone our news -- free!" Let's put "Antitrust" into the DVD one more time.

His point: "The digital Robin Hoods can't keep redistributing the wealth forever, because eventually the wealth runs out. Investors get sick of propping up private ventures that don't have viable business models."

To which this comment is interesting: "Many start-ups today are really non-profits that just have a different legal structure. I am not a tax expert, but given the tax bracket many VC's belong to, there may be better tax advantages to a failed investment than a charitable contribution. Fewer Non-profit start-ups fail than profit based start-ups because they are typically fueled by leaders passionate for their cause who can typically find donors equally interested in supporting the cause. Shaping culture can be terribly satisfying, more so than any profit." I suspect fewer non-profit start-ups fail primarily because they do not have to produce a profit. And the passionate leaders still need a paycheck. But when we're talking about the business of newspapers in the digital age, perhaps we are talking about two different universes more than we think. The comments go back and forth between "Monetize!" and "Social good!" Increasingly I think that the argument over "print" has just been a metaphor.

Innovation

As we watch to see if Chrysler disappears into GM: Well, the U.S. auto industry is widely condemned for 30 years of management short-sightedness, and who's going to defend it?

Yet the U.S. auto industry consisted of three companies. The newspaper industry is condemned for not developing Monster, or eBay, or Craigslist, or, in some truly over-the-top moments, Google. (Asking why the newspaper business did not develop Google is like asking why GM did not develop the Atlas rocket. Why exactly would it have?) But think back to 10 years ago, when the Web is four or five years old, and newspapers were starting to put content online. What did the newspaper industry consist of in 1998?

Well, the publicly held companies that were reviled for putting profits first -- Knight Ridder, Tribune, Gannett, Journal Register. And then the two-tier stock companies such as NYT, Times Mirror, Dow Jones-Ottaway, Belo, Scripps, Post, and McClatchy, which at the time was a small company. Occasionally reviled, occasionally not.

And then the privately held giants like Hearst, Advance, Freedom and Media News. And then a host of smaller companies -- Seattle Times, Block, Central, Wehco, Morris, Media General, Cox, Copley, Guy Gannett, Pulitzer, Lee, Landmark, Donrey-Stevens, Pioneer, Swift.

And then even smaller companies with still significant holdings such as World-Herald, Forum, Ogden, Schurz, Nixon, Post & Courier, Harris. And then the independent companies in places like Cedar Rapids and Youngstown and Atlantic City and Hackensack and Arlington Heights.

They all stand in the dock accused of not developing Craigslist? Of not throwing out the old model and putting every bet on the new? Of putting short-sighted profits ahead of long-term gains? We're ranging from the occasionally bombastic and dynasty-obsessed Frank Blethen in Seattle to the quiet down-home Marcils in North Dakota, from the back-and-forth futurism of Knight Ridder and the Cue Cat fiasco at Belo to the print-is-first Walter Hussman in Little Rock. We're ranging from companies that looked for 35 percent margins to ones that were happy with 5.

If there was a way to get it right, someone, somewhere, would have done it. (And indeed, the newspaper business is full of many success stories, and despite the secular components of change, there is a cyclical nature to the newspaper economics of late 2008 as well. Most journalists, of course, ignore the successes because they happen in places like Anniston and Oklahoma City where they do not really want to end up.) This is not three giant companies, based a few miles apart, operating under nearly identical contracts. Newspapers may have been local monopolies, but nationally it was a very diverse group of businesses.

Journalists are good at pointing out how solutions could be easily obtained by doing the right thing, spending lots of other people's money and not worrying about the cost. And journalists are often pretty certain what the right thing is. But sometimes, when you eliminate the blogs of the "we saw the future in 1985" tech-editors-turned-consultants who are still angry about not having been able to do what they wanted, you are left with: We are going to lose our jobs, and it's your fault, you should have done something. We trusted you. What we do is important and so you should have taken better care of us.

Well, yes, in the early 1950s, the Big Three could have seen that given the potential of increased foreign competition, higher oil prices, the growth of environmentalism, exponential changes in health care and mortality rates, and the failure of the United States to comprehensively address medical insurance for decades while every other industrialized country did so -- so knowing, it should not have signed pattern labor contracts that essentially guaranteed health benefits for life to retirees and encouraged them to retire early, in return for relative labor peace to satisfy the post-World War II demand for cars, cars and more cars. Right.

Companies without the same legacy, operating under different conditions and political systems, with factories they had to rebuild because of wartime destruction, from markets where space was less prevalent, roads were worse and gasoline was four times as costly, would come up with different solutions not because they were freaking geniuses, but because they had a different frame of reference. What we're really reacting to is the same thing Michael Moore has said since "Roger & Me" -- why is it that the worker for a long-established successful company finds himself unemployed when it's not his fault, he's done his job well? It must be greed and incompetence. It can't just be, sometimes you win and sometimes you lose.

The newspaper business has made myriad mistakes and few of its business leaders are terribly admirable. But it makes no sense to accuse it of not acting from 1993 on, or even today, as if it were a startup Internet business, or a hobby like Craigslist that just grew, or a program to organize all the world's information. Most innovation does not come from established players -- and should not be expected to.

It's tempting to think that a publisher could just stand up and say, "I'm shutting down the presses, laying off all the drivers and pressmen and carriers and circulation people and the classified ad-takers and a lot of the business side people, and I'm doing this so that we can save the news content and the reporters' jobs." Nice, but egocentric. The publisher has to operate the business he has, not the business he might start today if he were 21 and willing to starve for a while. It's true that the end product of the revolution in information may be the end of the newspaper companies we have known. That would be a shame, and readers of this blog know I do not believe it is inevitable or that the future does not involve print. But to expect that leaders of newspaper companies in the U.S. would have solved this problem by somehow developing Monster or Craigslist themselves is looking for a scapegoat. It comes from the same source as saying that if the publisher was just willing to live on $30,000 a year, eliminate all bonuses, dividends and payments to the owners, and give all that money to the newsroom, the newspaper would be a success, because think of all the great stories we could do. (CareerBuilder did take on Monster with some success. But when they have to compete with free, with niche job boards, etc., even if the newspaper business had created Monster first, it could not have kept all that classified dough rolling in. I am told that the job market in the rest of the world tends to be more localized than in North America, which has led to more success for newspapers overseas in holding onto help-wanted classifieds, which until the real estate collapse was the main source of newspapers' recent economic woes.)

The problem now is that newspaper companies are so confused that they cannot even figure out how to be successful newspaper companies, and they are surrounded by people telling them that they should not even try. It is hard in a cascading-to-the-bottom economy, but they really need to get a grip. More to come next week (as if this wasn't enough!)