Marketing Channels and Supply Chain Networks in North America: A Historical Analysis (SpringerBriefs in Business) 303044869X, 9783030448691

Table of contents :
Contents
1 Introduction
1.1 Historical Background
1.2 What Is a Marketing Channel?
2 Distribution in a Developing Economy: 1850–1900
2.1 Railroads Provide Channel Infrastructure
2.2 The Rise of the Department Store in the United States and Canada
2.2.1 A. T. Stewart: Department Store Pioneer
2.2.2 Department Stores Become Show Places
2.3 Marketing Channels Become Integrated, Linking Buyers and Sellers
2.4 Franchising
2.5 Consumer and Retailer Cooperatives
2.5.1 Consumer Cooperatives
2.5.2 Retailer-Sponsored Cooperatives
2.6 The Beginnings of Catalogue Retailing in the United States and Canada
3 Distribution Driven by Technology: 1900–1950
3.1 Transformative Changes in Distribution
3.2 Wholesaler-Sponsored Voluntary Groups
3.3 Mail Order Retailing Expands
3.4 Chain Stores
3.5 Transportation Advances: Goods and People
3.6 The Operations Function Advances
4 Technology Accelerates: 1950 to Present
4.1 Distribution Revolution
4.2 Intermodal Transportation
4.3 Supply Chain Becomes Prominent
4.4 Process Improvement to Reduce Costs
4.5 Efficient Consumer Response Transforms Supply Chain Networks
4.6 Technology’s Impact on Marketing and Supply Chain Relationships
4.7 Blockchain Data System Transforms Communication
4.8 Nonstore and Omnichannel Retailing
4.8.1 Nonstore Retailing
4.8.2 New Challenges of Omnichannel Retailing
5 Conclusion: Marketing Education and the Future
5.1 Marketing Education Issues
5.1.1 Marketing’s Concern for Distribution Diminishes
5.1.2 Future of Marketing Channels in Marketing Education
5.2 Conclusion
References

Citation preview

SPRINGER BRIEFS IN BUSINESS

Robert D. Tamilia O. C. Ferrell Karen Hopkins

Marketing Channels and Supply Chain Networks in North America A Historical Analysis

SpringerBriefs in Business

More information about this series at http://www.springer.com/series/8860

Robert D. Tamilia O. C. Ferrell Karen Hopkins •

•

Marketing Channels and Supply Chain Networks in North America A Historical Analysis

123

Robert D. Tamilia University of Quebec at Montreal Montreal, Canada

O. C. Ferrell Raymond J. Harbert College of Business Auburn University Auburn, AL, USA

Karen Hopkins Raymond J. Harbert College of Business Auburn University Auburn, AL, USA

ISSN 2191-5482 ISSN 2191-5490 (electronic) SpringerBriefs in Business ISBN 978-3-030-44869-1 ISBN 978-3-030-44870-7 (eBook) https://doi.org/10.1007/978-3-030-44870-7 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 What Is a Marketing Channel? . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Distribution in a Developing Economy: 1850–1900 . . . . . . . . . 2.1 Railroads Provide Channel Infrastructure . . . . . . . . . . . . . . 2.2 The Rise of the Department Store in the United States and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1 A. T. Stewart: Department Store Pioneer . . . . . . . . . 2.2.2 Department Stores Become Show Places . . . . . . . . . 2.3 Marketing Channels Become Integrated, Linking Buyers and Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Franchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Consumer and Retailer Cooperatives . . . . . . . . . . . . . . . . . 2.5.1 Consumer Cooperatives . . . . . . . . . . . . . . . . . . . . . 2.5.2 Retailer-Sponsored Cooperatives . . . . . . . . . . . . . . . 2.6 The Beginnings of Catalogue Retailing in the United States and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 5

..... .....

9 11

..... ..... .....

13 13 16

. . . . .

. . . . .

17 18 19 19 20

.....

21

. . . . .

. . . . .

. . . . .

3 Distribution Driven by Technology: 1900–1950 3.1 Transformative Changes in Distribution . . . . 3.2 Wholesaler-Sponsored Voluntary Groups . . . 3.3 Mail Order Retailing Expands . . . . . . . . . . . 3.4 Chain Stores . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Transportation Advances: Goods and People 3.6 The Operations Function Advances . . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

. . . . . . .

23 24 25 27 28 31 32

4 Technology Accelerates: 1950 to Present . 4.1 Distribution Revolution . . . . . . . . . . . 4.2 Intermodal Transportation . . . . . . . . . 4.3 Supply Chain Becomes Prominent . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

35 35 37 38

. . . .

. . . .

. . . .

. . . .

. . . .

v

vi

Contents

4.4 Process Improvement to Reduce Costs . . . . . . . . . . . . . 4.5 Efficient Consumer Response Transforms Supply Chain Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 Technology’s Impact on Marketing and Supply Chain Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7 Blockchain Data System Transforms Communication . . 4.8 Nonstore and Omnichannel Retailing . . . . . . . . . . . . . . 4.8.1 Nonstore Retailing . . . . . . . . . . . . . . . . . . . . . . 4.8.2 New Challenges of Omnichannel Retailing . . . .

........

40

........

41

. . . . .

. . . . .

44 45 46 46 49

....... ....... .......

53 53 54

....... .......

56 58

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63

5 Conclusion: Marketing Education and the Future . . . . . . . 5.1 Marketing Education Issues . . . . . . . . . . . . . . . . . . . . . . 5.1.1 Marketing’s Concern for Distribution Diminishes 5.1.2 Future of Marketing Channels in Marketing Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . .

. . . . .

. . . . .

. . . . .

. . . . .

. . . . .

Chapter 1

Introduction

A review of the history of marketing channels and supply chain networks of any country intimately ties to a review of the economic development and growth of that country. The evolution of marketing channels and supply chains is related to population growth, increased immigration, improved living standards, and the processes of industrialization, communications, urbanization, transportation, and motorization. A robust and growing industrial economy is a prerequisite for the emergence of specialized channel members working together to move goods efficiently and timely across many markets. Such an economy did not exist in many countries prior to the 1850s, notably in the United States and Canada. The economic development of countries such as the United States and Canada is well documented by economic and business historians. Most have focused their scholarly efforts on particular industries or sectors of the economy (e.g., fur, wheat, lumber, railroads, steel, chemicals, and cars). They have also explored how the improvements in technology helped transform the economy into a mass market. The industrial revolution of the nineteenth century led to the emergence of large-scale manufacturers with their mass production methods, their mass distribution (Chandler 1977; Tedlow 1990), and the rise of the professional manager referred to by Chandler and Tedlow (1985) as managerial capitalism. While the history of marketing thought is fast disappearing in doctoral education, there is a need to understand the past. It is important to analyze the development of market distribution (i.e., channels and supply chains) from a historical perspective. There is an opportunity for marketing education and practice to make better decisions by understanding more about how marketing channels and supply chains developed and the forces behind the present situation. For example, in the last decade or so, supply chain management has evolved as its own department in many colleges of business, often separate from and distinct from marketing. On the other hand, channel management, as a major component of marketing planning and strategy, is found in few, if any, related courses in marketing departments at the undergraduate level, and even less at the graduate level (Stern and Weitz 1997). Yet, channel members and their supply chain partners built relationships that have evolved over hundreds of © The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 R. D. Tamilia et al., Marketing Channels and Supply Chain Networks in North America, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-44870-7_1

1

2

1 Introduction

years, which have contributed to the type of complex distribution systems we have in our high level economy. With knowledge of the past, there can be better prediction of the future. In other words, how did we get here and what’s ahead? While there are a number of paths to historical research in marketing, we rely on recorded facts, historical research, and our acquired knowledge on the topic. This descriptive approach focuses on a synthesis of the work of early scholars. Proceedings from the Conference on Historical Analysis and Research in Marketing (CHARM) and the Journal of Historical Research in Marketing provide a rich source of information. Various other scholars present research facts on the historical development of retailing, wholesaling, and distribution in general (e.g., Hollander 1959; Beckman 1926; Strasser 1989; Tedlow 1990). The Smithsonian Library of Congress and the U.S. Census, as well as various websites, supply historical facts that relate to this review. Our purpose is to provide an overview that will help explain how previous channel members, along with their suppliers, gave rise to our existing distribution structure. The task is ambitious, and we are not aware of any previous attempts to trace those developments over the period we have selected. Obviously, our attempt will not be able to cover every historical development dealing with changes in channel organization and structure and historical innovations in supply chain, that is, in transportation and logistics, over the past 170 years. A general overview of the developments in marketing channels will help us understand what changes occurred and how some of these changes impacted marketing education and practice. First, we will provide an overview of the historical background of how manufacturing and distribution evolved in the nineteenth century. Next, we define marketing channels and supply chain networks. Then the three time periods within 1850–present are covered. We will then look at how supply chain has become prominent in organizations. The movement to nonstore and omnichannel retailing is discussed to focus on recent developments in distribution. Finally, we look at developments that relate to the marketing discipline and implications for the future. We conclude by describing what the historical analysis means to the relationship between marketing channels and supply chain today, as well as what it means for marketing education in general.

1.1 Historical Background The history of American capitalism from the American Revolution to the Civil War and beyond has not focused enough on the role played by channel members in fostering economic growth and creating a national market. Exceptions are the works of Shapiro and Doody (1968), Chandler (1977), Strasser (1989), and Tedlow (1990), among others. They offered proof enough that marketing was indeed present not only in pre-twentieth-century America but existed in colonial times as well. Notwithstanding such scholarly efforts, the academic marketing literature on the history of marketing channels and the role channel members and their suppliers played in fostering changes in the way goods are sold and distributed throughout the economy is remarkable for its neglect.

1.1 Historical Background

3

It is no easy task to isolate the economic, technological, political, and social contributions of channel members, with the resultant changes in the organizational structure of channels, from those contributions and resultant changes made by manufacturing. Suppliers (i.e., manufacturers or wholesalers) decide to do business with their distributors, often very informally and at other times, in more formal arrangements such as in alliances, business partnerships, contractual or licensing arrangements, or marketing agreements with their distributors that have no parallel in businessto-consumer (B2C) marketing efforts. Such legal arrangements can involve a select number of channel members (i.e., dyads) and be applicable only in certain parts of the market or region of the country in a given time period (i.e., territorial restrictions). The study of marketing channels and logistics, historically or not, is the study of business-to-business (B2B) marketing par excellence and not of B2C marketing. The emphasis on studying the ultimate consumer these past few decades has resulted in the channels domain being neglected in academic marketing (Stern and Weitz 1997). The economic and business history literature has focused much of its attention on the manufacturing sector because of the sector’s presumed vital and strategic importance to the economy for job and wealth creation, growth, productivity gains, and increases in living standards. The history of retailing and wholesaling, made up of various members of the distributive trades, has not been the forte of economic or business historians. This uneven focus is not surprising because throughout history, the manufacturing sector has been considered the backbone of any economy because it produced added value, while the distribution sector, allegedly, did not. Economists focus more on the production side (manufacturing) of the economic equation while social historians focus on the consumption end (consumers), and both pay less attention to the complex set of operations that go on in between. Channel members involved in retailing, wholesaling, operations and logistics have not received the attention they deserve as important contributors to innovation, product availability, cost savings, and wealth creation in a market economy. Depew’s (1895) text commemorating America’s first century of commercial progress overwhelmingly focused on the manufacturing sector. Out of 100 articles, not one discussed the contributions of retailing, wholesaling, or the intricate organizational network of any members of the distributive trades to the American economy over the previous century. Cost reductions in production were often highlighted, but not once was there mention of channel members’ contributions in reducing the cost of distribution. In the early 1800s in the United States, distribution was most likely concerned with transportation during a time when most goods were moved from small-scaled manufacturers to middlemen, known then as merchants. These merchants were tasked with the responsibility of moving small and large quantities of imported goods, as well as those made domestically, across vast regions of the United States, mostly to other merchants such as dry goods wholesalers, general store merchants, and some to ultimate consumers. Such wholesale middlemen performed most of the marketing functions needed to move goods, including collecting and assessing market information, extending credit to buyers, assuming liabilities, and even arranging transportation and delivery (Porter 1980). Advertising and promotional efforts were

4

1 Introduction

uncommon, given the low-level economic development of the economy. No wonder they were called the all-purpose merchants until the market expanded enough to create more specialized middlemen as a result of division of labor (Livesay and Porter 1972). They used various means of transportation alternatives—such as land (horses, pony express for information), canals, and waterways through which steamships traveled—carrying supplies and materials during Colonial America to aid everyday life in an agrarian society. Yet wholesaling, and not manufacturing, is considered to be the key sector in economic development (Bartels 1963). Channel members at the local, regional, and national levels were the key players in establishing a market economy. In pre-Civil War America, the manufacturing sector was largely small scaled, as was the retail sector, with very few exceptions. Small local manufacturers were predominant during that period, and they faced many market constraints which wholesalers were able to overcome. Manufacturers lacked capital and access to credit; their products were undifferentiated; and they dealt with small, mostly local, diverse segments of buyers. They lacked knowledge of more distant markets. Porter (1980) summarizes well the multiple roles which the all-purpose wholesale merchants played toward the development of a capitalist and self-regulated market economy in pre-Civil War America: In order to carry out that basic sorting task, those engaged in marketing often had to play many other roles, including those of financier, advertiser, insurer, freight agent, warehouser, information gatherer, and risk taker. Their key position as multipurpose interconnectors between other economic units made them the most powerful persons in the economy. It also placed them among the most influential elements in the social and political systems (p. 396).

It should be added that these merchants were also part-time retailers before distributive trade specialization emerged with a growing economy. The channel captains of the period were wholesaling agencies and agents, and they dominated the U.S. economy until the arrival of mass production methods after the Civil War and during the early part of the twentieth century. Mass producers needed mass marketing methods (Porter and Livesay 1971; Strasser 1989). Thus, large-scale manufacturers became channel captains not only in consumer goods but industrial goods as well. Manufacturers’ brands became a major force in distribution for most of the first half of the twentieth century until the mass merchandising movement of the 1950s and beyond in which distributors regained more control over the distribution of goods they handled. The large warehouse type of stores of mass merchandisers and the consumer’s acceptance of their private brands, among other contributing factors, helped them regain the position of channel captains, a position they had lost to manufacturers almost a century before. When we think of a marketing channel, we most often think of it as consisting of a local firm, usually a manufacturer, selling to wholesalers and agents who in turn perform a number of marketing functions to get the products to the right places in a timely manner, and to sell them to retailers. Retailers in turn make the products available to consumers by displaying them in stores with some advertising. However, most small-scaled retailers before the nineteenth century, such as the general store,

1.1 Historical Background

5

or local bakery shop or butcher shop, did not advertise, given that branding became more entrenched in the American economy near the end of the nineteenth century and early part of the twentieth century (Strasser 1989). However, emerging largescale retailers, such as dry goods stores and specialty shops which morphed into department stores after the 1860s and 1870s, did much promotion. In this context, physical products are transported between these entities, but channels usually treat the carriers as a service that is provided by the partners to facilitate their relationships, rather than partners in the channel who add value. However, that view is largely a historical myth, given that merchants assumed the transportation task and had to partner up with logistics service providers. Of course, as supply chains became more specialized through division of labor and improved transportation facilities, separate from the duties of the general merchant, transportation carriers and other logistics service providers were considered more important partners in the distribution of goods, offering more specialized logistical services. The term “distribution” continued to be used to refer to the marketing stream from suppliers of products to the consumers, regardless of the mode of transportation employed. Dixon (1982, p. 146) traced the historical origin of a channel of distribution and concluded The concept of a marketing channel, the organizations comprising it, and the functions performed by marketing intermediaries were the subject of intellectual interest well prior to the beginning of the present century.

A channel of distribution, or marketing channel, was not a term used in the American marketing literature until the early part of the twentieth century. A marketing channel is a term whose history is even more recent. Moreover, Davidson (1961) argued that the “term is part of the working vocabulary of every business executive, yet many would be hard pressed to define its meaning precisely” (p. 85). To use distribution as a term which refers to a marketing channel is therefore acceptable. Besides, the core of the marketing discipline was distribution until the managerial school of marketing took precedence from the 1960s (Shaw and Jones 2005). Channel arrangements are often described in terms of institutions and/or ownership or agent relationships. Organizational arrangements between channel members can involve the transfer of ownership between a supplier and its customers, but not always, as in the case of an agency relationship with an agent or a broker.

1.2 What Is a Marketing Channel? It is important to examine what a marketing channel is. Marketing channels provide an integrated connection from product creation to a point of consumption. This supply side of marketing consists of a spider web of entities including individuals, organizations, and third parties that direct the flow of products and create a supply chain. They should have a common shared goal to move products to the customer.

6

1 Introduction

Market channel members include all of the intermediaries that link producers to the ultimate customer. Over 100 years ago, Shaw (1912, 1916) was the first to formally present functionalization in marketing. His approach toward an understanding of the marketing process transformed not only the nature and content of the marketing discipline, but also the way textbooks were written and the way marketing was taught; that is, until the 4 Ps paradigm took over in the 1960s. Shaw dichotomized the marketing process as being made up of two distinct halves (i.e., functions) working in tandem. Recently, Svensson (2001) reminded us of Shaw’s seminal work. The two halves of marketing represent a marketing channel having two distinct functions. A marketing channel consists of its supply side (the supply channel or supply chain) while the other half is the demand stimulation side in which sales are eventually realized, also known as the sales or the transactional channel. The supply chain management (SCM) literature refers almost exclusively to the supply side of a marketing channel, including members in a network designed to transport and deliver an assortment of products and services at the right place, at the right time, in the right quantity, and at the right price, according to customers’ logistical services requirements. The marketing work done by the supply side of a channel includes logistics services such as transportation, materials handling, and inventory management, and may include procurement, operations, and production scheduling as well. The supply side of the marketing channel facilitates the management of information, which flows from production facilities to warehouses and to other members of the supply chain. In modern supply chains, some of these members, known as 3PLs (third party logistics firms), are under contract with other members of the supply chain, such as manufacturers, wholesalers, and even retailers. These channel members decided to outsource their logistics services for part or all the supply chain management functions for economic reasons. Given the fastchanging world of IT used in SCM, some companies realize that it’s best to rely on the expertise of specialists rather than to assume the SCM responsibility internally. Some 3PLs offer more than just logistics services and may include service related to production or procurement. Thus, a marketing channel consists of a supply side and a demand-stimulation side, and both need to be working in harmony and be well-coordinated to satisfy channel members as well as ultimate consumers. It can be very costly for members in the distribution network when demand and supply are out of sync. It can cause excess inventories which are very costly or loss of sales due a lack of product availability. Changes in society and business have altered the form and function of supply chains over time. At one time, a marketing channel could be thought of as being made up of cooperating partners arranged in a linear process, assembling and assorting goods from varied sources, and delivering and selling goods to others in the channel. While such basic marketing tasks still exist, technology and worldwide infrastructure have drastically shortened the time and space needed for a product to travel through a supply chain (marketing’s other half). Logistics service providers who pick up products at points of origins and deliver them at some destinations do not take title to the goods. Such was the case before when the all-purpose merchant made goods

1.2 What Is a Marketing Channel?

7

available throughout Colonial America, as is now the case in modern times under technologically advanced supply chains. Freight delivery by container ships, trains, planes, trucks, and pipelines now provide fast and timely digital information to supply chain members and to the original owners of the products. Technological advances in supply chains do not confuse who are the rightful owners of products, as Kozlenkova et al. (2015) have suggested. The supply channel performs vastly different marketing tasks relative to the demand stimulation channel. The latter channel is concerned with getting sales using promotion and media advertising efforts, including the following: utilizing social media, studying buyer behavior, training and motivating a sales force to get sales, creating alluring points of purchase displays, planning advertising campaigns, attending trade shows, or offering temporary price reductions to move products. Vertical integration in marketing channels is one reason, among others, why the channels domain is complex. For example, a firm may own its fleet of trucks, as in the case of Walmart. However, this trucking firm is a wholly owned subsidiary, operating separately from Walmart’s retail division. The “make or buy” question in production has been studied extensively in the literature. However, another question must be addressed: When should a firm’s marketing tasks, such as transportation, warehousing, advertising, sales force, even IT in supply chain, be outsourced? The “make or buy” questions pertinent to marketing tasks—or as Mallen (1973) referred to them, functional spinoff questions—represent some of the most challenging and perplexing decision making in marketing, indeed in all of business. Advances in SCM are helping to answer some of the issues for some highly vertically integrated firms such as car manufacturers, appliance makers, and pharmaceutical companies. For other products, such as perishable foods and staple grocery items for which market distribution often involves tens of thousands of wholesalers and retailers as well domestic and international producers and importers, vertical integration in channels is a complex decision area and can involve corporate restructuring as a result of mergers and acquisitions. The vast amount of product information flows rapidly among supply chain partners, and even to consumers, as a result of IT innovations and the internet. Faster access to information has increased consumer expectations as to product availability and prices. In turn, channel members have used such timely information to adjust their purchase requirements and prices accordingly when selling.

Chapter 2

Distribution in a Developing Economy: 1850–1900

The time period 1850–1900 is our starting point because new developments such as railroads, urbanization, and communication systems rapidly advanced distribution, especially for retail institutions. The economic development of the United States and Canada in this time period created a mass market to support manufacturing, distribution, and new retail institutions. Supply chains developed to accommodate a developing industrial economy. Studying formal and informal channel arrangements, historically, is, indeed, a rather complex task. Often, it involves a single manufacturer whose insights and prowess led to new and innovative channel arrangements, operations, and logistics methods beneficial not only to an industry but to the economy as well. Historical research of archival documents can reveal a company’s past channel arrangements. For example, Jones (1905) and Jack (1957) found that initial attempts by the Singer Company to establish a marketing channel proved to be quite challenging. The firm first manufactured its sewing machines in 1851, and it first granted territorial rights to independent sales agents. These agents worked in branch stores under a very elementary franchise-type of arrangement of selling the machines on consignment. The agents were paid primarily on commission, thus not taking ownership title to machines they sold. The Company later operated wholly-owned stores, and unlike branch stores, these were staffed by well trained and knowledgeable people who could service and repair the machines and could offer an installment credit plan to customers. Eventually, company-owned stores dominated the Singer distribution network, with over 800 such stores in the United States alone by 1900. Singer became a worldwide market leader in the sewing machine market due to this distribution system. The theory of economic utility argued by economists in the late nineteenth century shifted perceptions of the role played by members of the distributive trades. Manufacturers were commonly given all the credit for creating value for buyers as they transformed raw materials into tangible finished or semi-finished goods (Shaw 1994). However, economic value is also created by channel members, as contended © The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 R. D. Tamilia et al., Marketing Channels and Supply Chain Networks in North America, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-44870-7_2

9

10

2 Distribution in a Developing Economy: 1850–1900

by the theory of economic utility. Value is added not only by form utility (manufacturing) but also by time, place, and possession (ownership) utilities; other utilities, such as information and assortment, can also add value. While the number of utilities may be debatable, the concept of utilities is not. This recognition of multiple utilities refuted the long, historical bias against channel members. Channel members have been perceived as being unproductive, adding nothing to the value of the product, being costly and motivated by greed, and being immoral as well as parasitic (Lerner 1949). This bias, unfortunately, still persists today, despite the identifying of time, place, and possession utilities (among others) produced by the marketing work of channel members. Before 1850, steamboats and other water-based means of transportation (e.g., large and small transport canoes) dominated American river transportation. Steam railroads began to appear in the United States around 1830. At the same time, the United States built the first nationally funded road, the National Road, from Cumberland, Maryland, to Columbus, Ohio. There were also 3,326 miles of canals that served as the major arteries for delivering goods, led by the Erie Canal from the Hudson River to the Great Lakes. Prior to this time, much of the country’s commerce, including investment in manufacturing, movement of raw materials, and distribution of finished products, was controlled by the all-purpose merchants who were also involved in wholesaling. They conducted their business in bigger cities and had access to local distributors to serve smaller markets. This system of distribution began to change after the Civil War, because manufacturers grew in size due to their adoption of mass production techniques. They were able to circumvent existing wholesale merchants and deal more directly with their business and retail customers. After the 1890s, mass manufacturers began to promote their branded goods aggressively. They took over some of the marketing functions previously assumed by wholesale merchants, namely demand stimulation functions such as advertising, promotion, and merchandising efforts aimed at buyers. However, mass producers still needed their wholesale distribution partners, but mainly as logistics service providers to replenish warehouses and stores (Strasser 1989). By 1850, industrialization was launched in the United States, and transportation systems were becoming established, with the railroads being built at a rapid rate. The economy was mostly rural, with 20 million of the 23 million people in the United States living in rural communities and farms. Farming was mainly subsistence with any surplus traded to a general store merchant for commodities and supplies for operations. Virtually all food and textiles, except for the milling of grain, were for sustenance, with little excess for marketing. Businesses were small and very few manufacturers had more than 50 employees. In fact, up until the 1930s, the nation’s largest employers were department stores and other mass retailers and not manufacturers. Their sales level and the surface size of their stores far surpassed that of most industrial giants of the time (Tamilia and Reed 2007). In manufacturing, there were cotton mills, machine shops, and cigar factories, among others. Patent medicine, liquor, beer, and other products were produced locally and sold locally. Central business districts started to emerge in the downtown core of large cities such as New York, Boston, Chicago, and Philadelphia. Hill (1923)

2 Distribution in a Developing Economy: 1850–1900

11

reported that as late as 1850, Chicago’s population numbered but 29,640 as compared with a population of 77,860 in St. Louis, 115,436 in Cincinnati, and 116,375 in New Orleans (Hill 1923, p. 265). This is where manufacturers were located initially until land costs proved to be too expensive during the second half of the nineteenth century. These cities had access to waterways, roads, railroads, and other rail lines (street cars). Eventually, the downtown core of cities once populated by producers, retailers, wholesalers, and consumers moved away from the central business cores to relocate in less expensive areas. By then, a transportation infrastructure permitted the relocation of people, warehouses, and manufacturing plants away from city cores. By the late 1800s and early twentieth century, the downtown core of cities was eventually replaced by businesses mainly providing services such as banking, accounting, insurance, and legal and government work, as well as retailing, notably in large department stores.

2.1 Railroads Provide Channel Infrastructure As industrialization advanced, maritime and rail infrastructure was transforming an agrarian economy into one of cities with more complex retail channels and supply chains. For example, early transportation systems in the southern United States were developed to deliver products to the northern areas of the United States and to ports. By 1860, 31,000 miles of railroad track scaled across the United States in the Northeast, South, and Midwest; the combined efforts of the southern and the northern United States resulted in the development of a skeletal land-based supply chain. The North had railroad networks that reached almost every city, and the South had short lines linking cotton regions to ports. All of these developments made transportation of goods and people more efficient, increasing accountability and making delivery deadlines more attainable and predictable (Richey 2001). By the time the Civil War began in 1861, the thousands of miles of tracks in the South provided the path to supply centers and distribution ports for agricultural products. When war disrupted the railroads, supply chains were broken (Richey 2001). Following the Civil War, railroad construction in the United States increased dramatically. In 1869, western expansion was marked with the planting of the “Golden Spike” to complete the transcontinental railroad link at Promontory Summit, Utah. This created a need for people and goods (goods flowing west to meet the needs of a growing population, and goods like cattle travelling east to a growing population). Another need was satisfied by the development of specialized consolidation and trading centers. Chicago became a major railroad center for the distribution of livestock raised in the western part of the United States to eastern markets. The rise of Chicago as a major meat packing center in the United States was due to the combination of the MichiganIllinois canal and railroads. By 1861, there were 13 lines centered in Chicago, with a length of 4,500 miles (Hill 1923, p. 261). Chicago’s stockyards and others were being fed from various ranches by cattle collection centers, like Fort Worth. Cattle were

12

2 Distribution in a Developing Economy: 1850–1900

driven over long distances to cattle yards by cowboys on horseback then transferred to railroad depots for shipping to processing plants. Transporting the animals to market required herds to be driven up to 1,200 miles to a rail depot, where they were loaded into specially designed railcars and delivered to regional processing centers. Upon arrival, livestock were slaughtered and bought by wholesalers, who then delivered the meat to nearby butcher shops for retail sale. Driving cattle on the hoof across such vast distances caused tremendous weight loss, with some animals dying in transit. The railroads minimized weight loss, with a lower animal mortality rate. In effect, it assured a higher price for cattle and more revenue for railroads, given the per-unit shipping cost. The railroads were innovative in many other ways. Some railcars were designed to feed the cattle on board, eliminating the need for cattle to disembark and graze near the railroad tracks. Despite rail transportation improvements, transporting live animals by rail still proved to be costly for owners, given that close to 60% of the animal is inedible. Moreover, some animals still died en route, which further increased the shipping costs for each animal. Fruit and vegetable farmers, as well as ranchers and meat processers, sought a better and less costly way to transport their perishables over long distances. Attempts were made to transport perishables even before the 1850s using ice to prevent spoilage, but all failed until one of Gustavus Swift’s engineers designed the refrigerator railroad car in the late 1870s (Kujovich 1970). As a result, Swift revolutionized the Chicago meat packing industry by transporting dressed beef rather than live animals. Meat now became more accessible to consumers across the United States. Ice was positioned in a compartment at the top of the well-insulated and ventilated car, which allowed the chilled air to flow downward. The initial design, along with further refinements and innovations by others, provided a temperature-controlled boxcar not only for dressed beef and other meats (pork and chicken), but also for agricultural products as well, such as fruits and vegetables. Perishable and edible products could now be shipped and sold across the United States and internationally as well. According to Hill (1923), dressed beef from Chicago alienated eastern slaughter houses and butchers, who accused the Chicago meat packers of invading their markets. Railroads feared loss of tonnage revenues with the shipment of dressed beef. If dressed beef was shipped successfully from Chicago, it “would reduce their tonnage and lessen the value of the capital which they had tied up in stock cars” (p. 276). Swift tried to convince railroads to adopt his new cars but was rebuffed. Dressed beef reduced the weight of the animal to be shipped by 60%. However, consumers proved to be the ultimate winners in this politics of distribution, with lower meat prices and better-quality meats. By 1871, some 45,000 miles of track were laid, and by 1900 another 170,000 miles were completed. By 1900, most of the U.S. rail system was complete, creating a system that facilitated the supply of many goods from agriculture and meats to industrial and consumer goods, shipped to almost every area of the country. Railroads were an important contributor to rapid U.S. economic growth and opportunities and also caused innovation in managerial techniques, such as cost accounting

2.1 Railroads Provide Channel Infrastructure

13

(Chandler 1965). Railroads in West Virginia shipped vast quantities of coal (as they still do) to Chicago to fuel power generation stations. In addition to the railroads, new technologies such as the telegraph, telephone, electricity, and new materials (glass, iron, reinforced concrete, steel) and construction methods (skyscrapers) transformed American society during this period. The nineteenth century New York City seaport was the world’s greatest and busiest seaport (Albion 1939). New York was the destination of millions of new immigrants to America and was the nation’s major immigration station from 1892. New York City was a magnet for entrepreneurs, manufacturers, jobbers, selling agents, commission merchants, auction houses, importers and exporters, all seeking fame and fortune. It is no coincidence that a high proportion of the nation’s class of merchant princes of the nineteenth century originated in New York City. Imported products arriving at the New York seaport were coming from Europe, Asia, and elsewhere and needed to be distributed across a vast and expanding domestic market. At the same time, America’s industrial and commercial infrastructure was fast expanding. Americanmade products were arriving from many parts of the United States and needed to be shipped abroad as well. Demand and supply channel arrangements necessitated the establishment of agreements and partnerships among channel members, which resulted in higher levels of organizational integration.

2.2 The Rise of the Department Store in the United States and Canada The transformation of the economy with large scale production and mass distribution created mass markets. Many of the retail institutions that exist today emerged in the 1850 to 1900 time period. For example, department stores, branding of products, franchising, catalogue retailing, and other types of distribution served a changing economy. Railroad systems provided the transportation systems to move products and people to facilitate mass consumption. Technology provided new ways to facilitate operations.

2.2.1 A. T. Stewart: Department Store Pioneer In 1846, A. T. Stewart opened the very first free-standing, multistoried building exclusively made for shopping in New York City. Initially, it was not a department store but a dry goods store. Many large-scaled dry goods stores morphed into a department store from the 1860s and beyond by offering a greater variety of goods. A. T. Stewart, Rowland Macy, John Wanamaker, and the Parisian Aristide Boucicaut, among others, are reputed of being the founding fathers of the department store, an innovative new type of store. Historians are still debating who was first. It depends on one’s definition of a department store.

14

2 Distribution in a Developing Economy: 1850–1900

A department store is characterized by its unique architectural design, its wide diversity of merchandise, its vast assortment of customer services, its massive use of print advertising in newspapers, its innovative managerial policies and procedures, and its quick adoption of technological innovations such as the elevator, the escalator, radio, and lighting, among others. No wonder Tamilia (2003) called the department store marketing’s contribution to the industrial revolution. The success of the department store came from lower prices relative to other retailers, cash sales, marked prices, fixed prices, money refunded if not satisfied, and the wide assortment of merchandise. The department store signaled the emergence of mass retailing in the nineteenth century not only in America but in Canada, France, and other European countries as well, with France as a leader in this new type of retail business, at least initially. The department store was the Amazon.com of the period, a one-stop shopping experience for the whole family with everything under one roof. Using a number of definitional criteria, not just the assortment of merchandise offered (often the sole criterion used by some historians), A. T. Stewart appears to be the leading contender for the title of department stores’ founding father, as agreed upon by several researchers (Resseguie 1965; Tamilia and Reid 2007). A department store is one in which decision making is decentralized to many department heads in charge of the buying and selling responsibilities of the department, which operates as its own cost and profit center. Each department is made up of an assortment of merchandise (e.g., jewelry, women’s, men’s or kids’ clothing, small wares, home furnishings, etc.), with some departments generating more sales (women’s clothing) and the head of the department being paid accordingly, while others less so (stationery and books). The department head had a high degree of managerial autonomy, as if managing one’s own retail business, but was still held accountable to the owners’ centrally established policies and sales objectives. Note that this innovative organizational arrangement goes beyond having a store’s merchandise arranged by departments, a retail practice in existence before the coming of age of the department store. Of course, with the advent of department store chains, such as Federated Department Stores in 1931, one of the managerial and accounting practices that helped create the department store in the first place had to become more centralized, which is one factor, among numerous others, that resulted in their slow demise. Stewart’s 1846 store is referred to in the literature as the Marble Palace because the building had real marble imported from Italy and installed by Italian craftsmen. The building on Broadway is now a National Historical Landmark but is no longer devoted to retail. As his retail and wholesale business grew, Stewart built a second retail store, which opened in 1862 and was enlarged in 1869. It was called the Cast Iron Palace. Granite, having been the standard construction material, was replaced by cast iron as part of the new Iron Age and cast-iron architecture. The Cast Iron Palace had prefabricated parts to save money and provide a fast installation with a ready-made storefront façade. Eventually, cast iron was replaced by stainless steel. Stewart used his own funds to buy the land as well as to cover the construction costs. He also supervised the construction to meet his expectations. Architectural historians consider both Stewart buildings as state of the art for the period. In fact, his Cast Iron

2.2 The Rise of the Department Store in the United States and Canada

15

Palace is considered to be the world’s largest man-made building ever constructed at the time. It was destroyed by fire in 1956, and that is when architectural historians declared that its construction was the first prototype of a skyscraper (Tamilia and Reid 2007). There was much traffic in the downtown core of New York City from the early 1850s, with a population of 500,000, growing to over 3.5 million at the end of the century (counting the five boroughs). Public transportation, such as omnibuses (enclosed horse cars), was needed as people movers. Stewart, with the support of other merchants on Broadway, spent much money to avoid having a railroad built in front of his store (Spann 1981). However, that did not stop him from venturing into the public transportation business. His omnibus service for would-be shoppers was almost free (one penny). Presumably, his service was taken over by the city. A. T. Stewart was a visionary businessman. He knew what New York women wanted in terms of the latest fashions, styles, and colors. He became the largest importer of European dry goods in the United States. He was the first merchant to establish European-based manufacturing plants to make dry goods sold in his store. He also sold his merchandise to other dry goods wholesale merchants and retailers (general stores). Many merchants would travel to his New York wholesale division to place their orders. In fact, the Marble Palace became his wholesale division soon after the Cast Iron Palace was opened. His venture into wholesaling, transportation, and manufacturing places him as the pioneer American businessman. He vertically integrated his retail operations backwards decades before giants in steel, oil, and cars vertically integrated their businesses at the turn of the century and during the first decade of the twentieth century. Stewart’s supply chain networks enabled him to obtain exclusive distribution rights of well-known European brands sold in his store. He would often buy the entire output of some of his manufacturers/suppliers, thus becoming the sole U.S. national distributor and de facto owner of the brand. Marshall Field, Wanamaker, and other American mass retailers imitated Stewart and were also involved in establishing such supply chain networks. Large-scale retailers were able to circumvent wholesalers and buy direct from manufacturers and obtain better prices and terms of trade. Moreover, the creation of sales offices, locally and abroad, further strengthened their supply chains. The supply channel was created mostly by purchasing agents, paid on commission, working on behalf of their mass retailers. They established links with suppliers until both parties agreed to do business with each other; the partnership was more like a gentlemen’s agreement, at least initially. There was no formal written contractual agreement, and the partnership was based on tradition, which was regarded as binding. Private branding by retailers is sometimes presented in the literature as a recent merchandising practice. In reality, department stores and other mass retailers practiced it in the last half of the nineteenth century with the aid of channel partners. In other words, branding was not solely mass manufacturers’ attempts at obtaining distribution by appealing directly to consumers by pull marketing efforts. Mass retailers did the same thing with their private branding by offering their own version of manufacturers’ brands but at a lower price, which won the approval of

16

2 Distribution in a Developing Economy: 1850–1900

consumers (Strasser 1989; Fitzell 1998). The battle of the brands between manufacturers and department stores is a fascinating story. Some cases were contested all the way to the Supreme Court. Department stores refused to sell manufacturers’ branded products at their suggested retail price. This led to bitter legal battles between the two, which lasted for years. It affected market distribution and channel arrangements, which encouraged department stores and other mass retail merchants into vertical integration and the private goods business (Tosdal 1915, 1918). Today’s consumers should be thankful for those dedicated mass retailers that fought hard and long in order to offer them quality goods at lower prices. Stewart was also a merchandising genius. He paid close attention to what customers wanted. He trained his thousands of salesclerks accordingly. Customer satisfaction was his business philosophy long before the marketing concept was proselytized as a new era in marketing thought in the 1960s. He focused on the services that customers wanted and invented new ways to create customer engagement.

2.2.2 Department Stores Become Show Places Stewart’s Marble Palace had an attractive storefront with exquisite interior décor, high ceiling, and storefront plate glass windows to let natural light in at a time when in-store lighting was a challenge. He installed huge mirrors, and merchandise was displayed neatly on mahogany counters. Many architectural features, both inside and outside, attracted many would-be shoppers and tourists alike. Stewart’s Marble Palace, and later his Cast Iron Palace, enthralled New Yorkers so much that New York tourist guides listed A. T. Stewart’s stores as must-see places to visit. As dry goods stores morphed into department stores from around the 1860s, many other large-scale retailers such as Macy’s, Wanamaker, Siegel-Cooper, and Filene competed with each other as to which one had the largest and most eye-appealing store, equipped with the state of the art technological amenities. Department store owners would brag about the number of departments their flagship store had or the wide range of customer services offered on a scale never seen before, from home delivery, refunds, and returned goods, to restaurants, wrapping services, layaways, washrooms, healthcare services, reading rooms, libraries, concerts and art exhibits, live entertainment, and so on. According to Resseguie (1964), many other merchants, such as Marshall Field and Wanamaker, adopted Stewart’s merchandising policies. In addition, many architectural features first utilized by Stewart were also copied by other merchants. He was, indeed, a leader and a mentor to the class of large-scale American merchants that emerged in the second half of the nineteenth century. It is also no coincidence that many of the great merchants of the nineteenth century and early twentieth century originated from New York. Merchants from Philadelphia, Boston, Chicago, Atlanta, Pittsburgh, Cleveland, Los Angeles, and other big cities have their share of visionary retailers. However, New York produced more of this type of merchant princes than elsewhere. Discount retailing of the 1950s, which originated in New York City

2.2 The Rise of the Department Store in the United States and Canada

17

by Eugene Ferkauf with his stores, called Korvettes, revolutionized retailing—and off-price retailing—on a world scale (Barmash 1981). This led to the birth of the discount department store, which helped establish Walmart, the world’s largest retailer, among other mass retail discounters (e.g., Target). Despite the great retail activity and innovation seen there historically, we cannot attribute the online retail revolution of the twenty-first century to New York.

2.3 Marketing Channels Become Integrated, Linking Buyers and Sellers What are some of these organized networks of channels members, which will be referred to later as vertical marketing systems? They represent the dynamic and innovative nature of marketing. Manufacturers are usually credited with product innovations and technologies that changed the world, such as the printing press, the steam engine, the telegraph, electricity, the telephone, cars, radio, television, pharmaceutical drugs, the PC, and so forth. What about marketing? We tend to forget that organized networks of channel members gave us innovative new ways to distribute goods and to buy them. Itinerant peddlers and traveling salesmen have been around for centuries. They represent the first organized periodic networks of buyers and sellers in history, before fixed store retailing. Fairs have been around even longer, dating back before A.D. Fairs were also pioneers in the development of organized networks of channel members, specializing in logistics to bring goods to fairs on time and to retrieve unsold goods (Tamilia 2016). Fixed store retailing gave us the general store, the specialty shop, followed by the department store, the mail order house, the chain store, the supermarket, the discount store, the hypermarket, the big box store, and the membership store, among other types, all of which have changed the consumer world, perhaps just as much as new product innovations have. The emergence of new types of wholesalers has also had much impact on the way goods are distributed. These include the drop shipper, the resident buyer, the cash and carry wholesaler, the wholesaler-sponsored voluntary groups, the retailer-sponsored cooperative groups, rack jobbers, manufacturers’ agents, food brokers, franchisors, and others. Some of the organized channel networks with these wholesalers are presented here. The organized networks of channel members can be formal arrangements such as business partnerships, contractual and licensing agreements, and joint ventures. Moreover, the arrangements may even consist of minority or majority owned subsidiaries of retailers, wholesalers, or manufacturers working independently with channel members. These networks may also involve vertical integration of manufacturers going into wholesaling or retailing, retailers and wholesalers going into manufacturing, or even wholesalers going into retail. The marketing and business agreements need not be formal and legally binding but informal between channel members (i.e., a gentlemen’s agreement), outlining who

18

2 Distribution in a Developing Economy: 1850–1900

is supposed to do what, when, and where, and to get what benefits. Such informal cooperative marketing agreements are in the interest of concerned channel members and can involve numerous aspects of marketing practices necessary to move products along the channel. Informal, and often temporary, marketing agreements are common in network channel arrangements. They are not legally binding and are harder to detect and to study historically. McCammon (1970, pp. 36–37) provides a brief list of the types of help suppliers can offer to their resellers in order to gain their support. The key point to remember with formal or informal marketing agreements is that gaining the cooperation and support of channel members to gain distribution is not free. There is a price to pay because channels members are in business to make money. These organized network arrangements in distribution will only work if members find it profitable and suitable to meet their marketing objectives and corporate goals.

2.4 Franchising The terminology describing some of these channel arrangements has been at times confusing. Academics and channel practitioners do not necessarily use the same language. For example, franchising is a special type of distributive channel arrangement in which a parent company (franchisor) grants the right to a franchisee (individual or a small company) under contract to do business according to a prescribed format over a certain period of time in a specified territory. However, that is just one type of franchising arrangement, a rather modern version, quite unlike the franchising arrangement of Benjamin Franklin in the eighteenth century, as we will show. Today, fast food franchising is ubiquitous in our modern retail landscape with the likes of McDonalds, Burger King, and Subway, among many others. Many contractual obligations may apply, such as the architectural design of the building, its colors, accounting system, administrative control, source of supplies, training of employees, hours of operations, and so forth. A standard, one size fits all franchising arrangement does not exist. Rather, many different types of franchise systems exist. Stern and El Ansary (1977, p. 407) describe ten types of franchising systems, and Seid and Mazero (2017) go even further. A franchising agreement is basically a contract between two parties seeking rapid market penetration and expansion of a product or an idea. The contract can stipulate various obligations, responsibilities, territorial rights, and fees, among numerous other clauses that are unique to the franchisor and franchisee situation. Some involve marketing and licensing arrangements between manufacturer-retailer, wholesaler-retailer, manufacturer-wholesaler, and service-sponsor-retailer. Franchising, as an organized channel network among members, has a long history. Some believe, for example, that wholesaler-sponsored voluntary groups, retailersponsored cooperative groups, and franchising distribution systems are all similar because they operate under a common logo banner. However, their business models are quite dissimilar and so are their histories.

2.4 Franchising

19

Seid (2019) provides detailed information of Benjamin Franklin’s franchise arrangements with various business partners. On September 13, 1731, in Philadelphia, Franklin entered into a six-year business contract with Thomas Whitmarsh for a “co-partnership for the carrying on of the business of printing in Charlestown in South Carolina.” Whitmarsh was obligated to purchase all of his printing materials from Franklin, as stipulated in the contract, and was not allowed to be in any other business but printing. Of course, such business restrictions did not apply to Franklin. Franklin became the first commercial franchisor in Colonial America. He established similar franchise partnerships with other printers throughout the Colonies, located in New York, Pennsylvania, and Boston. He also established additional franchise arrangements (i.e., co-partnerships) with other printers located in North Carolina, Georgia, Dominica, and Jamaica. Seid (2019) also stated that records exist, showing that Franklin entered into similar commercial franchise arrangements in Canada and Britain in later years. Not only did Franklin establish the first commercial franchise contract in Colonial America, but he was also one of the first to create a supply chain for his partners’ printing needs—not only domestically but across borders as well. Benjamin Franklin, one of the founding fathers who co-wrote the Declaration of Independence and is credited with many innovations such as the lightning rod, swim fins, bifocal glasses, the odometer, daylight savings time, the Franklin Stove, and a musical instrument, somehow found time and energy to create the first commercial franchise system and supply chain in what was known then as Colonial America.

2.5 Consumer and Retailer Cooperatives 2.5.1 Consumer Cooperatives A consumer cooperative is a cooperative business owned by customers in the form of retail stores operated for the mutual benefit of members that patronize the stores. MacPherson (2017) suggests that a retail cooperative may have existed in western Canada as early as 1828. However, the group of Rochdale Pioneers, located in Rochdale, England, are regarded as the founding fathers of the modern cooperative movement in 1844 (Patmore and Balnave 2018). The conditions there were such that the quality of available food was poor, working conditions were poor, and workers could not afford the high prices of food and essential household items due to their very low wages. A group of artisans decided to pool their scarce resources and work together in order to lower middlemen’s high cost of distribution and to make sure their suppliers would deal with them fairly and honestly. Each consumer became a member and had a stake in the business. The beginning of the American-based consumer cooperative movement coincides with the Rochdale cooperative efforts. Parker (1937) suggests that the first known consumer cooperative appeared in America, also in 1844, notably in Boston. Apparently, it was not organized according to the Rochdale principles of cooperation,

20

2 Distribution in a Developing Economy: 1850–1900

“except that goods were sold for cash; dividends were paid, not in proportion to purchases, but on capital stock; and goods were sold at or as near cost as possible” (p. 91). Initially, very few items were offered for sale in consumer cooperatives. Some of the first cooperatives did not even have a store, and when they did, it did not carry stock of all merchandise for sales, with grocery items making up the bulk of their sales. Such cooperatives were essentially consumer buying groups organized to pool their members’ buying power to get better price concessions from suppliers (group buying).

2.5.2 Retailer-Sponsored Cooperatives A retailer-sponsored cooperative operates for retail members to gain economies of scale and purchasing power. Brown et al. (1970) report that the first retailersponsored cooperative in the United States was established before the advent of wholesaler-sponsored voluntary groups, probably around the 1860s. The timeline makes sense because it was natural for consumer retail cooperatives to morph into retailer-sponsored cooperatives because many consumer cooperatives had branches or affiliations with a retailer as the parent organization. In a retail cooperative, each member-retailer has a voice in the operations of the organized network, and there’s profit sharing among all members, similar to a consumer cooperative. It was not difficult for consumer cooperative branches to opt out and join with other independent store owners to form a buying group, even its own wholesale organization, owned by retail members for the specific purpose of acting as a supply chain for members. Retail members realized soon enough that to stay competitive with corporate chain stores and other forms of organized retail distribution networks, the wholesale arm of the retailer-sponsored cooperative needed to offer more professional services to retail members than just being its fulfillment center. They began to offer private brands, employee training for member stores, help to curb shoplifting, and more store operations advice to help independent store owners better manage their stores. The retail store cooperative movement as an organized channel network has a long history, especially in Europe, where it became an important form of retail organization in the nineteenth century and early part of the twentieth century. On the other hand, retail cooperatives in the United States and Canada were not a dominant form of retail distribution. Retail cooperatives were established in the nineteenth century due to the undeveloped structure of the distribution of consumer goods, notably food. Essentially, a buying group was formed, with each member paying a membership fee and some members managing the cooperative. Members, as owners, were entitled to share in the profit the retail cooperative made as an incentive to shop there. Moreover, the retail store cooperative had a mission that went beyond operating a business and making money. It was an organization that adhered to social values, sometimes being anti-capitalist. It was a community-oriented organization, which cared about the working conditions of its workers and the price of goods sold to members, and it

2.5 Consumer and Retailer Cooperatives

21

had goals of reducing the cost of living and improving the welfare of its members. With greater bargaining power, the main goal of a retail store cooperative was to pass on cost savings to consumer-members, thus lowering the prices they paid for goods. Some cooperatives also established their own warehouses and later in their evolution, some retail cooperatives vertically integrated into manufacturing, making some of the products they sold to members. Most of the retail store cooperatives accepted cash only, products had marked prices, the consumer had to pay extra for delivery, and the consumer wrote his own invoice using a price list. Retail store cooperatives were not professionally managed retail organizations, given that consumers as members were largely responsible for managing them, with the goal of saving a few dollars. Retail store cooperatives were more successful in the U.K., France, Belgium, and other European countries than in the United States, where the movement never really caught on. Parker (1937) says that one cooperative organization had about 40,000 members before the Civil War, but many cooperatives failed by 1875, following the end of the war.

2.6 The Beginnings of Catalogue Retailing in the United States and Canada Catalogue retailing emerged during the second half of the nineteenth century and was made possible by a railroad system that connected most towns in the United States and Canada. This new type of retail institution was available to almost the entire population. While department stores were mainly in cities, the rural population now had access to the products they needed to advance their standard of living. Catalogues were used to learn about products, and immigrants used them to learn about America. The history of catalogue selling, or mail order selling, presents a fascinating history (Boorstin 1973). Pioneers, such as A. Montgomery Ward and Richard Sears, changed the buying habits of rural America. Montgomery Ward became the supplier of the Patrons of Husbandry (the Grangers) and competed with Sears in selling goods to rural residents. He issued a one-page catalogue in 1872. Moreover, Wren and Greenwood (1998) report that ordering merchandise by mail was not new. In 1744, Benjamin Franklin issued a catalogue listing 600 books that could be ordered by mail. Macy’s did not have a mail order catalogue department, at least not before the 1930s, even though it received such orders by mail, according to Hungerford (1922). Perhaps Macy’s and other retailers, such as Stewart, Wanamaker, and Marshall Field, accepted orders by mail as well, but it is uncertain if they had a mail order department. If they did, they targeted tourists or visitors and appealed to some shoppers located in other urban cities who mailed in their orders. Thus, few department stores in the United States and Canada had a separately managed catalogue division, operating independently from its store operations and offering a different mix of products and prices, to the extent that Eaton’s of Canada did. Eaton’s closed this unique division in 1976 due to the high cost of printing and distributing numerous catalogues throughout the year.

22

2 Distribution in a Developing Economy: 1850–1900

Eaton’s of Canada first issued a catalogue in 1884, many years before Richard Sears issued his first. The 1884 Eaton catalogue had no illustrations, while the 1919 catalogue had 8,811 illustrations and was 588 pages long. Richard Sears’ first complete catalogue was published in 1894, after the 1893 World Columbian Exposition held in Chicago. It was 322 pages selling goods, with the slogan “satisfaction guaranteed or your money back.” The book was called the Book of Bargains; a Money Saver for Everyone. It referred to Sears, Roebuck as the Cheapest Supply House on Earth. It expanded to over 500 pages in 1895, and catalogue sales had reached $50 million in 1906, the largest company sales in the United States. The Eaton catalogues, as well as the Sears’ catalogues, were required reading for all family members. Family members anxiously awaited their arrival, and the catalogues soon inspired their wish list. Catalogues were especially helpful for new immigrants in both countries to learn about American and Canadian culture and to improve their English language skills. The channel arrangements of Ward and Sears, with their suppliers and logistics service providers, parallel somewhat those of the department store and other mass retailers. More detailed information of the type of relationship they had with their channel partners can only be documented by a careful analysis of published company histories and biographies and perhaps through archival company material. An important factor which contributed to their growth at the end of the nineteenth century was rural free delivery (RFD). In 1889, Wanamaker was appointed U.S. Postmaster General. In 1896, a nationwide RFD system of direct-to-home mail delivery was established and endorsed by Wanamaker. Before 1896, many rural residents had to travel long distances to get their mail. Yet, they comprised the majority of the population at the time. Private mail delivery companies and rural retail merchants (general stores) fought hard against the establishment of RFD. Their complaints at times were quite vocal, illustrating once again the politics of distribution.

Chapter 3

Distribution Driven by Technology: 1900–1950

A major change in transportation, communications, and technology provided the infrastructure for rapid change in marketing channels and supply chains. These changes were facilitated by mass production and personal transportation, such as automobiles, that changed the access to markets. The early 1900s saw cars replacing electric street railways and finally, buses replacing trolleys as public transportation. The development of roads, radios, telephones, and other technology opened new frontiers for mass consumption. Physical distribution networks including warehousing, materials handling, and distribution centers become important. The impact on the lifestyle and standard of living of rural consumers by catalogue retailers cannot be underestimated (Fuller 1964). The increased availability of modern household items and even farming tools and equipment changed their mentality, and they became progressively more modern in their outlook. The advent of the radio from the early 1920s further accelerated their acculturation process. In fact, radio became a national medium that proved to be a unifying force in American culture. From the early 1910s to the early 1920s, the department store played a crucial role of exposing the public to radio, a wireless new technology. The first full-fledged department store radio station in North America was at the Eaton’s department store in Toronto (Arceneaux 2007). However, rural radio owners faced a severe problem of providing electrical power for their sets. Back then, all early radio receivers used inefficient vacuum tubes that consumed large amounts of electrical current. In 1930, only ten percent of farm homes had electricity. It was not until the mid-1940s that 50% of rural dwellers were on the power grid. As a result, special “farm radios” were technically designed to pull in distant stations. A typical farm radio of the 1930s required batteries weighing as much as fifty pounds and were sold by mail order houses such as Sears, Roebuck and Montgomery Ward (Craig 2006). As distribution advanced, new transformative retail institutions obtained information to create organizational structures to serve growing markets. There was a distribution revolution with organized networks to link producers, intermediaries, and buyers. Franchising and chain stores evolved in this time period. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 R. D. Tamilia et al., Marketing Channels and Supply Chain Networks in North America, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-44870-7_3

23

24

3 Distribution Driven by Technology: 1900–1950

The practices of marketing and intermediaries have co-existed since man could not satisfy his needs for goods and services by being totally self-sufficient. The existence of man’s need to trade in order to better his living conditions means the need for traders, merchants, or intermediaries to handle such business transactions. The more sophisticated the interorganizational channel arrangement among members is, the higher the level of market specialization and of distributive efficiencies. Lower prices with a greater assortment and availability of goods at both the retail and wholesale levels are a natural outcome of a more organized channel arrangement. Channel members are able to increase the efficiency of market exchanges, which leads to a decline in transaction costs. They help lower search costs by bringing together potential suppliers with potential customers. This results in reduced negotiation and bargaining costs and contract enforcement costs, as well as the lowering of other market costs.

3.1 Transformative Changes in Distribution Conventional channels, or non-organized channel networks, have been the dominant force in distribution in the U.S. and Canadian economies ever since the two countries were founded. These non-organized channel arrangements can best be described as: fragmented networks in which loosely aligned and relatively autonomous manufacturers, wholesalers and retailers have customarily bargained aggressively with each other, established trade relationships on an individual transaction basis, severed business relationships arbitrarily with impunity, and otherwise behaved independently (Davidson 1970, p. 7).

However, with the arrival of new forms of retail distribution in the late nineteenth century and early twentieth century, such historically dominant conventional channels were being displaced by more organized networks of channels, with members being more interdependent and sharing information. Chronologically, the formation of more organized and better-managed channels began with the arrival of the department store and the mail order house in the later part of the nineteenth century. They grew in importance in the 1920s with the coming of the chain store, the supermarket, and the rise of self-service in the 1930s. The real push toward more professionally managed channel networks occurred during the post-World War II period. It was then that the “distribution structure in the United States underwent transformative changes that were as profound in their impact and as pervasive in their influence as those that occurred during the commercial revolution or even in the Industrial Revolution” (Tamilia 2016, p. 190). The discount retailers of the post-World War II period were strategic change agents. They helped to launch the distribution revolution of the 1950s. Manufacturers’ brand names and product reputation were firmly established in consumers’ minds. Discounters began selling the very same products at much lower prices than those found at more traditional retail outlets, in defiance of established resale price maintenance policies and fair trade laws. As a result, long established conventional channel

3.1 Transformative Changes in Distribution

25

arrangements with manufacturers, wholesalers, and retailers were disrupted by discounters, and conventional channels were gradually displaced by more organized channel networks. Specifically, Discounters adapted the supermarket method of distribution of low markups and high inventory turnover rates, a mass merchandising policy, and expanded it to other lines of goods such as furniture, clothing, hardware, office supplies, building materials, and sporting goods. Discounting helped create new types of distributors with names reflecting new mass merchandising retail formats such as hypermarkets, warehouse clubs, power retailers, off-price retailers, mass merchandisers, category killers, big box stores, home renovation centers, superstores or supercenters. The lowly cash and carry wholesalers of the 1930s morphed into international mass merchandise distributors, such as Home Depot, Sam’s Club and Costco. They also began to promote aggressively their own private brands (Kenmore, Craftsman, President’s Choice, Kirkland, Hunt Club, Great Value, generic/no name brands) (Tamilia 2016, p. 190).

From the late nineteenth century, manufacturer-dealer franchising has been the principal method of selling automobiles but not before wholesalers were first tried. Henry Ford appointed franchised dealers to sell the Model T Ford in the early 1900s. The oil companies followed suit with franchised gas stations. Another type of commercial franchise arrangement is implemented by J. C. Penney. In 1902, Penney and two partners opened a small dry goods store, called the Golden Rule, in a small town in Wyoming. The store offered no credit and faced tough competition with a local mining-company-owned store that offered credit. The store name was changed in 1910, becoming the J. C. Penney Company. By then, J. C. Penney had developed a type of commercial franchise arrangement with partner associates in small towns and cities where the partners were well known and respected members of the community. The parent company not only supplied store merchandise to partners but also personal training and administrative services. The store offered quality products at low prices but still on a cash basis. J. C. Penney had confidence in the people he selected to manage a store such that he financed his partner associate but on the condition that he “trained one of his employees to the point where he could go out and effectively manage such a new store” (Hartley 1986, p. 120). This was sufficient motivation for a store manager to earn enough out of the store’s sales so that he could buy a partnership in the store. The store profits were “plowed back into the company to pay off partnership interests or to back new outlets” (p. 121). More partnership stores opened, and there were 34 such stores in the American West when the firm was incorporated in 1913. By 1929, the number of J. C. Penney partnership stores had increased to 1,392 and reached 1,466 in 1933 and 1,586 by 1940.

3.2 Wholesaler-Sponsored Voluntary Groups Wholesaler-sponsored voluntary groups came later than retailer cooperatives and were first established in the United States, probably in the mid-1910s. The Independent Grocers Alliance, better known as IGA, was founded in 1926. It is a group of

26

3 Distribution Driven by Technology: 1900–1950

wholesalers, each one located in various regions, seeking independent food retailers to join the Alliance under contract, with clauses outlining obligations, privileges, and responsibilities related to store management, fulfillment, ordering procedures, and goods that can be purchased from suppliers other than from the designated list of IGA wholesale suppliers. Basically, it is a wholesaler that bands together a number of independently owned retailers in a contract and provides them with “goods and support services far more economically than these same retailers could secure acting solely as individuals” (Stern and El Ansary 1977, p. 401). Voluntary groups and retailer cooperatives have quite different business models despite the fact that they may look similar. Both types of contractual channel arrangements are vertical marketing systems in which merchandising programming to members is the norm. White (1938) reports that by the 1930s, these two types of organized channel networks had twice as many outlets as the corporate grocery chains and accounted for about 30% of all grocery stores in America. A retailer-sponsored cooperative is one in which the wholesaler-supplier is owned by retail members (and not by retail consumers). A voluntary group is one in which numerous retailers contractually agree to purchase a large portion of their supplies, up to 80%, from the sponsoring wholesaler. Both are still buying groups and are sophisticated organized networks to get very favorable terms of trade from suppliers, with benefits passed on to independent retail members. The members are not the ultimate consumer but rather member-retailers, part of an interorganizational channel arrangement, representing a special type of marketing channel arrangement known as vertical marketing systems (McCammon and Bates 1965; McCammon 1970). Over time, voluntary groups became managerially more sophisticated than retailer-sponsored cooperatives for the same reasons why consumer cooperatives never achieved a marked presence in the distribution of goods and services in the United States and Canada relative to European countries such as Scandinavia and Belgium. However, some retailer cooperatives were quite successful in some provinces (Quebec, for example) until retailer-sponsored cooperatives began to act more like corporate chains in the distribution of some commodities such as food, healthcare, hardware, and appliances. From their inception, voluntary groups offered more managerial and marketing services to their retail members than retailer-sponsored cooperatives. On the average, voluntary groups offer more retail advice and managerial packages to members and act like a consulting arm to members. This is one reason why wholesalersponsored voluntary chains/groups are more effective competitors compared to retailer-sponsored cooperatives. They are more international in their outlook, with IGA, as an example, being present in over 30 countries, while retailer-sponsored cooperatives are more local and regional. Voluntary groups are likely to possess more of the managerial expertise needed in diverse areas such as store renovation financing, bargaining power with suppliers/retailers, leadership, focused decision making, innovation, and willingness to take risk. They offer more and better marketing programs for retail members, such as the turnkey program in which a new retail recruit having little experience in operating a store is given all the proper training

3.2 Wholesaler-Sponsored Voluntary Groups

27

necessary to assure the store’s success. Moreover, a voluntary group has more stringent control over retail members, is able to coordinate information and provide more help from international headquarters, offers more and better merchandising plans, and has a better choice of members.

3.3 Mail Order Retailing Expands Between 1908 and 1940, Sears, Roebuck sold homes by mail order to approximately 100,000 families (Stevenson and Jandl 1986). In 1908, the inaugural issue of the mail-order home catalogue was unveiled. It featured 22 house styles, priced between $650 and $2500. These prices included plans, specifications, and most materials, down to the nails. Material delivery was made by rail near the buyer’s location. In addition, Sears provided cost estimates for labor and excavation. Over the years, approximately 450 ready-to-assemble, pre-cut designs for bungalows to mansions were made available. Sears was not the only company to manufacture and to sell prefabricated houses through mail-order catalogues. Eaton’s of Canada was also in the mail order house business. In 1936, Eaton sponsored an architectural competition for house designs. House building was then a very uneven industry, both in Canada and the United States, having wide standards and mostly local builders, with few economies of scale and few pre-assembled housing components, such as trusses. Mail order houses and some lumber dealers featured their prefabricated scale models to meet the high demand at affordable prices. Prefabricated houses sold by mail order houses contributed toward the establishment of house building standards, which helped to reduce their building costs. Whiteley (1936) reported that in 1929, mail order sales in Canada were much higher than in the United States, 2.6% versus 1% of all retail sales. Eaton was also innovative in establishing shopping stations or branch stores (pickup stores) located away from its flagship store. Customers walked in and ordered merchandise either from the catalogue or from ads, and the merchandise would be delivered the next day, a practice similar to today’s online shopping. Customers also used these shopping stations to pick up merchandise ordered by mail order catalogues, an innovative supply chain practice for the time. No wonder Eaton was referred to as one of the world’s great retail establishments (Ditchett 1923). In 1913, the U.S. parcel post service was created. RFD, parcel post, and the use of mailboxes provided rural consumers the means for them to acquire the same assortment of goods as urban dwellers. Some farmers even began seeking new markets by shipping farm products, such as eggs, vegetables, and butter to urban customers by mail.

28

3 Distribution Driven by Technology: 1900–1950

3.4 Chain Stores Some would say that J. C. Penney was a chain store and not a commercial franchising arrangement, and that would be correct if the stores were company-owned by the parent company. The chain store was a new type of innovative organized channel arrangement among members. A chain store, or a retail chain, is one having a number of retail outlets owned by a parent company located in various geographic locations and sharing some standardized business practices such as buying, which is administered centrally for all stores. Chain stores have been in existence since before the twentieth century in the United States, with A&P having as many as 70 stores by the late 1870s (Lebhar 1963). Chain stores became important retailers in the nineteenth century, especially in food distribution, with A&P firmly established as an important competitor to small, family-owned grocers. A&P was one of the first grocery stores to provide private brands (Eight O’ Clock Coffee) in the 1890s. Chain stores grew in importance during the 1910s. The 1920s can be referred to as the chain store era in the distribution of commodities other than food, with chain stores revolutionizing retailing in establishments such as drug stores, cigar shops, gas stations, and variety stores. In fact, “chains increased their share of overall national retail sales from 4 to 20%, and their total share of grocery sales to 49%” (Schragger 2005, p. 1013). While cooperative store retailing was not as successful in the United States and Canada as Europe, it did not deter Edward Filene, owner of Filene’s department stores of Boston, to put the business at risk. Edward Filene was a department store innovator with his Automatic Bargain Basement, which began in 1909 and ended in 2011. It may be the oldest off-price retail merchandising practice in the United States. It used a low-tech automatic markdown price system. Slow-moving items in upper floors were relocated to the Bargain Basement and prices were automatically reduced 25% after 12 selling days; a further 25% was made after 18 selling days; and another 25% reduction was made after 24 selling days. If after 30 days the merchandise was still not sold, it was donated to Boston’s charities. Filene was also known as a philanthropist and social reformer, one who has done more than many others to promote the growth of credit unions in America. He firmly believed in the consumer cooperative movement to the point that he was enthralled with the idea of establishing a chain of cooperative department stores. He financially supported the creation of the 1936 Consumer Distribution Corporation, a cooperative chain of department stores. Filene believed that there was too much waste in distribution and planned for his new stores to be more economically efficient as well as more democratic toward employees. He also felt that his new venture at the time would reduce unemployment. After his death, a big chunk of his wealth was spent attempting to realize his dream of establishing such a cooperative scheme. However, employees were not that enthusiastic about assuming co-ownership of such stores, and the department stores closed as failures at a substantial loss for many reasons. There were merchandising and operating inadequacies, unrealistic markdowns, inadequate sales volumes, and very high expense rates. Bell’s (1956) historical account of the

3.4 Chain Stores

29

failed venture is well documented as America’s only major attempt to establish a chain of cooperative department stores. Schragger (2005) reports that “the chain store revolution came quickly as did the movement to contain them” (p. 1013). As early as 1929, trade associations in over 400 cities were vowing to curtail chain store growth by taxing them, “almost out of business,” as some have suggested. The Depression years accelerated the anti-chain store movement such that 26 states had enacted chain store tax laws (Schragger 2005). Small town retailers, independent merchant associations, and antimonopolists, among others, voiced their concern about the growth of such chain stores and about the destructive impact on American values of bigness in retailing. Independent retailers had a hard time competing with chain stores because consumers liked the lower prices and the variety and quality of products offered by chain stores. Note that the movement was not consumer-led, although the “most visible form of consumer activism was that pursued by middle-class women reformers as members of the National Consumers’ League,” which “many historians regard such women as the founders of modern consumer politics” (Scroop 2008, p. 939). Small town retailers felt chain stores were unfair to the local communities. They did not get involved in community affairs, and the profits they made were not reinvested in the community but siphoned off to chain store owners. Such stores did not have the same business model as department stores. Centralized buying direct from manufacturers gave them more buying power over suppliers. Moreover, the larger the chain organization, the greater were quantity discounts, cash payment rebates, and promotional allowances for product displays, among the benefits they received. Their standardized business practices and their lower prices further increased their competitive advantage over local stores. Chain stores did not offer the same assortment of goods and services, they did not offer the latest in fashion as department stores, and the stores were much smaller and functional, one story, and were not architecturally designed stores, unlike department stores. Similar to traditional department stores, chain stores had efficient and innovative supply chain networks. However, unlike department stores and other mass retailers, their purchase orders from suppliers were not scheduled months ahead and were promptly paid when merchandise was delivered. As a result, they were unable to follow fashion trends. Their success was due to the high rates of inventory turnover, their direct purchase agreements with manufacturers, the lower carload rates from the railroads, their use of the telegraph, and lowered expenses through minimal service (Ingene 2014). As the chain store movement grew in the 1930s, numerous politicians opposed the movement and vowed to curtail the menacing growing economic power of chains and their alleged destruction of local retailers with their destruction of community values. The literature on the anti-chain store movement of the 1930s makes for fascinating reading. It revealed that the rise of national distribution networks in the American economy was not welcomed, except perhaps by consumers. It showed that American-style capitalism was not always revered and held on a pedestal by many Americans. Theodore Beckman, the famed marketing scholar, got involved in the anti-chain store movement by publishing a textbook outlining the role and competitive power of the chain store in relation to other retail formats, including the

30

3 Distribution Driven by Technology: 1900–1950

department store (Beckman and Nolan 1938). Many well-meaning politicians, even high-ranking members of the Supreme Court, felt that small retailers needed legal protection from mass merchandisers: The anti-chain store movement urged federal and state interference into the workings of the national market in order to preserve local economic and political independence (Schragger 2005, p. 1016).

The movement culminated in 1936, with the passage of the Robinson-Patman Act and the Miller-Tydings fair trade laws. The Robinson-Patman Act has been referred to as the anti-A&P Act as well as the “Magna Carta” of small business. Such laws were intended to curb the business practices of A&P and Woolworth, among others, but not department stores because department store chains were not yet a threatening market force for small businesses in retail and wholesale distribution. Canada was not immune to the anti-chain store movement of the United States (Phillips 1937). Wilbur (1962) discusses the acrimonious relationship of Stevens Bennett, the Prime Minister of Canada during the 1930s, with H. H. Stevens, chairman of the Royal Commission on Price Spreads and Mass Buying. Stevens was known to be a champion of small business, firmly against the mass buying power of chain stores, department stores, and other large mass buyers. He made a speech in October, 1934, in which he accused mass merchandisers, such as Charles L. Burton, president of the Robert Simpson Company (a large department store chain), of exploiting his employees for profits. His speech made headlines all over Canada and eventually forced Stevens to resign. No such dramatic political event happened during the antichain store movement in the United States. By the late 1930s, the anti-chain store movement died on the eve of World War II, and it failed to curb the growth of chains. However, the movement was reborn in the 1990s when Walmart stores began to threaten the survival of small retail merchants, among other issues. The modern movement is not only aimed at Walmart (i.e., the Walmart effect) but at other mass retailers, such as McDonald’s (i.e., the McDonaldization of Society), Costco, Home Depot, Target, and other mass merchandisers. History seems to be repeating itself but with a twist. Opponents of mass retailers are still in favor of the need to decentralize their economic power but they are also concerned with numerous social issues, such as the way they treat their employees and the wages paid, the lack of women in management, the manner by which they deal with suppliers, the outsourcing of the products they sell to overseas sweatshops, and so forth, all issues that did not exist in the 1930s. Department store chains became more of a reality after the 1950s, when department stores began to branch out in suburbs and got involved in shopping centers and real estate development. Initially, branch stores were managed from the flagship store located downtown. However, the management practices of one store and the range and assortment of goods sold in the flagship store could not be imposed across a chain of stores. The branch stores were smaller, and their assortment of goods needed to reflect the consumer taste of the community in which the stores were located. There are many more factors that precipitated the downfall of traditional department stores

3.4 Chain Stores

31

in American and Canadian retailing. The success of Sears, Roebuck as a department store chain was its ability to apply chain-store management concepts with centralized buying, but with home office direction for each individual store.

3.5 Transportation Advances: Goods and People Once the vast North American infrastructure was established over the previous 50 years, the turn of the century ushered in an era of developing new ways to utilize that infrastructure. Where the priority had largely been moving goods to the people, the new era was greeted by a desire for people to move around as well. The first part of the twentieth century saw a transformation in transportation, communication, and distribution systems. Besides trains, electric trolley lines in cities meant that people could venture out of their local neighborhoods to shop. In 1900, there were some 8,000 cars in the United States, a mixture of electric and gasoline powered. Cars, also known as horseless carriages, were handmade and were very expensive, and only the very rich could afford one. As transportation continued to improve for goods and people, better street surfaces made it easier to walk, cycle, and to provide public transportation. Americans’ love affair with the automobile began at the turn of the century. In 1900, the Newport automobile races began, five years after the Paris-Bordeaux car races. The first coastto-coast car trip was accomplished in 1913 when H. Nelson Jackson drove from California to New York. In the same year, the Lincoln Highway from New York to California began construction, with the support from various businesses, although it would not be fully paved until 1930. By 1920, Americans were mobile, and retailing was booming. Macy’s Herald Square became the largest store in the world in 1924, and it hosted the first American Thanksgiving Day Parade. Eaton’s of Canada had staged such a parade in 1905 in Toronto, two decades earlier. By 1920, there were some 8 million cars and trucks on the roads. By the late 1920s, regional airlines were developing. All of these changes in transportation, and the movement of people from rural areas to urban cities, opened the door for advances in wholesaling, retailing, and improved logistics to transport goods to markets. Improvements in distribution and the growth of business accelerated both the practice and academic development of marketing. Many believe that the Interstate Highway system was a development for private passenger cars, to support manufacturers who mass produced them following World War II. In actuality, it was General Dwight Eisenhower, who had been Supreme Allied Commander prior to becoming President, who championed the development of Interstate Highways as an infrastructure to move men and material quickly around in case of war: to defend the West by moving forces and material from the industrialized East, for example. This also literally paved the way for the development of the longhaul cross-country trucking industry, and trucks have been widely used to transport countless retail and other products since.

32

3 Distribution Driven by Technology: 1900–1950

When prepared baby foods were first marketed at the beginning of the twentieth century, they were sold almost exclusively through drug stores. These stores sold prescribed medicines and related healthcare products. Mothers often followed the advice of pediatricians and other healthcare providers, who prescribed such foods to feed their babies. There was synergy between the baby foods and the stores themselves where they could be purchased. A drug store is where a mom sought reassurance about what to feed her baby, given that the store sold numerous other health-related goods. However, some baby foods began to be sold in grocery stores, using a very different set of wholesale channel members than those used by wholesale suppliers to the retail drug store trade. Beckman and Davidson (1962) explained that, at the time, about 300 wholesale drug firms supplied the drug store trade while the number of wholesale grocers was ten times more numerous. Nationwide coverage for prepared baby foods to the grocery trade required the need of channel specialists, such as food brokers, to cover a vastly more extensive market. Thus, a new channel arrangement was established for baby food distribution. The addition of many more channel members soon resulted in over 85% of baby food purchases being done in grocery stores, adding the value of convenience for consumers, as independently owned neighborhood grocery stores were common. Sometimes changes in channel arrangements benefit only one channel member (a manufacturer or a mass merchandiser), while in other cases such as baby food distribution, a whole industry is affected.

3.6 The Operations Function Advances Henry Ford’s 1913 moving assembly line, in which men worked in assigned work stations, sped up the automobile assembly process. Ford’s empire was vertically integrated such that raw materials, steel, glass, and other parts needed for car assembly, were produced on site in Ford’s Rouge River plant. This huge plant was known in the automotive industry as the “ore to assembly” plant. Mass production of automobiles opened up the possibility of automobile ownership across the United States. Ford paid his workers $5/day for a five-day work week, enough for them to afford to buy his Model T car, which sold for as little as $290. By 1920, Ford had sold over 10 million Model Ts (Tin Lizzies) since its introduction in 1908. By 1927, he had sold 15 million before it was discontinued and replaced by a newer model. One of the myths in marketing is that Henry Ford was not consumer-oriented because a customer could order a Model T only in black and was not offered a choice of colors. In reality, Ford selected black as the ideal color for the car given that it cost less to make and it dried faster, which sped up the assembly line. Moreover, the vast majority of roads at the time were unpaved, mostly dirt and mud, making the black color very appropriate. Mass retailers and mail order houses of the nineteenth century and the twentieth century contributed to the growth of the manufacturing sector with the sale of stoves, sewing machines, bicycles, hats, guns, shoes, radios, electric refrigerators, and so forth (Asher and Neal 1942). One persistent rumor reported by Drucker (1954) was

3.6 The Operations Function Advances

33

that Henry Ford visited and carefully studied the humongous automated Sears mail order handling factory (the size of 40 acres, with a separate building for heating and cooling and space devoted to print the millions of catalogues) before it became fully operational in 1906, more than seven years before Ford developed his Model T car assembly plant in Detroit, operational in October 1913. Sears, Roebuck may have been the real inventor of the moving assembly line concept with conveyer belts which crisscrossed the multistoried mail order handling factory. History of the assembly plant as reported by Wikipedia (2019) confirms the Henry Ford visit and adds that one of Ford’s employees may have also inspired the moving assembly line concept after his visit to the Swift slaughterhouse in Chicago in which carcasses were butchered as they moved along a conveyer, replicating a “disassembly line.” On the other hand, Hollander and Marple (1960) provide detailed analysis of the origin of the supermarket and suggest that Henry Ford maybe have been the one who first developed such stores when his food stores began serving employees from 1919 and later the public at large. The stores were closed down after 1927, due to public outcry, indicating the politics of distribution at work. The mail order plant is considered by Drucker (1954) as the first modern mass production plant, complete with breakdown of all work into simple repetitive operations, assembly line, conveyor belt, standardized, interchangeable parts— and, above all, with planned plant-wide scheduling (pp. 29–30).

Otto Doering, the plant manager of the Great Works in Chicago, designed the receiving and expediting mail order system. However, mixed orders were still the chief problem. Doering’s elaborate system of assembling, packing, and shipping orders on an exact time schedule managed to clear the shipping room of its backlog of unsent orders. The department was given a 15-min grace period to get the ordered merchandise to fulfill the order. If it was not received within that time frame, the order went forward and shipped to the buyer and the balance was shipped later. The timely 15-min schedule meant exactly 15 min, no more and no less, similar to a rocket launch countdown. If part of the order was not there on time, the order was forwarded later by express, prepaid to the buyer at the expense of the department responsible for the item. This strict timetable became the policy, and the department was penalized and not the customer (Asher and Neal 1942, p. 124). Rosenwald (1928), part owner of Sears and past president and chairman, provides some interesting details of the need for the Sears’ mail order plant to have an advanced and efficient internal logistics system capable of handling the huge quantity of mail received. Up to 8,000 lb of mailbags were received each and every day at the plant, made up of 165,000–440,000 letters (p. 481). The handling and processing of that large of a number of daily orders is mindboggling. Teams had to be very organized to open the letters, sort the orders, and then direct them to the various departments in the mail plant that stocked the items ordered by the buyer. Using an elaborate system of conveyor belts which ran throughout the plant, the items were collected and sent to be packed and shipped. With sales reaching $200 million in 1926, with few sales outside the United States, the mail plant needed a state of the art internal logistics

34

3 Distribution Driven by Technology: 1900–1950

system, especially when unavailable items caused delays and customers had to be informed. The plant itself was a sophisticated internal logistics system but without the use of modern computer technologies and software. It was capable of tracing and tracking the tens of thousands of items ordered by consumers. However, the mail order plant could not stock all items listed in the Sears catalogues. Some of the items offered for sale were too heavy or bulky and too expensive to stock, like some farm equipment or prefabricated houses. Finding information on how Sears sought suppliers, and the network relationship it had with them, poses a very interesting supply chain question. Sears was proud to announce that “our trade reaches around the world,” which meant that suppliers were local, national, and even international. How did Sears inform suppliers of the need to replenish fast-moving in-stock items or that a customer ordered an item that was not in stock but had to be ordered from a supplier, such as farm equipment? Was the internal logistical system connected in any way with suppliers? If yes, then Sears may have been one of the first to implement a prototype blockchain technology without the use of computers. Further analysis of such questions is beyond the scope of this monograph. The functioning of the Sears mail order plant was not unlike Alderson’s (1957) sorting processes, made up of four sorts (sorting out, accumulation, allocation, and assorting). For Alderson, marketing as distribution was essentially a sorting process. Sorting is the sequential breaking down or building up of product assortments, with the ultimate sort being assortment as desired by the buyer’s mail order. Sorting represents one of marketing’s general economic tasks as a series of distribution activities. The purpose of these activities is to create assortments of goods and services purposeful for buyers/users. These tasks help explain what a wholesaler does but are not exclusive to them, given that others also perform such distribution tasks (manufacturers, retailers, U.S. Post Office, UPS, FedEx, or DHL). Sears, Roebuck and Co., an exclusive mail order retailer, began selling some of its catalogue merchandise in-store in late 1925. The merchandise for sale occupied a very small space in its otherwise massive mail order factory in Chicago. According to Eskilson (2000), by 1930, store sales had surpassed catalogue sales, and by 1932, Sears had opened up 385 retail facilities. However, the merchandise displays inside stores were a designer’s nightmare. Jammed into the first floor of mail order buildings, the stores operated with only the crudest and most perfunctory efforts at display. Goods were simply stacked on wooden tables and customers rummaged through them to find what they wanted (Eskilson 2000, p. 41).

It was only in 1932 that Sears recognized the importance of visual merchandising in their stores and appointed a senior designer fully in charge of a store planning and display group.

Chapter 4

Technology Accelerates: 1950 to Present

From 1950 to the present, technology has been a major driver of changes in the marketing environment. Communication and transportation transformed marketing channels and supply chains. Computers and the internet had a major impact on marketing institutions. More recently, AI and information technology such as blockchain assisted in providing what some refer to as the 4th industrial revolution.

4.1 Distribution Revolution The distribution revolution was the result of many factors, such as the rise in inflation during the period, a need to lower the cost of distribution, and the goal of increased productivity. The oil embargo of the early 1970s and the rise in international competition from Japan and other countries gave consumers more choices. Product recall legislation required reverse marketing channels. The rise in the number of vendors required better selection and better managerial controls of vendors. A more rapid change in fashion and product life cycles required concurring adjustments in the supply chain. Product expiration dates on packaging forced retailers to be more astute in their purchase requirements and inventory turnover. The rise in computer and information technologies transformed communication and control of operations. As the size of stores increased, so did the assortment of goods. Retailers like to add unrelated assortments of products and services to their existing product mix, a policy known as scrambled merchandising, as a means to increase volume and profits and, of course, consumer shopping convenience. The policy means that the retailer has to deal with a mix of suppliers other than the ones he is accustomed to, thus becoming a member of their organized channel networks. All of these, among others, meant that mass retailers needed better means to manage and coordinate both the sales channel and the supply one, which resulted in a shift of market power from producers to resellers. Such a shift drastically changed the marketing practices in marketing channels and even altered the economy’s overall distribution structure. Briefly, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 R. D. Tamilia et al., Marketing Channels and Supply Chain Networks in North America, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-44870-7_4

35

36

4 Technology Accelerates: 1950 to Present The mass merchandising movement allowed distributors to make unprecedented changes both in the size of their stores and their operational methods. The introduction of the computer and the UPC changed ways that products were transported, stocked, packaged, packed, labeled, ticketed, handled, ordered, and displayed. The computer gave mass distributors more market power over producers with computer assisted ordering (CAO), point of sales tools (POS), RFID, category management, shelf space management, and self-serve checkouts (Tamilia 2016, p. 190).

The 1950s and following years brought new concepts in shopping centers which necessitated greater efficiencies in distribution. In 1956, the Southdale Shopping Center became the first fully enclosed, climate-controlled, two-level regional mall, located in Edina, Minnesota. Walmart opened its first store in Rogers, Arkansas, in 1962. Walmart’s impact on retailing, logistics, and supply chain management transformed the American economy. Walmart and other mass merchandisers, such as Home Depot and Target, among others, changed not only American capitalism but world capitalism as well. Their innovative use of computer technology to better manage in-store merchandise was also applied to their suppliers. The Walmart supply chain revolutionized internal logistics which increased efficiency and productivity, leading to lower prices to consumers and an increase in standard of living for Americans (Lichtenstein 2006; Volpe and Lavoie 2008). The Walmart effect, which had its origin with the discount revolution of the 1950s, contributed to the major overhaul of the distribution structure in the United States. The first electronic cash registers appeared in stores in the 1960s. They were developed by NCR, and they were more than just cash registers. One of their many functions was to monitor store inventories, and eventually improve distribution, being linked to suppliers who could then quickly replenish the store’s low-inventoried items. Marcosson (1945) presents the fascinating history of the cash register with an emphasis on the origins of the National Cash Register Company and its founder, John H. Patterson. Mass retailers, such as Macy’s in the United States, were the first to make use of this new technology to better manage their large amounts of cash. One of Macy’s strengths as a department store, similar to all others, was that it only accepted cash. According to Hungerford (1922), pianos were not sold at Macy’s because they sold according to an installment plan. Credit was not part of Macy’s policy, only cash sales, at least until credit became socially acceptable and convenient to shoppers. In general, department stores were slow in extending credit to shoppers. Eventually they did but mainly after the post-World War II period. They preferred to issue their own store cards because it was more profitable for them. The first Universal Product Code (UPC) scanner was installed in a Marsh supermarket in Troy, Ohio, in 1974. Wrigley’s gum was the first product to include a barcode. A UPC consists of a number of numerical digits assigned to each item to be scanned at point of sales. UPC is used for inventory management and automatic reordering, among other supply chain benefits. UPC was a revolutionary technology for it enabled every individual item bought to have its own barcode. Each fruit bought (apples, oranges, tomatoes) or each piece of lumber purchased has its own barcode. On the other hand, RFID tags (radio frequency identification) are different than barcodes and offer many more advantages but are more costly. The tags need

4.1 Distribution Revolution

37

not be close to a reader and can be read hundreds of meters away. Each tag emits an electronic signal containing information and can be attached to just about any item for tracking purposes, including goods, people, and animals. The tags can be read inside containers, pallets, railcars, trucks, boxes, or cases. Tags are useful, not only in inventory management and internal logistics, but also in automatic billing, and they help speed up trade at border crossings. Tags were in use from the 1980s, and they are in use more and more as their unit cost decreases. These two technologies, UPC and RFID, demonstrate how the tracking of items in supply chains has greatly improved in just a few years.

4.2 Intermodal Transportation According to Donovan (2000), intermodal transportation gained popularity only in the 1960s “when containers began transforming the way freight is packed and loaded on trucks and ships” (p. 317). It existed as far back as the eighteenth century and predates the arrival of the railroads. It was used in England to ship coal from coal containers onto barges and later in France in the transfer of mail stagecoaches to rail cars. DeBoer (2000) says that intermodal freight service in America is as old as rail transportation, when intermodal was first offered in 1830. What is important to note is that intermodal transportation means the freight itself is not handled at all when changing transportation modes. Containerization reduced costs in road and rail transportation as well as in maritime and ocean shipping. Today, nearly everything is shipped in standardized metal boxes, which has transformed ports around the world into automated loading and unloading systems. Ocean shipping was one of the first industries to be globalized with the arrival of huge container ships capable of storing over 19,000 containers. It was only in 1956 that containers were first stowed on ships in the United States. Before, trailers from trucks were stowed in a ship’s cargo hold. There was too much waste in potential cargo space. Stackable containers that were never opened in transit economized space and permitted their ease of transfer on an intermodal basis among trucks, ships, and railcars. Not only did the growing use of containers revolutionize logistics, often referred to as America’s last Dark Continent, but transportation deregulation, from 1975 to the mid-1980s, also had a tremendous impact on the use of intermodal transportation. Prior to deregulation, freight rates were set according to the select mode of transportation, and all freight users paid the same rates. It was the American Management Association who was the pioneer group in the early development of logistics thought, and not the American Marketing Association. The American Management Association held a seminar in 1959 which resulted in the creation of the National Council of Physical Distribution Management in 1963 (Cowen 2014). The University of Michigan was the first to offer a distribution and logistics program in 1957. New trade magazines appeared about the same time, such as Handling and Shipping, Distribution Age, and Transportation and Distribution Management, among others.

38

4 Technology Accelerates: 1950 to Present

Another milestone in the logistics revolution and the rise of intermodal services in the 1960s was the seminal publication of the Lewis et al. (1956) monograph on trade-off cost analysis in transportation. Logistics was studied from a full distribution cost approach (i.e., a systems perspective) made up of various interdependent cost activities such as transportation, inventory, packing and packaging, materials handling, order processing, warehousing, information, insurance, damaged goods, and of course, meeting customer service expectations. Their approach revolutionized logistics with their total cost approach, also known as the “total least cost principle.” It means that a higher cost activity at one level of physical distribution, such as air freight, may actually lower the overall total logistics costs due to the interdependency (trade off) of logistics costs. Using air freight, the most costly mode of transportation, may result in cost reductions in packing, packaging, materials handling, damaged goods, lower insurance rates, less paperwork, lower inventory carrying costs, with overall lower total logistics costs, and with a faster delivery schedule to meet and even exceed customer expectations. The combined savings obtained in other logistics activities are greater than the higher costs associated with air freight. Moreover, with transportation deregulation, intermodal services resulted in many innovative ways to reduce total transportation costs using trade-off analysis such as double-stack rail cars, semi-trailers on flat rail cars, and so forth.

4.3 Supply Chain Becomes Prominent Over the past 170 years, logistics and supply chain management have evolved from improvements in labor-intensive processes, engineering, operations, and transportation. Operations advanced when scientists demonstrated the value of analytics in the study of military logistics problems. In the 1940s and 1950s, the focus was on mechanization such as lifts and pallets to assist in materials handling. The main focus of physical distribution was selecting the least costly and most reliable mode of transportation. At the end of the twentieth century, the internet and computers opened the door to better logistics planning, coordination, and cost savings. New information technologies along with the development of mathematical distribution algorithms further helped to create what we know today as supply chain management. The concept of transportation management evolved into logistics management with the invention of containers, referred to by Levinson (2006) as the metal shipping box that made the world smaller and the world economy bigger. Terms such as “warehousing,” “materials handling,” “distribution centers” which replaced the term “warehouses,” and “logistics” became common terminology. By the 1980s, the National Council of Physical Distribution Management changed its name to Council of Logistics Management. The recognition of inbound logistics, outbound logistics, and reverse flows of products provide evidence of the advances in logistics and supply chain management. While the first use of the term “supply chain” was during World War II, the term became popular in the 1980s. It is believed that Keith Oliver coined the term “supply chain management” in 1982, after which it emerged in the

4.3 Supply Chain Becomes Prominent

39

academic literature. The various related activities have existed throughout history, however. Over time, various functions such as logistics, operations, and procurement became integrated with a strategic focus; and supply chain management became part of the environmental, social, and economic goals for firms. Logistics and supply chain management have a long history. The Oxford English Dictionary included the term logistics as early as 1898. The term was associated with effective transportation and storage of goods and services. In the early 1900s, mass production evolved in the automobile industry as well as in other industries that needed efficient internal and external logistics. While the business function of operations has existed for thousands of years, operations research originated and progressed in the military during the two world wars. After the wars, these concepts were applied to business. Philip M. Morse played a key role in advancing operations research in World War II and is considered the father of operations research in the United States. Procurement has also existed for thousands of years but only became an organizational concern in the 1800s. Marshall Kirkman’s (1887) book related procurement to the materials and supplies needed by the railroad industry. During the two world wars, procurement became more of a supply issue due to the scarcity of materials, and consumer consumption restrictions were mandated. By the 1960s, procurement became much more strategic in business and gained departmental status. By the 1980s, with more supplier competition, more emphasis was placed on quality and dependability, and procurement became a major part of supply chain management. Now, internet collaborative systems establish upstream and downstream relationships, providing for instant information access and communication for all members of a supply chain network. In 1950, the principle of postponement, an old military concept, was first presented by Alderson (1950) and was further refined with the addition of the principle of speculation (Alderson 1957; Bucklin 1965). Improvements in transportation, expert systems in inventory management, and IT have increased the opportunities to more fully implement these principles. They have led to JIT (just-in-time) inventory or JIT delivery management. Briefly, postponement means buying after receipt of the order, while speculation means buying before receipt of an order. Postponement and speculation assist in understanding the difference between B2C and B2B buying where the former needs longer channels with more members participating in the distribution, while the latter requires a shorter institutional arrangement with fewer channel members. Historically, speculation has been the notable characteristic of retailing. Consumers, in contrast, have usually practiced strict postponement. They buy when goods are needed, assuming goods are available. Speculation means having goods available in stores, warehouses, or distribution centers before demand manifests itself. Such goods need to be made much earlier. Speculation allows for cost reductions in scale, economies in production, and cost reductions in logistics by channel members due to better managed inventories. Speculation reduces the possibility of stockouts with less consumer dissatisfaction and brand switching. An accurate sales forecast

40

4 Technology Accelerates: 1950 to Present

is needed, which requires channel members to be well informed and their work to be well coordinated and synchronized. On the other hand, postponement means orders are custom made according to buyer specifications, after an order has been received. There is less risk associated with a sale because ownership responsibility has shifted to the buyer. The product is most differentiated at that level as it more closely meets buyer demand. Postponement means inventories are held as late as possible in the channel and there might not be much of a need to hold inventories. Cost of logistics along the channel is reduced. Postponement is possible with products having a low need for delivery speed or frequency. Channels are usually more direct under postponement, with few channel members participating in the distribution.

4.4 Process Improvement to Reduce Costs New technological manufacturing methods, materials, and processes helped reduce the cost of making goods; but cost savings in production would not benefit buyers if the cost of distributing the goods increased. Distribution realized the need to apply similar cost-reducing methods, as in production. This was achieved by reorganizing and rearranging the various network links that existed among channel members, part of the supply chain, both upstream and downstream. The cost of distribution accounts for a large share of each dollar spent by the consumer, estimated to be as high as 59 cents in 1939 but revised to 51 cents (Cox et al. 1965). Mallen (1972) attempted to find the Canadian equivalent, reporting that “consumer marketing in Canada accounts for about two-thirds of total marketing and distribution costs (33.5 cents) with the distribution industries accounting for 75% of consumer marketing costs, or 25 cents of each dollar of the total cost” (p. 55). This means that distribution has the potential to offer many more opportunities for cost reductions than production. The distribution revolution, which began in the 1950s with the ongoing building of the supply chain infrastructure of today, would provide many of these cost savings. The current rush to offer more direct-to-home delivery in many retail sectors including grocery stores, restaurants, and others supports Christopher’s (1980, 1981) position that “improvements in transportation modes over time expanded markets, increased product assortment, reduced prices, made goods more readily available to buyers to the extent that logistics is a positive contributor to national wealth, and is the engine that drives the national economy” (p. 5). Beckman and Davidson (1962) outline a typical make-or-buy channel decision of the H. J. Heinz Company. Historically, the company’s sales force was responsible for product sales, which were distributed to dealers through its own vertically integrated wholesale arm. However, both the sales efforts and wholesale distribution were restricted to only large urban areas in the United States. The high costs of assuming the wholesale distribution of Heinz products forced the company to abandon its direct-to-retailer method in favor of using independent merchant wholesalers. These food wholesalers, located in many parts of the country, were efficient at distributing

4.4 Process Improvement to Reduce Costs

41

a much larger assortment of goods to many more areas and stores, faster and at a lower cost. Such a channel rearrangement led to the increased importance of food wholesalers in the United States. Value added translates to high wage jobs. The distributive trades, in working to keep costs lower, do not necessarily offer high wage jobs even though these jobs add value that is no less important than manufacturing. In fact, their efforts may be even more valuable because commodities need to be extracted from nature, to be processed and manufactured, and at each step, such finished or semi-finished goods also need to be distributed to potential buyers who are not only spatially, but also temporally, separated from sources of extraction or production. Additionally, a retailer, by definition, is also engaged in wholesaling activities. Before goods are sold to consumers and a sales tax is collected, such goods need to be ordered, invoiced, stored, assorted, stacked, bundled, crated and uncrated, packaged, wrapped and unwrapped, received, shipped, delivered, moved, displayed, and of course managed, inside warehouses or distribution centers, as well as in transit to such facilities. All of these activities are, in fact, valuable and necessary distributive services, which continue to retail stores and even inside the stores. Retailing, wholesaling, and transportation agencies form the backbone of the distribution structure of any economy, an important part of the service sector of the economy.

4.5 Efficient Consumer Response Transforms Supply Chain Networks In the mid-1960s, Bert McCammon (McCammon and Bates 1965) referred to the systemic integration of channel members as vertical marketing systems (VMS). Vertical integration of channel members has a long history, given the existence of franchising, retail cooperatives, and voluntary chains, among other types of organized distribution networks required to integrate the work of suppliers and distributors. McCammon pushed the marketing integration question much further with his theory of VMS by going beyond the dichotomous “make or buy decision” approach in vertical integration studies in economics: should a manufacturer make the product or should it buy it from others? The vertical integration of marketing work is much more complex and more difficult to achieve than in manufacturing, given the intangible nature of marketing functions and of determining their cost structure. Despite such shortcomings, McCammon (1970) felt that the integration of various retail and wholesale marketing functions in VMS was not only possible but desirable. He suggested the programmed merchandising approach as a “joint venture” in which a specific retail account and a supplier develop a comprehensive merchandising plan to market the supplier’s product line. These plans normally cover a six-month period but some are of longer duration (p. 48).

The programmed merchandising plan touched on many aspects of both planned sales activities for the period (sales channel) and concerns for supply management such as

42

4 Technology Accelerates: 1950 to Present

inventory turnover. The plan was more of a paper and pencil exercise given that the internet and the PC had yet to be invented. However, the advent of NCR’s electronic cash register in the 1960s—and McCammon’s association with NCR as a consultant—convinced him that programmed merchandising was a means to achieve better integration and coordination of the merchandising work with supply management. According to McCammon and Bates (1965), individual firms are part of an interorganizational channel arrangement. Today, the organized network of channel members is much more sophisticated and complex, and the application of programmed merchandising involves the use of computers with data sharing and data coordination from plant to warehouses to store shelves, such as inbound logistics, operations, outbound logistics, and consumer data at point of sale (POS). McCammon was one of the first marketing scholars to recognize the need for better distribution methods in the American economy. He foresaw the distribution revolution, post-World War II, which presented formidable new challenges to management. He called for a reengineering of the value chain, both demand (i.e., sales) and supply channels. He argued that improvements in distribution presented growth opportunities for firms, which would give rise to a sustained competitive advantage not easily imitated by others. He advocated improved transaction efficiencies with more routine transactions to reduce logistical costs and increase channel performance. More partnership agreements with suppliers were needed with more vertical integration among channel members. He recognized the need to outsource some of the channel work to others to improve channel performance. Finally, the distribution tasks along the supply chain required better planning, coordination, and control, leading to a more continuous marketing effort along the value chain. In other words, he was the first marketing scholar to offer a merchandising plan to better coordinate and harmonize both demand and supply channels some forty years before SCM allegedly assumed the managerial responsibility of such a task. The spirit of McCammon’s channel philosophy can be found in Efficient Consumer Response (ECR), a prototype of blockchain business technology. It is a marketing and supply chain initiative which greatly expanded the concepts of VMS and continues to drive the structure and function of supply chains today. ECR was the first U.S.-led initiative in 1993 by Kurt Salmon Associates (1993), a Harvard-led consulting firm specializing in retail distribution. It has since become not only a European enterprise but has spread elsewhere (Svensson 2002). Initially, ECR was the result of the established grocery industry’s growing concern over the new category killers entering into their markets (e.g., Walmart, Sam’s Club, and Costco). These new competitors had a major competitive advantage over the more traditional supermarket business because of their superior logistics/supply chain management skills. Their sophisticated use of technologically advanced logistical information systems and their sharing of data with their channel partners were far more advanced in such areas as ordering, billing, product replenishment, warehouse management, and shelf-space management. Even their promotional activities were better coordinated and synchronized, with inventories better managed, which resulted in less stockouts, less backorders, more timely deliveries, direct-to-store deliveries, and even reduced inventories.

4.5 Efficient Consumer Response Transforms Supply Chain Networks

43

ECR provides the foundation to make efficient marketing channels a component of supply chain management across the grocery distribution industry. ECR requires the entire industry to work together in partnership in order to reduce logistical inefficiencies, improve distribution productivity, reduce costs, and help lower prices for consumers. The grocery food distribution industry is an area where supply chain managers are changing the very way the food business is managed by the implementation of information technologies and the sharing of data among channel members, now benefitting traditional supermarkets and not only category killers. ECR was labeled as a new channel business-partnering philosophy. According to King and Phumpiu (1996), ECR brings together manufacturers, wholesalers, brokers, and retailers to cut costs, provide better logistical customer services, and become more competitive with other store formats in the industry. Many opportunities existed to implement better logistics and operations to this otherwise complex and often fragmented industry. ECR placed supply chain management as most important in distribution decision making. It guided the reengineering of the whole grocery distribution network from plant to store shelves, calling for fundamental structural changes among channels members. ECR requires that logistical, operations, and procurement partnerships be established with information technology (IT). The aim is to increase cost efficiencies by more cooperation and coordination among channel members. As reported by King and Phumpiu (1996), the widespread use of IT, such as scanning technology with UPC, transformed the logistics process/SCM of ordering, billing, inventory management, stock outs, shipping, tracking, handling, transportation, and more. This also led to Electronic Data Interchange (EDI) of orders to wholesalers and manufacturers. ECR outlines four main areas in which costs can be lowered: (a) efficient product assortments in-store, which attempt to optimize the productivity of inventory and store space at the consumer interface with the use of category management; (b) efficient product replenishment optimizes time and cost. A continual replenishment of inventory throughout the supply chain, in line with consumer demand, promotes faster movement of products and increases consumer satisfaction. An industry can save billions of dollars by eliminating excess inventory as well as redundant and duplicated logistical service activities all along the channel. This is an interfirm approach to more efficient data sharing across partners; (c) effective promotion, which attempts to maximize the total system efficiency of trade and consumer promotion. Trade promotions incorporate discounts and allowances, while consumer promotions include coupons, price reductions, and advertising. While such promotions can be valuable competitive tools, they can also reduce operational efficiencies. Channel management under ECR attempts to reduce the adverse effects of promotions; and (d) efficient product introductions, which attempts to achieve more cost control of new product development costs and the high cost of new product introductions, such as the cost for entering and removing products from the market, information market testing costs, inventory buildup costs prior to promotions for new products, plus all other costs dealing with product movement and tracking. Rationalization efforts to cut down the number of SKUs are also part of a much broader attempt on the part of grocery food distributors to cut costs. In order to

44

4 Technology Accelerates: 1950 to Present

achieve costs savings, ECR begins with consumer sales data recorded at the checkout counters. Point of sale (POS) scanner data enable category managers to track store sales of individual brands. Nielsen and Information Resources teamed up in 2009 to create joint consumer panels of up to 100,000 families. Panels provide the muchneeded data to retailers and other members of the distribution chain, especially since 2001, when Walmart decided to stop providing scanner data (Neff 2009). ECR is an integral part of both the demand and supply channels and is changing the way some industries operate. SCM will continue to be a major player in revolutionizing any firm or industry looking for cost savings, improved distribution performance, a means to be more cost efficient, and a sustained competitive advantage.

4.6 Technology’s Impact on Marketing and Supply Chain Relationships ECR has helped supply chain networks use information technology, innovative transportation systems, and integration of management decisions with marketing channel members to provide dynamic and optimized solutions. Rapid changes in all the important variables in supply chain networks are creating new challenges needing new solutions to gain efficiencies and provide all channel members the opportunity to maximize their success. As online retailing advances and consumers change, firms must be able to respond quickly and nimbly to all the variables to provide a competitive solution. This requires monitoring, collaboration, and proactive response to marketing conditions. However, the distribution revolution, which accelerated in the 1950s and the 1960s with the discount revolution—the arrival of Walmart, Home Depot, Costco, and so many other mass merchandisers—was not only the result of new technologies but also of innovations in the management practices within the distributive trades. Stern and El Ansary (1977) argue that the distribution revolution was the result of two major innovations by mass merchandisers. First, they adopted “the supermarket method of distribution to an expanding number of commodity lines” (p. 49). The second major technology encompassed by mass merchandisers was the application of warehouse operating techniques at the retail level, such as the use of forklift trucks and stacking goods vertically in stores. The sharing of scanner data among channel members gave firms access to very timely and accurate data on product movement in-store and in-transit. This gave the industry better means to schedule production and manage inventory. It also led to more cost savings in warehousing and dramatically lowered the lag between receipt of an order and delivery. The sharing of scanning data also allowed for more sophisticated analysis of consumer preferences and buying patterns.

4.7 Blockchain Data System Transforms Communication

45

4.7 Blockchain Data System Transforms Communication More recently, advances in information technology have transformed communication systems that support distribution. Information management has driven advances to facilitate efficient supply chains. Computer driven information technology can trace products, provide cost effective transportation systems, and determine what products will be successful. Newer innovations in technology, such as artificial intelligence (AI) and blockchain data-sharing technology, may have even more impact on changes in the future. These new technologies are accelerating ECR and information management in marketing channels, making supply chains remain a key part of business strategy. Blockchain is an emerging information technology that may have a major impact on channel partnership arrangements and supply chain relationships. Blockchain was promoted as the new emerging technology in supply chain networks just a few years ago. Yet the very same authors who praised blockchain as a revolution in business technology are not so sure anymore (Higginson et al. 2019, pp. 2, 7). The bottom line is that despite billions of dollars of investment, and nearly as many headlines, evidence for a practical scalable use for blockchain is thin on the ground… Is it really going to revolutionize transaction processing and lead to material cost reductions and efficiency gain?

Blockchain was first used in the financial services sector from 2012 to 2015. Then, insurers saw “the chance for contract and guarantee efficiencies and the potential to share intelligence on underwriting and fraud” (Higginson et al. 2019, p. 5). By 2017, cracks in the usefulness of blockchain began to appear. Was it really necessary, and were alternatives readily available? Moreover, information is shared in blockchain, which requires a sustained cooperative effort among companies and even more efforts to standardize data systems among companies. A key dilemma in blockchain, according to the McKinsey report, is why the pioneering efforts of a few firms should benefit an entire industry. It now appears that blockchain technology may be better suited for niche markets. One such niche market application is traceability in the food chain for food safety. Blockchain technology can help manage the food supply data of a large number of partners involved in the distribution of edible and perishable products from farm to fork, as they move throughout the food supply chain. The key players in the food supply chain networks are food manufacturers, farmers, distribution centers, 3PLs, and retailers. Food chain members are not only domestic players but international ones as well. Miller (2018) discusses one of the rare blockchain cases in retailing, with Walmart reporting its use to better manage its food supply for preventive food safety. Apparently, Carrefour customers can now scan a chicken label to determine when the egg was hatched, what food was consumed, what hormones were used, and other information that could relate to product quality and food safety. The technology can make such detailed information available to consumers, but to what end, given the

46

4 Technology Accelerates: 1950 to Present

short life cycle of a chicken from farm to fork? In our over-stimulated, informationrich environment, such minute details can lead to information overload and distract the consumer. It matters less than ever before to the ultimate consumer where a product is manufactured and matters more where the product can end up (on a consumer’s doorstep). Improvements in technology have the ability to deliver products, seemingly out of the air, by communicating and sourcing from anywhere in the world. Integrating internet communication channels, social-media, and mobile-phone apps with brick-and-mortar stores provides a modern shopping experience, unlike the past, with more enhanced consumer convenience. Services are rapidly changing, with technology enabling human-like AI exchanges of many intangible products. Banking, financial services, travel, medical care, education, government, and numerous other services are now being provided on digital platforms that can eliminate store-to-person and/or person-to-person communications. Innovations in information technology will further empower technological development in communication networks as the coordinating center of operations, procurement, logistics, and customer interactions.

4.8 Nonstore and Omnichannel Retailing The distribution revolution which began in the 1960s, as presented here, resulted in an unprecedented technological revolution that has impacted both the sales and logistics channels. However, we must be very careful not to confuse new technological ways to reach the consumers as creating new marketing channels. The internet has changed the way we understand marketing channels. The growing use of Google searches, social media, and electronic devices and apps used in online shopping have blurred and even confused the nature and function of a marketing channel. For example, Kozlenkova et al. (2015) even go as far as to claim that new smart electronic devices or applications to reach consumers constitute a new marketing channel. Are we dealing with multiple marketing channels when a retailer provides options, such as in-store or online, to customers to buy goods? The answer depends on how one defines a marketing channel rather than what it does.

4.8.1 Nonstore Retailing A marketing channel cannot be defined by the information technologies or the devices used to reach buyers. Otherwise, a purchase over the phone could also be labeled a marketing channel as well as a mail order purchase or a vending machine sale. The “devices” used in such nonstore retail sales are the printed catalogue, direct mail, the phone, the vending machine, or even a face-to-face salesperson in door-to-door sales encounters. Such a truncated view of a channel with its focus at the retail stage is

4.8 Nonstore and Omnichannel Retailing

47

mainly preoccupied with the final buying stage of the B2C interactions between the end seller and the consumer, while neglecting the B2B interorganizational arrangements that take place among the network of channel members working together in harmony to obtain and satisfy demand. After all, a marketing channel consists of a number of independent members working together in a hierarchy, coordinating their work to generate sales, and to deliver goods to buyers in a timely and cost-effective way. The consumer is largely unaware of the existence of this large and complex network of vendors, working together in synergy to obtain and satisfy demand. In fact, a typical consumer is oblivious to what is going on inside the organized network. Why would consumers want to know how channels members organized themselves to fulfill the order, as long as the goods ordered are received promptly as promised, at the right price, and at the right place? Marketing channel scholars have actually defined a marketing channel by not including the consumer in their research. That does not mean that the consumer is neglected or forgotten. It is quite the contrary because the consumer is the recipient of channel members’ coordinated efforts to organize themselves efficiently to meet his/her needs. The consumer is the final judge who will either accept or reject the manner by which channels members have organized themselves in a complex network to provide, or even exceed, the shopping experience sought by consumers (Stern and El Ansary 1977; Tamilia 2019). Another important and related issue in defining a marketing channel has been which members to include and which ones to exclude. Mallen (1976) offered a practical solution based on functionalization, or who does what, in the channel interorganizational network. Some members deal with the transfer and negotiation of ownership; others deal with the movement and storage of products and information; and still others help the first two groups. Should a marketing research firm or an advertising agency be members of a marketing channel? Only members involved in any of the actual marketing functions or flows dealing with title transfer or the work involved with negotiation of ownership in a sale are part of the sales channel. What about logistics supply members? Members that provide the physical or supply work are part of the supply channel. A third group of members who offer auxiliary services are not members of either the sales channel or the supply one, but they facilitate the transaction and the physical work to be done properly (i.e., trade groups, government agencies). Often, Amazon acts as a merchant wholesaler or an agent (not taking title) for hundreds of thousands of goods it offers for sale, similar to a giant mail order catalogue. Its role as a wholesaler or an agent requires the company to link up electronically with thousands of independent vendors, suppliers, and other wholesalers located nationally and internationally. These vendors, some of which can be importers, exporters, wholesalers, manufacturers, agents, and even retailers, must be selected and preapproved before joining the Amazon family of suppliers. They need to meet pre-established business and financial standards and business practices pertinent to the class of goods offered for sale. The vendors also need to be monitored and evaluated on an ongoing basis for customer satisfaction. From the consumer’s perspective, the process of buying from Amazon seems very fluid and carefree. The

48

4 Technology Accelerates: 1950 to Present

sales channel is a simple B2C channel, visible only on one level. The B2B work that is done within the interorganizational vertical network after a purchase is made is anything but simple. Gehr (2019) adds that E-commerce and multi-channel distribution have increased the complexity of distribution exponentially. What looks simple from the outside, is extremely difficult on the inside.

He offers many reasons for the distribution complexity, such as the need for retailers to greatly expand their inventories, at considerable cost to them, due to the speed at which orders must be filled. The inventory question gets even more complex when the retailer offers consumers many alternatives to place an order and to fulfill it. There is also the question of sales volatility—and the need to have just enough people on hand (for cost efficiency) without reducing customer service. The internet has also changed the priority and attention given to online sales while failing to acknowledge the existence of other types of nonstore retailing other than online shopping. There are alternative ways a consumer can purchase goods and services other than in-store or online. Online buying is, by definition, just another type of nonstore shopping, albeit newer and growing, among many others, such as direct mail (junk mail), telemarketing, catalogue selling, vending machines, infomercials, street vending, food trucks, direct selling, auction selling, mobile retail booths, bazaars, flea markets, garage sales, subscription selling, and even classified ads. We also need to include direct selling as part of nonstore retailing in which a consumer product or service is sold person-to-person away from a fixed retail location (e.g., Tupperware parties). For many direct selling companies, person-to-person is often implemented electronically. Most sellers today ship directly to the consumer. Nonstore retailing also includes direct marketing. Direct marketing relies on one or a combination of advertising media to inform and stimulate customer purchase responses. As a marketing tool, direct marketing can also be used in non-selling situations such as nonprofits seeking donations or political canvassing. For almost a century, the ratio of store sales versus nonstore sales remained relatively constant, around 3%, more or less, in America, and even less in Canada. Of course, online shopping has increased exponentially in the last decade, but such sales still account for less than 10% of total retail sales in America (Tamilia 2019). Nonstore retailing has been in existence since colonial times in America and hundreds of years elsewhere, before the arrival of fixed or permanent retail stores. Mail order catalogue sales greatly expanded retail and wholesale sales, first to rural customers in the United States and Canada from the late nineteenth century and later to urban consumers as well, as mentioned earlier. Door-to-door sales by itinerant peddlers or drummers have existed in the United States since before the Civil War and even longer in Europe. Periodic market fairs in antiquity and in the Middle Ages, farmers’ markets, and temporary stalls and kiosks also have a long history. If it had not been for technological developments and increased productivity of the supply channel, internet sales would not be what they are today. An order placed on the internet is just like an order placed via the telephone, by mail, or in a person-to-person sales situation. The use of sophisticated software or electric devices does not change the nature of the buying and selling process. It

4.8 Nonstore and Omnichannel Retailing

49

simply accelerates the process by making it easier and more convenient for the buyer to complete the transaction. However, the transaction is completed only when the payment is made and the buyer has physical possession of the goods. Similar to all retail sales, other transactional channel members are involved in store or nonstore sales (e.g., PayPal, credit card companies, gift card suppliers, etc.). In store sales, the consumer simply walks away with the goods or has it delivered if it is too bulky, heavy, or too awkward to carry home. In some nonstore sales, the consumer also walks away with purchased good (a vending purchase). However, in online shopping, the end seller organizes the logistics similar to what is done in mail order purchases or telephone orders.

4.8.2 New Challenges of Omnichannel Retailing We are now in the age of omnichannel retail, which calls for a multi-dimensional electronic media approach to delivering shopping value to consumers. This is disrupting traditional thinking about what a marketing channel is. Omnichannel retailing can be defined as “a multichannel retailing approach that allows the customer to have an integrated customer experience across all of a retailer’s distribution platforms” (Hochstein 2018). Omnichannel can also be described as creating a seamless, cross-channel buying experience that integrates in-store, online, and mobile shopping (Armstrong and Kotler 2017). Finally, omnichannel retail “is the set of activities involved in selling merchandise or services through all widespread channels, whereby the customer can trigger full channel interaction and/or the retailer controls full channel integration” (Levy et al. 2018). Omnichannel consists of multiple exchanges of information, mainly between the end seller and the consumer, and including logistics service providers when required. Omnichannel retailing embraces integration of all of the places and ways consumers and retail firms manage the flows of communication, products and services, and money. Technology has enabled multiple ways for information to flow between entities and in multiple directions. Because consumers have so many options of ways in which they can search, shop, purchase, and pay, they have developed the expectation of being able to do these things effectively across many platforms and in the sequence and timing of their preference (Mirsch et al. 2016). For example, a consumer may see an advertisement for a pair of shoes on a social media post, and then seek additional information via a Google search by visiting a branded website. They may visit a physical store to see the shoes in person and try them on to determine the correct size and color. While in the store, they may consult an app on a smart phone to determine if the shoes are available somewhere else at a better price. They may choose to purchase in the store, or they may choose to return to the social media site to make their purchase. In addition, they may complete the transaction using an online payment platform. During the entire process, technology enables the social media platform, the web browser, the physical retailer, the payment platform, the credit card company, the bank, and the smart phone operating

50

4 Technology Accelerates: 1950 to Present

system to collect data about the consumer’s preferences. Any of these may respond to those preferences by sending push notifications, text messages, or email messages to encourage and facilitate the final purchase. Once the purchase is made, the consumer has the option to carry the product from the physical store or to have it delivered in a time frame of their choice by the vehicle of their choice to the location of their choice. The growing demand for omnichannel retail presents a great market opportunity for all types of retailers to increase their overall sales. Online shopping represents an untapped market for many, but omnichannel retail presents many logistical challenges that most retailers have not encountered before. This is particularly true when it comes to the actual delivery stage: Which is the best way to get the products delivered to customers in a manner that is acceptable to buyers and affordable to both? In the case of omnichannel retailing, these questions are never addressed because the channel is not defined by the network of members involved in making goods and services available to consumers but by electronic media communication and devices used to seek information of the goods sought and to make a purchase. Thus, omnichannel can refer to the various communication modes by which an electronic retail sale can be realized, but it fails to distinguish the sales channel—only the transaction level with the consumer—from its supply side, thus truncating the marketing work. Obviously, there are other sales and supply efforts done by the online seller with various suppliers which may include wholesalers, importers, agents, producers, and even other retailers. This complex infrastructure of channel members is largely unknown by the consumer. Omnichannel discussions fail to acknowledge the existence of any partnership, agreement, and even contractual obligations and responsibilities an online retail seller has with his numerous goods suppliers and logistics service providers, as well as the agreed upon financial terms and arrangements made with such members. Doody and Davidson (1967) correctly predicted that nonstore retailing would grow in the near future due to the development of electronic devices, which would make it possible to do more at home shopping, resulting in routinized order processing and delivery from central distribution warehouses. This visionary article predicted that a consumer would buy staple food items in the comfort of her home, rather than going to the store, using a telephone connected to a central processing network. Moving forward by fifty years, we see that their amazing prediction is a reality as a result of the PC and the internet (and of course, Amazon). Is a company engaged in multiple marketing channels when selling the same goods over the phone, by mail, via a smart phone, self-pickup, door to door, in kiosks, or from vending machines? In the past, phone orders or buying from mail order houses were quite popular for some buyers and for some goods, even in grocery shopping. “Omnichannel” is a very recent expression, popularized by practitioners during the 2010s as a result of the growing use of electronic shopping. Having “channel” in the expression does not necessarily mean that we are dealing with a bona fide marketing channel as understood and defined historically. A marketing multichannel refers to a firm’s distributing network consisting of different types of channel members involved in bringing its goods and services to market. Mirsch et al. (2016) use the channel

4.8 Nonstore and Omnichannel Retailing

51

expression extensively in their paper. It is unclear if they were referring to the work done by various and different channel members or simply retail information sought using electronic media. They even admit that there is much confusion and fuzziness as to the meaning of such terms as multichannel and omnichannel management, which is understandable, given the recent use of such terms. As presently discussed in the literature, omnichannel has more to do with a consumer’s retail buying options, or purchase alternatives, as well as delivery choice options, capturing the idea that a product can be purchased across multiple media channels. The product owned by the same company may be bought in a physical store, using the internet at home, or even in-store using a landline phone or a smart phone. While many buying alternatives exist, delivery options are less. Consumers can leave the store with purchase in hand, or it can be picked up at the store after ordering it from home or from another nonstore location. Purchased orders can be delivered via U.S. mail, UPS, Parcel Post, FedEx, DHL, and even delivered to different addresses. Logistics service providers may have direct contact with consumers, and the services they provide during delivery can have an impact on the purchase experience. “Omnichannel” seems to refer more to a means to reach a consumer via the internet using various apps from a smart phone, a tablet, or an iPad than to a vertical marketing system or the hierarchal organized network of channel members working in tandem to achieve sales and then deliver the goods ordered. It is a modern means for retailers to tap the growing market of online shopping by detailing various offers to consumers in the same manner that printed catalogues did in the past. The option to buy products in stores or in nonstore alternatives existed long before the internet and the computer came along. The technology is now electronic and digital rather than on paper, which makes it faster and easier for consumers to make purchases. The technology may or may not result in an actual purchase, similar to the presence of a mail order catalogue in a person’s home. Even when an actual purchase is made, this transaction is only between the end seller (e.g., Amazon) and the consumer (B2C) at one level only in the channel, neglecting many other channel members involved in both the sales channels and the supply one. The use of communication media channels as buying options are not marketing channels because they deal mainly with information technologies that facilitate the purchase experience. More importantly, this highlights the purchase at the retail end of the process dealing with the retailer/consumer interface only and neglects the role played by other channel members involved in the transaction and delivery of goods. Online shopping, similar to other types of nonstore retailing, presents managerial issues related to delivery that are less likely to occur with in-store sales. For example, incomplete orders, lost or stolen parcels, backorders, pricing errors, quantity errors, wrong goods sent, returns, delivery delays, and other fulfillment and customer services costs are costly issues that a retailer engaged in omnichannel retail needs to consider and manage properly. Amazon has developed strategies in this direction, including an arrangement in which consumers can drop off packages for return to Amazon at a Kohl’s department store, or arrange for Amazon orders to be shipped to a Rite Aid drug store for pickup (USA Today 2019). A recent literature review

52

4 Technology Accelerates: 1950 to Present

on omnichannel management by Mirsch et al. (2016) failed to address any of these issues or their effects on profitability. Their focuses were on the demand side, and how the omnichannel can benefit retailers with more sales. Further discussion of such managerial retail issues is warranted.

Chapter 5

Conclusion: Marketing Education and the Future

5.1 Marketing Education Issues While distribution was the center of marketing education until the 1950s, today the supply side of marketing has become more isolated from the demand side of marketing. Consumer behavior and engagement is the focus of academic marketing research. In organizations, supply chain is a major focus. Supply chain is very concerned about costs, while most marketing research is more concerned with demand stimulation. The great divide between marketing and supply chain is challenging the marketing discipline to be relevant to business stakeholders. The teaching of marketing until the 1960s rested on three schools of thought: commodity, functional, and institutional (Shaw and Jones 2005). The institutional approach described the various marketing organizations involved in market distribution, such as retailers, wholesalers, agents, and logistics agencies. These three schools of thought set the foundation for colleges of business to teach courses related to the marketing and distribution of products. In 1881, the University of Pennsylvania was gifted $100,000 for the establishment of the Wharton School of Finance and Economy for the purpose of preparing future business leaders (Harris and Stock 1985). While they taught a course on transportation and commerce, it was nearly 20 years later that the University of Wisconsin, Ohio State University, and the University of Michigan offered courses on marketing. Marketing and distribution were once synonymous and interchangeable terms in the marketing literature (National Marketing Review 1935). However, the 1935 Committee on Definition recommended that the use of distribution for marketing henceforth be avoided to lessen the confusion with the economic term, which had a different meaning (wealth distribution). This recommendation did not in any way separate marketing from distribution. Market distribution was the core of marketing then, its raison d’être. Why should a discipline change its main focus only to accommodate changes in technology or ephemeral academic interests?

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 R. D. Tamilia et al., Marketing Channels and Supply Chain Networks in North America, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-44870-7_5

53

54

5 Conclusion: Marketing Education and the Future

While marketing has been practiced for thousands of years, marketing scholarship has gained prominence over the last 120 years (Ferrell et al. 2015). Possibly the first course in marketing was Distributive and Regulatory Industries taught at the University of Michigan. During this stage of marketing development, distribution was a major theme often tied to understanding the marketing of commodities and the functions performed by middlemen (Weld 1916). Weld (1916) laid the foundation for the study of how marketing channel members influence marketing strategy (Shaw and Jones 2005). Classifying intermediaries provided greater understanding of their functions and their creation of value. The first comprehensive academic development of retailing was provided by Paul H. Nystrom (1919). His Ph.D. dissertation was The Economics of Retailing. He developed this into a textbook, Retail Selling and Store Management, for use in university extension courses. As academic marketing became better understood, wholesaling became a subject worthy of study. As retailing and production advanced, the role of wholesaling became more important. By the 1930s, wholesaling became an important part of marketing. Beckman (1926, 1937) made it clear, using census data, that wholesaling was vital for effective distribution, was an important part of the business structure, and was a vital sector of the American economy. At least 12 years before the first principles of marketing textbook was published by Ralph Starr Butler, the first principles of management text was published by Samuel Sparling at the University of Wisconsin. The topics covered the distributive industries including wholesaling, retailing, and even direct selling. Most surprising is that one third of the book discusses marketing channels (Sparling 1906). This indicates the importance of distribution in business at the turn of the twentieth century. Many of the early courses in marketing were related to market distribution. By 1921, Ohio State taught courses in distribution, wholesaling, retailing, and sales, as well as others. In fact, marketing and distribution were terms that were used interchangeably. Therefore, distribution became the foundation of marketing education until the arrival of the managerial school of marketing thought in the 1960s (Ferrell et al. 2015).

5.1.1 Marketing’s Concern for Distribution Diminishes Advances in distribution closely parallel advances in transportation modes and communications. Today, as new technology advances, supply chain networks are becoming one of the most important areas of marketing. Integrating all members of the distribution system through advances in transportation and technology was the force behind the continued evolution of marketing channels and supply chains. To better understand today’s supply chains and the future of supply chain networks, this historical focus on how marketing channels and supply chains evolved is essential. Today, chief supply chain officers are challenging chief marketing officers for making key marketing decisions. This was the result when procurement, logistics, and operations became the key marketing variables for online retailing firms like Amazon and retailers such as Walmart.

5.1 Marketing Education Issues

55

The study of marketing channels is no longer a mainstream component of today’s marketing curriculum or even a research focus. Sadly, the history of marketing thought has disappeared in doctoral education. Marketing channels comprise but only a small portion of any marketing curriculum despite the fact that textbooks from the early 1900s to the 1970s contained a substantial amount of material on the distributive trades. For example, various retail formats were presented in such books, often outlining the historical origin of retail institutions such as general stores, mail order houses, department stores, chain stores, supermarkets, discount stores, and others. Wholesale merchants and agents, as well as physical distribution specialists, were also part of the discussion. More than 60% of Butler’s 375-page 1917 textbook covered various topics related to distributive members of the economy. Beckman and Davidson’s Principles of Marketing, in nine editions from 1928 to 1973, was one of the most influential marketing textbooks of the twentieth century. It was the most widely used textbook in American universities and colleges until the 1960s. The 1957 sixth edition alone sold more than one quarter of a million copies and was adopted by over 140 colleges and universities. Almost 50% of their text covered the distributive trades and related topics. Much attention was devoted to distribution up to the 1960s because the functional, institutional, and commodity schools of marketing thought dominated the discipline. However, the world of business changed after World War II, which brought an end to presenting the discipline from a macro approach for teaching and research to a micro perspective. A macro approach considers “marketing in the economy,” and the newer micro perspective views marketing as a managerial technology serving the needs of the firm. The Carnegie and Ford Foundation studies on business education in the 1950s recommended that the macro approach to marketing was no longer suitable following the post-World War II period. Apparently, the marketing curricula offered too many specialized, and often too practical-oriented, courses in retailing and advertising, among other topics. Marketing education was considered to be too descriptive, not analytical enough, and did not incorporate the decision sciences and quantitative methods that were developed during World War II and before. Moreover, the Ford Foundation made large grants in the behavioral sciences in the early 1950s, and business education had not incorporated enough of this material in the curriculum. These studies led to more importance given to the behavioral/social sciences in marketing, which changed the very nature of marketing education and research (Ferrell et al. 2015). The strong affiliation of the social sciences with the scientific method resulted in major changes in the marketing knowledge development process by emphasizing the hypothetic-deductive method of doing research. Over time, it led to the near domination of the post-1960s managerial and consumer behavior schools of marketing thought and to the demise of other schools of thought. Some might even argue that marketing’s raison d’être as a discipline changed drastically as a result (Shaw and Jones 2005). Dickerson’s (1961) entertaining and critical review of these studies predicted that if schools of business were to adopt their recommendations, historical analysis would disappear in the business curriculum. The McCarthy (1960) and Kotler (1967) textbooks of the 1960s, two of the most influential textbooks of

56

5 Conclusion: Marketing Education and the Future

the period, among others, incorporated these behavioral approaches to marketing education. Today, few textbooks in academic marketing exist which cover the channels area (e.g., Rosenbloom 2013). Moreover, the consumer orientation proselytized under the marketing mix (4 Ps) did not fit well with marketing channels: channel members are not employees of the firm; they cannot be managed in the same way as other marketing decision areas, such as advertising or pricing, and marketing channels are largely B2B, not B2C. Distribution (Place) as a P in the 4 Ps of marketing is not a decision variable that is easy to change or control. Finally, research methods in channels are both challenging and unconventional and require knowledge that is not well covered in the marketing curricula (Stern and El Ansary 1977; Stern 1988; Stern and Weitz 1997). A. T. Stewart’s development of the department store illustrated that the marketing concept was a driving force in his retail strategy. Marketing practices of Montgomery Ward’s or Sears, Roebuck mail order houses were as innovative and consumer centric as Amazon’s business model today. The market orientation concept was not created in the 1990s. It has existed in some firms over the last 150 years or so. Since marketing history is not taught, many scholars think that market orientation was only recently practiced.

5.1.2 Future of Marketing Channels in Marketing Education An important question for the future is: How will marketing channels and supply chain networks evolve over time, how will they be managed, and how will they be taught? In the academic world, marketing channels and supply chain are slowly moving into separate and distinct departments in many colleges of business with some SCM not taught in schools of business (e.g., engineering). Recruiters are focused on supply chain programs because of the practical importance of supply chains today. As internet retailing advances, supply chain has become a strategic focus of firms. Large retailers like Home Depot and Walmart are looking for Chief Supply Chain Officers as a recognized corporate executive suite title, and not Chief Marketing Officers. The position of Chief Marketing Officer (CMO) was designed to elevate the status and importance of marketing within the corporate structure responsible for strategic planning and thinking. The CMO was a position to differentiate it from marketing’s day-to-day decision-making responsibilities. However, as St. Clair argues (2015), this person holds the most dangerous title around because This is the person who maintains the whimsical vision and executable strategy for your company’s marketing plan. Inherent within this title, however, is one of the largest lurking dangers of the business world: a glorified role without any purposeful impact on the bottomline.

His comments are not very flattering to the management of marketing within the firm. Nath and Mahajan (2011) concluded that a CMO’s influence is increased with

5.1 Marketing Education Issues

57

top management when the CMO assumes responsibility for sales. Does it imply that a CMO is nothing more than a sales executive, responsible for day-to-day sales, instead of a top corporate executive involved in corporate strategic planning? The diminution of the strategic corporate role of marketing began in the early 1980s, to coincide with the rise of SCM. Day (1992), George et al. (1994), among others, argued in the 1990s that there was something terribly wrong with marketing departments. Marketing departments have been declared critically ill because they have failed to recognize the revolution in electronic commerce and its impact on logistics management brought on by information technology. According to O’Connor and Galvin (1997, p. 9), “Marketing has been outflanked by other disciplines, most notably finance and manufacturing.” The philosophy of the marketing concept insists that developing external relationships with consumers should be the sole focus of a business. How can marketing contribute to the corporate strategy dialogue when managers are being asked to adopt not just the marketing concept, but the ideology of marketing, as the only business philosophy, as if it had a superior technology or market knowledge? It is highly suspect if the marketing concept, as it has been propagated in the literature, can provide the basis for a firm to succeed in today’s fast-changing business environment. Business does not believe that marketers really understand the economics of the business. After all, marketers have yet to develop solid analytical tools to justify marketing expenditures. Marketing has little to offer in comparison with strategic management, financial concepts, and techniques of analysis developed in SCM. Marketing went through a transition period during the latter part of the twentieth century and emerged as a discipline subservient to supply chain management, more or less. Businesses refer to marketing channels as the business model they use from a strategic perspective. For example, direct marketing, retail stores, direct selling, and B2B all explain the channel that are used to sell products. An emphasis on supply chain networks is part of a disruptive marketing strategy process that could result in supply chain moving across the firm’s internal departments, outside suppliers, and other stakeholders to create a value chain (Hult and Ketchen 2017). Tracing the history of marketing channels over the last 170 years shows that marketing channels were crucial in building the retail and wholesale infrastructure of the economy, all supported by advances in transportation and logistics. Innovations, such as department stores, mail order houses, shopping malls, and discount stores, were the focus, and supply chain networks played an important supporting role. In today’s industrial economy with advanced technology, supply chain networks have now become a major strategic corporate focus that relates to service, costs, and profits. The current managerial preoccupation with supply chain management is similar to the 1950s and 1960s, when the corporate emphasis was on adopting the marketing concept and the idea that all organizations needed to be marketing-oriented in order to survive and prosper. Technological advances, such as artificial intelligence (AI), can automate predictable physical activities and place more emphasis on supply decisions. Blockchain creates a new use of internet communications. It connects computers to include producers, channel members, and consumers with a spreadsheet and creates rules about

58

5 Conclusion: Marketing Education and the Future

the data. It is distributed, decentralized, with append-only features, and all peers can work on the document. However, as discussed previously, blockchain may become another one of those faddish technological information tools that imitate or replicate what already exists, except that blockchain does it in a more costly and more disruptive manner.

5.2 Conclusion We have traced the evolution of marketing channels and supply chains over the last 170 years. While impossible to document all changes in practice and academic development, we attempted to provide a general overview with examples of how these sectors of the economy evolved. Marketing channels and supply chain networks are instrumental in the development of retailing and wholesaling sectors of the economy as well as major contributors to the nation’s standard of living. They also develop parallels of the processes of industrialization, technology related to transportation and communications, and urbanization and the new technologies that supported urban infrastructures. Railroads were the key driver of distribution before 1900. Motorization, as well as population growth, created the environment for rapid distribution and marketing advances in the twentieth century. While economics focuses on the role of manufacturing as a major driver of our economy, advances were made in retailing and wholesaling, which changed the nature and structure of distribution. The interorganizational arrangements among channel members, culminating in vertical integration, stimulated the need for manufacturing to develop. Let us never forget that the distributive sector was instrumental in the development of the manufacturing sector of the American and Canadian economies and still is, with the ongoing distribution revolution of the late twentieth century. Creativity and innovation by pioneering marketers developed our market-focused distribution networks. Early pioneers embraced market orientation just as much as today’s leading marketers. A. T. Stewart and his dry goods store, which morphed into a department store, were just as market oriented as Jeff Bezos and Amazon. Marketing has not been in the dark ages, and changes in technology have been the most important in driving progress. Marketing has always focused on customer engagement. An important question is: What is the future of marketing channels in both practice and academic research? Supply chain management is now a major functional area in business strategy and in education. Supply chain has assumed a “boundary-spanning role” that connects organizational activities. Logistics operations, procurement, and production connect marketing channels and firm strategy to advance market orientation. There is a demand-supply integration that is important for all businesses. Since supply chain cuts across numerous functional areas such as procurement, production scheduling, inventory management, warehousing, information technology, transportation, accounting, and other functions, with a network of alliances and partnerships with channel members, it is of strategic importance to the organization.

5.2 Conclusion

59

Significant innovations in transportation and information technologies are propelling channels and supply chain networks into a future of further cost and time efficiencies and competitive advantage with further customer satisfaction. The selection and organization structure of channel members represent corporate strategic opportunities. These channel members give tremendous value to customers, often more than what manufacturers offer. However, these members are often forgotten, neglected, or not given enough support by supply chain management aficionados. McVey (1960, p. 65) summarizes well their vital and strategic importance in market distribution: The middleman is not a hired link in a chain forged by the manufacturer but rather an independent market. As he grows and builds a following, he may find that his prestige in his market is greater than that of the suppliers whose goods he sells. In some cases, his local strength is so great that a manufacturer is virtually unable to tap that market, except through him. In such a case, the manufacturer can have no channel policy with respect to that market.

There is a need to include intermediaries in the management of marketing channels through reward programs, similar to what is done in consumer marketing. These programs are varied and are of many types. They can be monetary rewards, alliances, contracts, cooperation, and so forth, and they are not limited to just marketing but can involve all functional areas of business including joint ventures, venture capital, business loans, working capital, and so forth. Such programs can be used to select, motivate, reward, coordinate, evaluate, control, and even eliminate members of the value chain. These programs provide greater interdependence (business links) with all members of the interorganizational channel network. Channel research now falls mainly into the supply chain domain. Even channel decisions are based on the availability of a supply chain network that integrates key cost and benefit components into a strategic direction. What was left of marketing channel research in the past has been taken over by supply chain. Even principles of marketing textbooks are adding supply chain chapters and using a supply chain framework, with chapters labeled “Marketing Channels” and “Supply Chains.” The term marketing channels is not used as much today in business other than to describe the supply chain business model. Much of the historical conceptualization of marketing channels, and distribution in general, now falls under the activities associated with supply chains, as if SCM is rewriting marketing history. Our historical analysis answers the question about the future of marketing channels in marketing. This domain of marketing has moved into the domain of supply chain management. Academically, marketing and supply chain now have different conferences and journals, and seek answers to research questions that are different, with dissimilar research methods. Unlike consumer-focused and behaviorally oriented marketing management, supply chain management is solving real, practical business problems with a cost-effective consumer focus. Marketing management is preoccupied with obtaining sales (demand) by focusing on the psychological behavior of consumers and decision making, along with issues dealing with branding, advertising, social media, etc. Marketing management (i.e., mainstream academic marketing) is reducing itself to being an influence and persuasion technology, mainly subservient to the

60

5 Conclusion: Marketing Education and the Future

needs and whims of supply chain management. Philip Kotler, Richard Bagozzi, and others positioned “marketing as exchange” and marketing as a behavioral science focused on facilitating consumer transactions. Supply chain management felt “casted out” of marketing as marketing became more and more focused on studying consumer behavior. Mainstream marketing now targets decisions mostly related to retail consumers. Robust issues related to integrating strategic decisions associated with operations, procurement, and logistics fall outside marketing management interests. Marketing channels within the marketing discipline is dead. Long live marketing channels as a part of the network of supply chain partners! We do not want to end our discussion on such a negative note, with the inevitable demise of the study of marketing channels within academic marketing. There is too much at stake for the marketing discipline to abandon its historical link to market distribution. There is still an opportunity for academic marketing to engage in scholarly research to integrate supply-side supply chain with demand-side consumer engagement. To reintegrate marketing channels with SCM, perhaps we need to go back to our roots. We need a more modern version of the three schools of marketing thought to comply with our modern high-technology economy. The commodity, functional, and institutional schools provided us with a descriptive analysis of the nature and scope of the distribution structure of the country. Converse (1936, pp. 4–5) succinctly summarized these three methods of studying market distribution. Shaw and Jones (2005) referred to Converse’s three methods as schools of marketing thought, namely the functional, institutional and commodity schools, among other schools they presented. Surprisingly, they failed to recognize logistics as a legitimate school of marketing thought, despite the fact that logistics—marketing’s supply side—is intertwined and interrelated with these three schools. After all, all schools of marketing thought need not be separate and independent. We could even argue that logistics is subsumed in these three schools of market distribution. These schools of thought gave us a much-needed taxonomy of the types of economic participants responsible for market distribution and what they actually did. The ongoing distribution revolution, aided by the internet and information technologies, has introduced new channel members that have altered the market structure and the operations of organizations engaged in distribution. The roles played by channel members of all types have evolved with the times, and the study of marketing channels deserves, more than ever, its rightful place in academic marketing. However, with mainstream marketing focused so much on the ultimate consumer, academic marketing has neglected marketing channels and the ever-changing interorganizational network arrangements among channel members required to distribute goods in our ever-changing complex market economy. Bartels (1974) warned us of the identity crisis in marketing caused by too much emphasis on consumer research. He again repeated his concern when he argued that marketing and distribution are not separate domains, similar to what Shaw (1912) had presented at the beginning of the twentieth century (Bartels 1976). A more balanced teaching and research focus is needed in the marketing curriculum. Given that marketing and SCM cannot be treated separately, it behooves academic marketing to reconnect marketing channels

5.2 Conclusion

61

with SCM to allow channel members to reclaim their rightful cooperative link with supply chain members. Marketing channels and supply networks could benefit from systems thinking that integrates supply and demand. Building a theory of markets to develop a real world understanding that corresponds to dramatic changes that are disrupting traditional marketing channels is needed to advance knowledge. A systems approach could overcome static perspectives and a focus on fragmented developments that result in silos of knowledge. Systems theory has the philosophy that from the parts, to the whole, and from situations, to a web of relationships. All marketing activities should be viewed as a complex system (whole) that is emerging and changing and that cannot be understood by studying the parts in isolation (Vargo et al. 2017). The focus of marketing on demand stimulation and the focus of supply chain on procurement, operations, and logistics independently do not provide holistic understanding of marketing as a system of buyers and sellers. Both supply and demand need to be seen as parts of a whole to overcome the current fragmentation of the marketing discipline. This approach could result in building a hierarchy of marketing systems based on supply and demand. Seeing marketing channels and supply chain networks from a systems perspective could aggregate the two for better understanding of the overall macromarketing system (El-Ansary et al. 2018). There is an opportunity for marketing to advance as an integrated system to achieve success. Finally, it is hoped that this monograph encourages others to do more historical research on marketing channels and supply chain networks. Most historical research on this topic has been fragmented. We know of no other historical research that has attempted to trace channel developments over this time period. Our limitations relate to accessibility of information and the accuracy of websites and of those that recorded historical facts. In tracking this period of time, we could only do snapshots of events and did not include many academic and business developments that would contribute to a better understanding of channel development. Since far too many in the academic community know little about the historical development of these important topics, we hope this monograph provides a compelling case for further historical research in marketing channels and supply chain networks.

References

Albion R (1939) The rise of New York port. Charles Scribner’s Sons, New York Alderson W (1950) Marketing efficiency and the principle of postponement. Cost Profit Outlook 3(4):15–18 Alderson W (1957) Market behavior and executive action. Richard D. Irwin, Homewood, IL Arceneaux N (2007) Department store and the origins of American broadcasting 1910–1931. Dissertation, University of Georgia Armstrong G, Kotler P (2016) Marketing: an introduction, 13th edn. Pearson Asher L, Neal E (1942) Send no money. Argus Books, Chicago Barmash I (1981) More than they bargained for the rise and fall of Korvettes. Lebhar-Friedman Books/Chain Store Publishing Corporation, New York Bartels R (1963) Comparative marketing: wholesaling in fifteen countries. Richard D. Irwin, Homewood, IL Bartels R (1974) The identity crisis in marketing. J Mktg 38(October):73–76 Bartels R (1976) Marketing and distribution are not separate. Intl J Phys Distr 7(1):22–29 Beckman TN (1926) Wholesaling. Ronald Press Co, New York (rev. edn. 1937, with Engle NH, as Wholesaling: principles and practice, 2nd edn 1949; 3rd edn 1959, with Buzzell RD) Beckman T, Davidson W (1962) Marketing, 6th edn. Ronald Press, New York Beckman T, Nolan H (1938) The chain store problem. McGraw-Hill, New York Bell M (1956) The cooperative department store: an economic analysis of the attempt to establish a chain of cooperative department stores as visualized by Edward A. Filene. Unpublished dissertation, University of Pennsylvania Boorstin D (1973) A. Montgomery Ward’s mail order business. Chic Hist 2(Spring–Summer):142– 152 Brown M, Applebaum W, Salmon W (1970) Strategy problems of mass retailers and wholesalers. Richard D. Irwin, Homewood, IL Bucklin L (1965) Postponement, speculation and the structure of distribution channels. J Mktg Res 2(February):26–31 Chandler AD (1965) The railroads: pioneers in modern corporate management. Bus Hist Rev 39(1):16–40 Chandler AD Jr (1977) The visible hand the managerial revolution in American business. Harvard University Press, Cambridge Chandler A, Tedlow R (1985) The coming of managerial capitalism: a casebook on the history of American economic institutions. Irwin, Homewood, IL Christopher M (1980–81) Logistics and the national economy, vol 6. Cranfield Institute Press, England

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 R. D. Tamilia et al., Marketing Channels and Supply Chain Networks in North America, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-44870-7

63

64

References

Converse P (1936) Essentials of distribution. Prentice-Hall, New York Cowen D (2014) The deadly life of logistics. University of Minnesota Press, Minneapolis Cox R, Goodman C, Fichandler T (1965) Distribution in a high level economy. Prentice Hall, Englewood Cliffs, NJ Craig S (2006) The more they listen the more they buy, radio and the modernizing of rural America. Ag Hist 80(Winter No. 1):1–16 Davidson W (1961) Marketing channels and institutions. Bus Horiz 4(Feb):84–90 Davidson W (1970) Changes in distributives institutions. J Mktg 34(Jan No. 1):7–10 Day G (1992) Marketing’s contribution to the strategy dialogue. JAMS 20(4):323–329 DeBoer D (2000) Piggyback and containers: a history of rail intermodal on America’s steel highways. Golden West Books, San Marino, CA Depew CM (ed) (1895) One hundred years of American commerce. DO Haynes. Dickerson OD (1961) Reviewed works: higher education for business by Robert Aaron Gordon, James Edwin Howell; the education of American businessmen by Frank C. Pierson. J Insur 28(Dec No. 4):105–116 Ditchett SH (1923) Eaton’s of Canada: a unique institution of extraordinary magnitude. Dry Goods Economist, New York (1923) (Federal Printing Company, New York) Dixon D (1982) The historical origins of the channel concept. In: Harvey M, Lusch R (eds) Marketing channels: domestic and international perspectives. Center for Economic and Management Research, School of Business Administration, The University of Oklahoma, Norman, OK, pp 146–152 Donovan A (2000) Intermodal transportation in historical perspectives. Trans Law J 27(3):317–344 Doody A, Davidson WR (1967) Next revolution in retailing. Hvd Bus Rev 45(May–June):5, 6, 8, 11, 12, 14, 16, 20, 188 Drew-Bear R (1970) Mass merchandising: revolution and evolution. Fairchild Publications, New York Drucker P (1954) The Sears story. In: The practice of management. Harper and Row, New York, pp 27–33 El-Ansary A, Shaw EH, Lazer W (2018) Marketing’s identity crisis: insights from the history of marketing thought. AMS Rev 8(1–2):5–17. https://doi.org/10.1007/s13162-017-0102-y Eskilson S (2000) Sears beautiful. Chicago Hist 29(Fall No. 2):26–43 Ferrell OC, Hair JH, Marshall GW, Tamilia RD (2015) Understanding the history of marketing education to improve classroom instruction. Mktg Ed Rev 25(Summer No. 2):159–175 Fitzell P (1998) Private labels in North America past, present and future. Global Books, LLC, New York Fuller W (1964) RFD the changing face of rural America. Indiana Press, Bloomington Gehr J (2019) Behind the hidden complexity of E-commerce fulfillment. In: Chain store age. www.chainstoreage.com/technology/behind-the-hidden-complexity-of-e-commercefulfillment. Accessed 11 June 2019 Geist JF (1983) Arcades: the history of a building type. MIT Press, Cambridge George M, Freeling A, Court D (1994) Reinventing the marketing organization. McKinsey Q 4(Autumn):43–55 Harris W, Stock J (1985) The re-integration of marketing and distribution, a historical and future perspective. In: Hollander S, Nevett T (eds) Marketing in the long run, CHARM proceedings, Michigan State University, East Lansing, pp 420–440 Hartley R (1986) Marketing mistakes, 3rd edn. Wiley, New York Higginson M, Nadeau MC, Rajgopal K (2019) Blockchain’s Occam problem. McKinsey & Company. www.mckinsey.com/financial-servives/our-insights/blockchains-occam-problem Hill HC (1923) The development of Chicago as a center of the meat packing industry. Mississippi Valley Hist Rev 10(Dec. No. 3):253–273 Hochstein B (2018) core concepts notebook to accompany principles of marketing. McGraw-Hill Education 2020

References

65

Hollander SC (1959) Explorations in retailing. East Lansing, Bureau of Business and Economic Research, Michigan State University, East Lansing, MI Hollander S, Marple G (1960) Henry Ford: inventor of the supermarket? Marketing and transportation paper no. 9, Bureau of Business and Economic Research, Graduate School of Business Administration, Michigan State University, East Lansing, MI Hult GTM, Ketchen DJ (2017) Disruptive marketing strategy. AMS Rev 7(1–2):20–25 Hungerford E (1922) The romance of a great store. Robert M. McBride & Co., New York Ingene C, Hee K (2014) Retail evolution: historical facts, theoretical logic and critical thinking. J Hist Res Mktg 6(2):279–299 Jack A (1957) The channels of distribution for an innovation: the sewing machine industry in America, 1860–1865. Explor Entrep Hist 9(February):113–141 Jones E (1905) The manufacturer and the domesticated market. Ann Am Acad Polit Soc Sci 25(January):1–20 Jones C (2019) Amazon and Rite Aid to offer package pickup. USA Today Money 28 June 2019:2B King R, Phumpiu P (1996) Reengineering the food supply chain: the ECR initiative in the grocery industry. Am J Ag Econ 78(December):1181–1186 Kotler P (1967) Marketing management: analysis, planning and control. Prentice-Hall Kotler P, Armstrong G (2013) Principles of marketing, 15th edn. Prentice Hall, New York Kotler P, Armstrong G (2018) Principles of marketing, 17th edn. Pearson Education Inc., New York, NY Kozlenkova I, Hult GT, Lund D, Mena J, Kekec P (2015) The role of marketing channels in supply chain management. J Retail 91(4):586–609 Kujovich MY (1970) The refrigerator car and the growth of the American dressed beef industry. Bus Hist Rev 44(Winter No. 4):470–482 Kurt Salmon Associates, Inc (1993) Efficiency consumer response: enhancing consumer value in the grocery industry. The Research Department, Food Marketing Institute, Washington, DC Lebhar G (1963) Chain stores in America, 1859–1950, 3rd edn. Chain Store Publishing Corp, New York Lerner A (1949) The Myth of the Parasitic Middleman. Commentary 8(July):45–51. Levinson M (2006) The box: how the shipping container made the world smaller and the world economy bigger. Princeton University Press, Princeton, NJ Levy M, Weitz B, Grewal D (2018) Retailing management, 10th edn. McGraw-Hill, New York Lewis HT, Culliton JW, Steel JD (1956) The role of air freight in physical distribution. Division of Research, Graduate School of Business Administration, Harvard University, Boston Lichtenstein N (ed) (2006) Wal-Mart: the face of twenty-first century capitalism. New Press, London Livesay H, Porter G (1972) The financial role of merchants in the development of U.S. manufacturing, 1815–1860. Explor Econ Hist 9:63–87 MacPherson I (2017) Patterns, limitations and associations: the consumer co-operative movement in Canada, 1828 to the present. In: Hilson M, Neunsinger S, Patmore G (eds) A global history of consumer co-operation since 1850: movements and businesses. Brill Publishing, Leiden Netherlands, pp 431–455 Mallen B (1972) Just how big a role does marketing and distribution play in the Canadian economy? Bus Q 37(Autumn):53–60 Mallen B (1973) Functional spin-off: a key to anticipating change in distribution structure. J Mktg 37(July):18–25 Mallen B (1976) Understanding marketing channels. Eur J Mktg 10(2):83–104 Marcosson IF (1945) Wherever men trade: the romance of the cash register. Dodd, Mead and Co., New York McCammon B (1970) Perspectives for distribution programming. In: Bucklin L (ed) Vertical marketing systems. Scott, Foresman and Company, Glenview, IL, pp 32–51 McCammon B, Bates A (1965) The emergence and growth of contractually integrated channels in the American economy. In: Bennett P (ed) Marketing and economic development. American Marketing Association, Chicago, pp 465–515

66

References

McCarthy EJ (1960) Basic marketing: a managerial approach. R.D. Irwin, Homewood, IL McVey P (1960) Are channels of distribution what the textbooks say? J Mktg 24(January):61–65 Miller R (2018) Walmart is betting on the blockchain to improve food safety. https://techcrunch. com/2018/09/24/walmart-is-betting-on-the-blockchain-to-improve-food-safety. Accessed 28 Jan 2019 Mirsch T, Lehrer C, Jung R (2016) Channel integration towards omnichannel management: a literature review. www.alexandria.unisg.ch/248768/1/CHANNEL%20INTEGRATION% 20TOWARDS%20OMNICHANNEL%20MANAGEMENT%20A%20LITERATURE% 20REVIEW.pdf. Accessed 10 April 2019 National Marketing Review (1935) Definition of marketing terms. Consolidated Report of the Committee on Definitions 1(Autumn No. 2):148–166 Nath P, Mahajan V (2011) Marketing in the C-suite: a study of chief marketing officer power in firms’ top management. J Mktg 75(January No. 1):60–77 Neff J (2009) Nielsen and IRI team up to use single pool of panelists. http://adage.com/print/138652. Accessed 15 Nov 2018 Nystrom PH (1913) The economics of retailing (1915; 2nd edn 1919; 3rd edn 1930, vols 1 and 2; rev edn, 1932, vol 2 only; 4th edn 1937 as Retail Store Operation. Ronald Press Co., New York) O’Connor J, Galvin E (1997) Marketing and information technology. Pitman Publishing, London Parker F (1937) Consumers’ cooperation in the United States. Am Acad Pol Soc Sci 191(May):91– 102 Patmore G, Balnave N (2018) Controlling consumption, A comparative history of Rochdale Consumer Cooperatives in Australia and the United States. In: Patmore G, Stromquist S (eds) Frontiers of labor: comparative histories of the United States and Australia. University of Illinois Press, Urbana, pp 266–286 Phillips C (1937) The chain store in the United States and Canada. Am Econ Rev 27(March No. 1):87–95 Porter G (1980) Marketing. In: Porter G (ed) Encyclopedia of American economic history, vol 1. Charles Scribner’s Sons, New York, pp 386–396 Porter G, Livesay HC (1971) Merchants and manufacturers, studies in the changing structure of nineteenth century marketing. The Johns Hopkins Press, Baltimore, MD Resseguie H (1964) A. T. Stewart’s marble palace-the cradle of the department store. N Y Hist Soc Q 48:131–162 Resseguie H (1965) Alexander Turney Stewart and the development of the department store, 1823– 1876. Bus Hist Rev 39(Autumn No. 3):301–322 Richey RG (2001) The civil war, the supply chain, and creative destruction in the U.S. South. In: Milestones in marketing history, CHARM proceedings. Duke University, Durham, North Carolina, pp 128–136 Rosenbloom B (2013) Marketing channels: a management view, 8th edn. South-Western, Mason, OH Rosenwald J (1928) Mail-order merchandising. In: Wile FW (ed) A century of industrial progress. Doubleday, Doran, New York, pp 474–485 Schofield MP (1966) The Cleveland Arcade. J Soc Arch Hist 25(December):281–291 Schragger RC (2005) The anti-chain store movement, localist ideology, and the remnants of the progressive constitution, 1920–1940. Iowa Law Rev 90(March No. 3):1011–1094 Scroop D (2008) The anti-chain store movement and the politics of consumption. Am Q 60(4):925– 949 Seid M (2019) The history of Franchising. A web site which provides additional management information on franchising not contained in his book. https://www.thebalancesmb.com/the-history-offranchising-1350455. Accessed 6 June 2019 Seid M, Mazero J (2017) Franchise management for dummies. Wiley, Hoboken, NJ Shapiro SJ, Doody AF eds. (1968) Readings in the History of American Marketing; Settlement to Civil War. Richard D. Irwin, Homewood, IL Shaw A (1912) Some problems in market distribution. Q J Econ 26(August):703–765

References

67

Shaw A (1916) An approach to business problems. Harvard University Press, Harvard University Shaw E (1994) The utility of the four utilities concept. In: Fullerton R (ed) Explorations in the history of marketing, research in marketing, Supplement 6. JAI Press, Greenwich, CT, pp 47–66 Shaw E, Jones DGB (2005) A history of schools of marketing thought. Mark Theory 5(3):181–239 Spann E (1981) The new metropolis New York City, 1840–1857. Columbia University Press Sparling S (1906) Introduction to business organization. Macmillan, New York St. Clair N (2015) Chief marketing officer is the most dangerous title around. https://www.forbes. com/sites/neilstclair/2015/03/03/chief-marketing-officer-is-the-most-dangerous-title-around/# 33eae00a296e Stern L (1988) Reflections on channels research. J Retail 64(Spring No. 1):1–4 Stern L, El-Ansary A (1977) Marketing channels. Prentice-Hall, Englewood Cliffs, NJ Stern L, Weitz B (1997) The revolution in distribution: challenges and opportunities. Long Range Plan 30(6):823–829 Stevenson KC, Jandl HW (1986) Houses by Mail: a guide to houses from Sears, Roebuck and Company. Preservation Press, Washington Strasser S (1989) Satisfaction guaranteed: the making of the American mass market. Pantheon Books, New York Svensson G (2001) The other half of marketing, reintegrated? In: Witkowski T (ed) Milestones in marketing history, Proceedings of the 10th conference on historical analysis and research in marketing (CHARM). Association for Historical Research in Marketing, Long Beach, CA, pp 176–184 Svensson G (2002) Efficient consumer response—its origin and evolution in the history of marketing. Manag Decis 40(5/6):508–519 Tamilia RD (2003) An historical overview of the department store, one of marketing’s greatest innovations, 1850–1930. In: Redmond W (ed) Marketing to diverse cultures. In: Proceedings of the 28th annual macromarketing conference, August, Bowling Green State University, Bowling Green, OH, pp 44–60 Tamilia RD (2016) History of channels of distribution. In: Jones DGB, Tadajewski M (eds) The Routledge companion to marketing history. Routledge, London and New York, pp 173–201 Tamilia RD (2019) History of channels of distribution and their evolution in marketing thought. In: Larsen V (ed) Exploring identity building: Marketing history as an instrument of transformation. In: Proceedings of the conference on historical research in marketing, vol. 19 Ottawa, Ontario, pp 120–138 Tamilia RD, Reid S (2007) Technological innovation and the rise of the department store in the 19th century. Intl J Tech Mktg 2(2):110–139 Tedlow R (1990) New and improved, the story of mass marketing in America. Basic Books, New York Tosdal H (1915) Price maintenance in the book trade. Q J Econ 30(November No. 1):86–109 Tosdal H (1918) Price maintenance. Am Econ Rev 8(March No. 1):28–47 Vargo SL, Koskeela-Huotari K, Baron S, Edvardsson B, Reynoso J, Colurcio M (2017) A systems perspective on markets—toward a research agenda. J Bus Res. https://doi.org/10.2016/j.busres. 2017.03.011 Accessed 15 Jan 2017 Volpe R, Lavoie N (2008) The effect of Wal-Mart Supercenters on grocery prices in New England. Rev of Ag Econ 30(Spring No. 1):4–26 Weld LDH (1916) The marketing of farm products. MacMillan, New York White WL (1938) Topics for marketing research. J Mark 3(2):161–165 Whiteley AS (1936) Retail trade in the United States and Canada. J Polit Econ 44(February No. 1):54–69 Wikipedia (2019) https://en.wikipedia.org/wiki/Assembly_line. Accessed 6 June 2019 Wilbur JRH (1962) H.H. Stevens and R.B. Bennett, 1930–34. Can Hist Rev 43(March No. 1):1–16 Wren DA, Greenwood RG (1998) Business leaders: a historical sketch of Richard W. Sears. J Leadship Organ Stud 5(2):40–49