<<

. 15
( 39 .)



>>

soundest business policy to be constantly creating conditions such that
any man with the necessary capacity can advance to millionairedom
within the organization as readily as if he were in business for himself
alone”if not, perhaps, more readily.”68
Walgreen™s position”you worked for it, you invested it, you deserve
it!”might not seem exceptional to anyone unfamiliar with the world of
salespeople and sales managers and the commissions they haggle over.
Most seasoned salespeople can tell all-too-familiar horror stories that go
like this: They achieve so much under their companys™ incentive plans
that their boss feels their bonuses have grown too big to bear, prompting
the boss to slash salespeople™s pay to get their income “in line” with others
who achieved far less and to restructure the pay plan so it can™t happen
again. This happens every day in the car business alone.
So, although Walgreen should not be praised for simply honoring his
word, it™s worth noting that Walgreens™ policy of celebrating, not punish-
ing, such successes, distinguishing the company from many others that
were not so trustworthy.




TLFeBOOK
88 america™s corner s tore

In the next installment on Walgreens for Chain Store Review (August
1929), the publication laid out Walgreens™ marketing strategy. In it,
Charles maintained that the most effective ads were simply “newspaper
copy packed with facts about merchandise and prices that will bring people
into the stores.”69
Despite Walgreen™s almost religious belief in the power of good cus-
tomer service, Walgreen advised against bragging about it: “Do not talk
about service; let it speak for itself. Give the service, to be sure, and strive
to make it better than any competitor™s, but let the customers discover it
themselves.”70
Even the magic of Walgreen™s famed two-minute drill, which he and
Caleb Danner conducted in the first store™s first years to make a splash,
would be spoiled if it was officially promoted by the company. Doing the
drill was a great way to spread the word about Walgreens™ excellent serv-
ice, he explained, but advertising it would raise expectations to impossible
levels and create negative publicity whenever they fell short. “Let the ad-
vertising copy concern itself with getting customers into the stores,” he
cautioned, “not to be served in just a certain way, but to get the merchan-
dise they want at a proper price”perhaps an advantageous price. Talk to
the main issue.”71
Walgreens did just that, to the tune of $84,000 in 1924, $905,000 in
1929 (the year the preceding story was published), and $1.093 million in
1933, in the depths of the Depression. Walgreen™s faith in advertising
was absolute.



chain fight

Beware of what you wish for, as they say, because you just might get it.
With Walgreens™ increasingly public success, it was inevitable that detrac-
tors would emerge to take their shots.
Walgreens was not a juicy target then, nor is it now; but if you were




TLFeBOOK
the s tar t of something special 89

looking for something to criticize in the 1920s, you would probably do
what Walgreens™ competition did: argue that chains of stores were evil.
Antichain proponents, then and now, have made several negative ar-
guments”including quality of community life, variety of consumer
choices, and the like”but their main point is simply that chain stores
are bad for the country because independent stores can™t compete
against them.
In the late 1920s, chain store opponents”consisting primarily of inde-
pendent businesspeople”urged their state and federal legislators to con-
tain the chains™ growth. They found sympathetic listeners in Iowa Senator
Smith Brookhart and Louisiana Governor Huey Long, among others.
When several states tried to impose special taxes against chain stores,
however, the courts quickly declared them unconstitutional. These rulings
only seemed to anger Senator Brookhart, who then prodded the Federal
Trade Commission (FTC) to investigate the chains to determine if the
critics™ concerns were well-founded.
In 1929, a year after the FTC started its investigation that would last six
long years before being completed in 1934, Walgreen decided to take the
initiative and wrote an essay titled “There™s No Monopoly in Selling” for
Chain Store Review to make one chain™s case.
Walgreen started by assuring independents that the U.S. economy had
enough space for all merchants to survive. “There is, and will be, ample
room for the live, progressive, independent merchant using modern meth-
ods in location, the selection of stock, arrangement of fixtures, training
and personnel, and cooperation with other independents to mutual ad-
vantage,” he wrote. “The wide-awake independent merchant who oper-
ates his business in a scientific manner need have no fear of being forced
out of congested retail trade areas.”72
The independent, Walgreen argued, had considerable advantages over
the chain operations in knowing the local market, providing a personal
touch, maintaining closer supervision of his store, and conducting more
detailed stock control. Despite these edges, Walgreen wrote, “We have




TLFeBOOK
90 america™s corner s tore

often found when buying out an insolvent business that the failure resulted
first and last from carrying dead stock rather than any difference in prices
of merchandise.” In other words, James Ward™s carefully crafted purchasing
strategy gave Walgreens the upper hand over those stores”chain or oth-
erwise”who bought too much and found themselves holding the bag later
on. And, just to underscore his belief that the best man usually wins in
U.S. capitalism, Walgreen couldn™t resist saying, “No successful chain has
ever been a dowdy, hodgepodge store. Invariably, there has been order,
cleanliness, atmosphere.”73
Walgreen believed that customers didn™t care if a store was independent
or part of a chain, only if it looked clean and sharp, with good selection
and excellent service”an argument with which most customers would
agree, in any era. And, it goes without saying that even the world™s biggest
chains started out as single stores”neat, well-run independents. They
didn™t become bigger by being bad and unpopular.
In 1934, after the FTC spent six years and $1 million at Senator
Brookhart™s behest to confirm the many ills he believed chain operations
beset on the country, the report stated that the investigators found just the
opposite to be true.

If ability to undersell based on greater efficiency or on elimination of
credit and delivery costs is destroyed by [special] taxation, it is the
consuming public which will really pay the tax and not the chains.
To tax out of existence the advantages of chain stores over competi-
tiors is to tax out of existence the advantages which the consuming
public has found in patronizing them, with a consequent addition to
the cost of living for that section of the public.74

Despite the FTC™s rather sweeping dismissal of the chain opponents™ ar-
guments, 28 states tried to assess special taxes on chains through out the
Depression anyway; but all of them failed in the legislature, in the voting
booth, or, most commonly, in the courts.




TLFeBOOK
the s tar t of something special 91

Walgreens was not deterred. Pop Coulson™s famous chocolate malted
milk shake combined with the modern marketing methods and old-
fashioned morals that Walgreens instilled in each store through its grow-
ing core of True Believers stimulated the most ambitious expansion in
Walgreens™ century-long history.
Walgreens started the 1920s with 20 stores and closed it by entering
Utah, Idaho, Wyoming, Nevada, and California when it bought up the 28
stores of the Schramm-Johnson chain, thereby bringing the company™s
total holdings to 397 stores in 87 cities across the country”an almost
1,000 percent increase in the number of stores in just 10 years. Revenues
and profits soared with the growth. In 1923, the company reaped $3.6 mil-
lion in sales and $192,000 in profit, creating a profit margin of 5.3 percent.
In 1929, Walgreens brought in $47 million in revenue”a 13-fold increase
from just six years earlier”and $4 million in profit, for a profit margin of
8.5 percent. The young Robert Knight was right: One of the chain™s most
impressive accomplishments was increasing the yield per store, even as it
spread across the country, establishing the 1920s as one of the most suc-
cessful decades of the company™s long history, any way you slice it.
As the decade entered its final months, John Nickerson and Company,
a prominent New York investment house, issued a report titled A Chronicle
of Progress, in which it discussed, among other things, the virtues of
Walgreens™ management and, by extension, its stock.

Among all the chain stores of the country, the one which we regard
as outstanding at this time as an attractive medium for investment is
the Walgreen Co. It operates in the most favorable of all the major
chain store fields and has a management [team] which has proved it-
self competent and experienced. . . . As chains go, it is compara-
tively young, but already it owns nearly ten percent of all chain
drugstores of the country. Its growth has been little short of phe-
nomenal, exceeding even the rate of growth of most outstanding
chains in other fields.75




TLFeBOOK
92 america™s corner s tore

The Nickerson report proceeded to explain Walgreens™ success, citing
many of the same attributes Robert Knight had noticed four years earlier,
including carefully selected locations, clean stores, attractive displays,
powerful marketing, and, not least, an unusual dedication to customer
service”the exact same basic formula the company follows today.
Interestingly, the report went out of its way to make special mention of
two aspects of the Walgreens operation that didn™t have a direct impact on
the bottom line”employee relations and the pharmacy division”but
were vital to the chain™s success: “Without the loyal cooperation of its en-
tire personnel,” the report said, “particularly those who are in constant
touch with the public, it would not be possible for the company to show
the successive annual increases in volume of business.”76
The Nickerson people were sharp enough to recognize the important
role the pharmacy played in fostering customer trust and loyalty:
“Particular attention has always been devoted to the prescription depart-
ment, and the company™s high reputation in this regard has been a large
factor in the successful building up of the business.”77
It is a bit surprising that a financial house would notice the pharmacy
division, as it only brought in a few small percentage points of revenue
each year”just a tenth of what the company made from the food service
division alone or from tobacco sales. But the Nickerson researchers recog-
nized that the professional reputation of the division separated Walgreens
from the thousands of other drugstores on street corners across the coun-
try that had untrained or unscrupulous people behind the counter selling
snake oil for top dollar. Although the soda fountain might have been the
friendly face Walgreens showed the public, the pharmacy department was
its soul, the repository of the bedrock values of honesty, integrity, and cus-
tomer care when it mattered most.


the good life

Having already succeeded beyond his wildest dreams, Charles was now
well-prepared to make good on the promises he™d made to Myrtle early in
their marriage.




TLFeBOOK
the s tar t of something special 93

Years before, he had told her that once they had $20,000 in the bank
they would buy a nice place in the country. In March 1929, just months
before the stock market crash, Charles purchased a gorgeous 15-acre tract
of land outside Dixon, his hometown. The lot was heavily wooded, with a
clearing on the bluffs overlooking the Rock River.
On this clearing stood a log cabin, a large barn, a few smaller buildings,
and all that remained of a once glorious mansion in woeful disrepair, a sort
of postbellum “Tara.” Almost a century earlier, about the time the Black
Hawk War was fought in the same woods and fields, a man named
Alexander Charters had bought and named the estate “Hazelwood,” in
honor of a treasured park in Belfast, Northern Ireland, his former home.
Charters had opened Hazelwood to Abe Lincoln, Stephen A. Douglas,
and other dignitaries of the day until his death in 1878, after which the
property gradually fell apart due to neglect.
Walgreen fulfilled one other promise, too. On that brisk winter evening
22 years earlier, after the young couple had walked down the block to drop
the final payment of the loan for his first store into the mail box, he had
turned to his wife and whispered, “One of these days, I™ll buy you a fur
coat, Myrtle.” Years later, Charles Walgreen provided his hard-working
wife with everything she wanted.
The Walgreens™ dreams had come true.
It might have taken Walgreen 15 years to realize he was a pharmacist,
but it only took 20 more to make Walgreens one of the largest drugstore
chains in the world. The Walgreen Way was spreading fast; and thanks to
its foundation of bedrock values, it was built to last.




TLFeBOOK
TLFeBOOK
3
CHAPTER




nothing
to fear:
1929“1945




facing fear itself


<<

. 15
( 39 .)



>>