Rosenwald and Wood - Giants of American Industry

Codger_64

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First of all, I suppose I should explain what the connection with this tome is with Imperial Schrade, whose history and principal leaders I have written about at some length. As the demographics and buying habits of the American public shifted dramatically from the late 1800's through the mid 1900's (and, as you are aware, continued to do so from the mid 1900's through the turn of this new century), it took some innovative thinking, calculated risk-taking and marketing insight to stay not only on top of the markets and meet the demands for new products, but to actually lead the way through recession, depression, war, recoveries, and boom times. These remarkable leadership and organizational skills come naturally to a select few men. Still more rare are the men who have the ability to far excel all competition and dominate a particular industry while maintaining a "code of honor", going beyond merely giving their markets what will sell at whatever the costs, and extending to philanthropy, fair treatment of workers, vendors and customers. Naturally, this leads to involvement in social issues and thus into politics.

In my past writings, I have given examples of these traits involving Albert Baer, his rise from stockboy to the owner and director of the world's largest cutlery corporation, his philanthropy (Co-founder of the International Heart Association) and business acumen. Attendant with the rise of the Baer holdings, and chiefly responsible for providing him with a very important market outlet for his goods, inspiring him to expand his lines well beyond the pocketknives with which he started his eventual cutlery empire, was Sears Roebuck & Company. Baer himself, by my research, was greatly inspired and influenced by his early business mentors, grandfather Henry Bodenheim and family friend.. former partner of Bodenheim and eventual employer... Adolph Kastor (much to the chagrin of Kastor's two sons, Robert and Alfred).

So, along with researching old Sears Roebuck & Co. catalogs to determine who made which knives and when, I've also been researching the company itself. Unlike the Imperial Schrade Corporation, much has been written over the years regarding Sears, it's history and leaders. Reading about Sears history with ISC history in mind, it is easy for me to picture the influence the company's leaders had not only on our evolving culture, but upon Albert Baer's own philosophy and principals. If I had to boil down my gleanings from the study of both enterprises and their current situations, I would have to say that the loss of not only the founding giants, but the corporate memory of their philosophies and ability to read and adjust to markets led to their downfall. As Sears went through a succession of so-so leadership after the retirement and death of General Robert E. Wood and has now found itself merged with their old nemesis, Kresge (K-Mart), ISC after the passing of Baer (also Camillus) found itself floundering and unable to keep up with a changing market while moving into the new century. Sears never found another Rosenwald or Wood. ISC/Camillus never found another Baer.

Kudos to Gardiner and Furgal for keeping the ship from hitting the sand as long as they did, however. Both worked long and hard trying to fill some mighty big shoes, but in the end despite divesting the companies of outside holdings and unprofitable enterprises, the companies demises were only prolonged. They knew manufacturing, but not forward vision of the market, and facing disinterested owners, did not have the power to command. Likewise with Sears, once the world's largest merchant with the world's largest store.

I'll continue this an give some insight into Sears history, and just who Rosenwald and Wood were if there is sufficient interest.

Michael
 
Your research and findings are very informative. I like knowing more about Sears, company histories and any ISC associations and connections. Please carry on.
 
As I mentioned, much has been written about Sears history, and anyone wanting a more full story can do their own research, beginning with Sears own online archives. Then there are at least four or five full books written on the subject from the 1930's onward. I recommend first Sears Roebuck U.S.A., The great American catalog store and how it grew, Gordon L. Weil, 1977. Most of these books are out of print, but easy enough to find. I am giving these references so as to not be accused of pulling information out of my arse, or plagiarizing preceding authors. My use of this information falls squarely under the fair use doctrine of the copyright laws and, as far as possible, I will try to note when I use exact quotes from those sources.

The beginning of Sears Roebuck & Co. is pretty well known to most people, even if only by the names of the two founders surviving to this day. Richard W. Sears was a firebrand, an innovator, but restless. I've noted him being called a "visionary" by biographers. In some ways, that was true. But in other ways, he was more akin to a snake-oil salesman. The son of a failed "49er", bitter Civil War veteran, blacksmith who tasted success and lost it all in a failed stock farm scheme, Richard Warren Sears at age 15 became the family breadwinner. He learned telegraphy and began work for the Minneapolis & St. Louis Railroad, then in St. Paul in the auditing department where he quickly became bored and was reassigned to the North Redwood station. There, his interest was piqued by shipments of watches coming from back East, and he figured a way to get a piece of that market. When a watch dealer (jewelry shop?) refused a shipment of watches, Sears stepped in and accepted the offer from the Chicago supplier and purchased the watches for $12 each. He then shipped them back down the line, selling them to other railroad agents for $14 each, and suggested they sell them for less than the price of the $25 which they sold for in stores. They sold. And he ordered more C.O.D. out of Chicago and sold those the same way, paying his accounts when he got paid. Within six months, he had netted more than $5,000. Success! Quitting the railroad, he moved to Minneapolis and founded the R.W. Sears Watch Company in 1886, and began advertising in the local paper. Success. And he moved to a more central location, Chicago. With success, came another opportunity, repairing watches. Thus he advertised for a watch repairman and enter his soon-to-be partner, Alva. C. Roebuck from Hammond Indiana.

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At first, the company was a reseller of pocketwatches, at that time a sign of urban sophistication, to rural people along the railroads. With the expansion of the railroads between major cities, farmers had the need to know the time as never before, in order to pick up ordered supplies, but more importantly in order to ship their own produce to city markets. This was the era of the farmer, with farm production increasing exponentially along with the associated rural population (in 1880, 70% of the population lived in rural areas). Attendant with the increased production from existing farms and new farms starting up, was a nearly untapped market for astute merchants. First, itenerate peddlers, then general merchants with brick-and-mortar stores answered the need. Both were quite limited in the variety and quantity of goods they could stock and sell. This niche was where Sears saw his opportunity. As his orders for watches increased through newspaper ads, he found himself behind the financial curve between reciept of payment for merchandise and payment to his vendors. Initially, his answer was to expand his offered line to include typewriters, jewelry, optical goods, and, later, phonographs, magic lanterns and motion picture machines and revolvers. In 1893 the company name was changed to Sears Roebuck & Co. Previously it had been the R.W. Sears Watch Company, and the Warren Company. in a brief few years the company was sold back and forth between Roebuck and Sears, with Roebuck finally calling it quits for good in 1895, right when the company was on the cusp of it's greatest success, though obviously heavily in debt due to Sears' "pyramiding" to meet increasing orders. He paid Roebuck $25,000 for his 33% shares. But before Roebuck's chair was cold, he brought in a new partner, Nusbaum. Aaron Nusbaum had made a fortune ($150,000) at the 1895 Chicago Columbian Exposition...selling shaved ice with flavored syrup poured over it. Sears offered him 1/2 interest in the company for $75,000. Unable to come up with the liquid cash in the alloted ten days the offer was good, Aaron Nusbaum approached his brother-in-law, a clothier dealing in men's suits, for the needed cash.

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Aaron's brother-in-law was Julius Rosenwald. Rosenwald was aware of Richard Sears. Sears had waltzed into his shop one day and ordered 50 suits if they were ready for delivery. The salesman suggested a smaller order to see if Sears could sell them. Sears already had them sold before his visit. Rosenwald was thus convinced that Sears' catalog sales was a workable business and was ready to invest. But, as it turns out, Sears already owed him a considerable sum for suits already sent, so Rosenwald didn't have to invest cash, but simply reduced Sears' debt for his and Nusbaum's shares. Nusbaum was a ruthless manager and kept the company's debts paid, though often by furlowing employees to get the needed cash. This did not sit well with Sears own business philosophy. Before long, Sears became disenchanted with Nusbaum, and gave Rosenwald an ultimatum... either you two buy me out, or you and I buy him out. The latter is what happened.

This change of management pointed a new direction for Sears Roebuck Co. WHile Sears continued to be the best connection to the marketing to rural America, and maintained control of the advertising, catalogs and product lines, it was Rosenwald who made the decisions that made the business work, developed the methods and facilities for handling the ever incresing orders to be filled. The management ideas of Sears and Rosenwald were at directly at odds when a depression hit in 1909. Sears felt that the way to survive was through constant expansion of markets and increased sales. Rosenwald's approach was to consolodate and maintain sales. His method is what worked, and profits continued to increase. Sears effectively retired around 1913, and died the following year.

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One major hurtle that mail order companies had to overcome was that of shipping to remote farms. People were much more likely to make orders from faraway places if they didn't have to make a special trip to the nearest train station to pick up their merchandise, or pay someone local to deliver it.

A partial solution was the advent of RFD, rural free delivery. Though by 1901 there were more than 76,000 post offices in the United States, it took a few more years to work out a system to deliver mail by carriers to rural areas without additional fees being charged. When that was in place, orders of small items increased. And the demand for further services wasn't far behind, so Parcel Post was initiated in 1913. Sears Roebuck and Company was it's largest user and Rosenwald had to totally reorganize the shipping department. Chicago post office likewise had to adapt, as the shipments from Sears soon hit 20,000 pieces a day.

Attendant to the rise in orders for small items, Sears expanded their offerings of "soft goods", as they were called. Pocketknives, a needed item of every farmer and his workers, were one of these product lines. From many sources we see that Wilbert branded knives were sold by Sears from 1908 through 1921. Some citations state that this branding was made almost exclusively for Sears by Empire Knife Company, but I have noted corespondence from Camillus that they also produced some Wilbert branded knives for sears up until approximately 1926. At around that time, the Kwik-Kut and Sta Sharp brandings were being introduced at the behest of Col. Thomas Dunlap, hired to oversee the expanding lines of tools and hardware, and sourced almost exclusively through Camillus (Adolph Kastor & Sons). This is where Albert Baer came into the picture developing a lasting relationship with Tom Dunlap, and thus Sears, which continued until the recent demise of Camillus.

Now back to Rosenwald and Wood.

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Mailorder sales continued to increase through the 1920's. With Rosenwald's direction, the Sears catalogs themselves changed. The former outrageous claims used by Sears were gone, as were the patent medicines. Beginning in 1909, the ultimate "hard good" was being marketed, complete "Modern Home" packages (with indoor plumbing and electrical), and also financing for those homes. The classic design of these homes and identified surviving examples is an interesting study unto itself. The depression cut deeply into catalog sales. It also spelled the end of the Sears housing sales as mortgages failed and forclosures were required.

In 1924, Rosenwald began looking for a successor as his right hand man. Unable to find the right person withing the company management, he began looking outside the company. Believing that only among the railroad executives would he find someone with the organizational skills and procedural thinking to keep Sears growing, he selected from a list Charles M. Kittle, senior vice-president of Illinois Central. To be groomed for the second in command position, he hired one of the executives of his chief mail order competitors, Montgomery Ward vice-president Robert Wood (AKA General Robert Elkington Wood).

General Wood had a background that spoke volumes for his organizational talent and record of success. He was, like Richard Sears, from the Midwest. A 1900 graduate of West Point, he served in the Philippine insurrection with distinction, then returned to West point to teach. Dissatisfied with the staid atmosphere of academics, he learned of the construction beginning on the Panama Canal and volunteered to serve there, eventually becoming Chief Quartermaster. He retired from the army with rank of Major in 1915 and went to work for DuPont, then General Asphalt. Then the war came and again, he reenlisted. Promoted to Colonel and in charge of all port and shipping operations in Europe, in 1918 he was recalled back to the States and named acting Quartermaster General at age 39. This introduced him to the field of small retail stores with big supply and sales as he developed the Army Post Exchange system. As the war ended, he went to work at Montgomery Ward. There, he pioneered the entry of the catalog mail order company into retail stores. Increased profits through increased sales via a physical presence in the marketplace. Ward's management had other ideas and moved to close the store. Wood left in disgust and went to Sears where his experiment was more warmly received. In 1925, the first eight stores opened. Retail sales the first year accounted for only 4 1/2% of Sears' sales, but with nine stores in 1926, retail sales reached 8 1/2%. Two years later, Wards tried to catch up with entry into the retail stores, but never was able to do so, forever to be behind the industry leader, Sears Roebuck & Co.


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Kittle died unexpectedly in early 1928 setting off an internal power struggle. Two existing vice presidents considered themselves as shoeins, deserving the Presidency of the company, but Rosenwald, now Chairman of the Board had other ideas. He did not consider either of them as good candidates for the ultimate leadership of Sears. His own son who had worked his way up through the comany for years, Lessing Rosenwald, was also not considered. Rosenwald's choices were narrowed down to two, vice-president Doering and Wood. Doering had already acquired wealth and in Rosenwald's estimation, did not have the "hunger for success" that drove the younger Wood. General Wood was given the Presidency and Doering resigned. Rosenwald was still Chairman, but his health was declining. He died in 1931.


At this point, I would be greatly remiss and do disservice to the subjects of this story and it's readers if I did not back up and give a bit more detail as to exactly what made Mr. Rosenwald a giant worthy of our respect so many years later. The rise of Sears Roebuck & Co. and attendant innovation in mail order and retail merchandising, while important and continuing to provide a framework for retail and mail order businesses even today, his most important legacy had nothing to do directly with the company's success. It was his lifelong philanthropy, his deep seated personal belief that his fortune endebted him to the betterment of not only his workers, but of society as a whole.

When the depression began in 1920 unemployment rose and the company's sales took a dive, Sears was carrying a huge inventory and needed an infusion of capitol to remain solvent. The company stock having reached $243 per share in 1920 took a dive to $98, and slid further to $54. The company didn't issue stock dividends in 1921, but paid it in notes bearing 6% interest and due in late 1922.

Concerned that small investors, many of them employees, would be forced to sell their stocks at huge discounts to speculators, Rosenwald offered to "buy all script of stockholders who held less than 50 shares. He paid full face value." Further drastic measures were made in reducing executive salaries (including eliminating his own entirely), and firing less productive executives, resulting in twenty million in overhead savings. In spite of rumors in financial circles that Sears would soon be in receivership, and in spite of posting a loss of 16 million dollars (the first time the company had actually posted a loss), Rosenwald opened his own wallet to keep the company afloat and solvent.

He retired 50,000 shares of his own stock in exchange for the company's real estate holdings which he could then use to secure further bank loans, with an option to repurchase his stock after three years. It was a very complicated transaction worked out by his attorneys, and took a bit of convincing on their parts, but in the end, Rosenwald propped up the company, investor, employee and consumer confidence using his own money and assuming a huge financial liability personally.

If this was not enough, he likewise made investments in many of his suppliers to prop them up. Rosenwald's efforts caught the attention and immediate praise of John D. Rockefeller and small investors alike. It was a huge gamble on his part and, while he stood to make a modest profit if he succeeded in keeping the company solvent, he faced financial ruin if his efforts failed.

It worked. The company showed a modest profit that year and was able to pay off bank loans that came due as well as borrow further capitol when needed. Recovery came and he was able to buy back his stocks as agreed. His estate was repaid the 4 million dollars after his death.

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Julius Rosenwald's efforts and personal sacrifices to save Sears Roebuck & Co. were monumental, but are in reality a small part of his legacy. Having been introduced to William H. Baldwin and Booker T. Washington by his friend Paul Sachs, Rosenwald made the education of black Americans a priority and worked with Washington, and was asked to serve on the Board of Directors of the Tuskegee Institute in 1912.

Further quoted from a WIKI article on Julius Rosenwald:

"Dr. Washington encouraged Rosenwald to address the poor state of African American education in the US. He responded by providing funds for the construction of six small schools in rural Alabama, which were constructed and opened in 1913 and 1914, and overseen by Tuskegee. Built by and for African Americans, the project foreshadowed the role in education Julius Rosenwald would play. Inspired by the social progressivism of Jane Addams, Minnie Low, Grace Abbott, Paul J. Sachs, and Booker T. Washington and the Reform Judaism of Emil Hirsch and Julian Mack (many of whom were his personal friends as well), Rosenwald devoted his time, energy, and money towards philanthropy. In his words, written in 1911:

"The horrors that are due to race prejudice come home to the Jew more forcefully than to others of the white race, on account of the centuries of persecution which they have suffered and still suffer."

His Rosenwald Fund was established in 1917 for "the well-being of mankind." Unlike other endowed foundations, which were designed to fund themselves in perpetuity, The Rosenwald Fund was intended to use all of its funds for philanthropic purposes. In doing so, the fund was completely spent by 1948.

Over the course of his life, Rosenwald and his fund donated over 70 million dollars to public schools, colleges and universities, museums, Jewish charities and black institutions. The school building program was one of the largest programs administered by the Rosenwald Fund. It contributed more than four million dollars in matching funds to the construction of more than five thousand schools, shops, and teachers' homes in the South. These schools became informally known as "Rosenwald Schools."

As if this all wasn't enough, here is a bit more:

"Rosenwald gave $1000 grants to the first 100 counties in the U.S. to hire County Extension Agents, helping the US Department of Agriculture launch a program that was very valuable to rural Americans. He was also the principal founder and backer for the Museum of Science and Industry in Chicago, to which he gave over five million dollars and served as the President (1927-1932)."

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Robert Elkington Wood, as previously profiled above, was an organizational genius. Forever called "General Wood", as much out of respect for his commanding presence as for his former military rank of Brigadier General, steered Sears on a steady course of expansion of retail stores. It was he who noticed bored men waiting on their shopping wives in Sears stores and initiated strategically placed men's departments with tools, tires and sporting goods. "We made a store for the family; in other words, for the men too. We added hardware, tires, service parts and other items of particular interest to men".

As the new war loomed on the horizon, General Wood staunchly advised against American involvement. With the disaster of Pearl Harbor, he once again put nation and defense foremost. Assuming an unofficial "quartermaster" role using Sears' networks, he provided Sears tool kits to defense manufacturers, special clothing to munitions makers, and on and on. As the supply of available hard goods for his catalog and store sales dried up, the catalogs shrank. More and more as the war progressed, Wood reverted to Richard Sears original market, the farmers and the soft goods not rationed during the war. Sales fell but profits remained steady. Throughout the war, Sears remained a steadfast supporter of the country's war effort, the military personnel, and the stateside families and workforce. Shortages and rationing were explained in patriotic themed catalogs. Sears returned a quarter billion dollars to customers for orders it couldn't fill as late as 1946 (rationing continued for some time after the war ended). That year, Wood made the decision to reinvest the majority of profits rather than to take the conservative approach as did Montgomery Ward's executive who expected another recession such as followed WWI. Sears on the other hand, opened 92 new stores and enlarged, moved and improved 212 others. Wood's gamble paid off and Sears sold 2.8 billion in goods by 1951, the expansion money providing a stimulus for many local (and the national) economies. Sears doubled the gross receipts of chief competitor Wards and became the nation's sixth largest corporation in volume of sales.

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General Wood was always a fan of demographics, and studied the trends of population movements, growth of market segments and demands for particular products. He used this information constantly to decide where and how to open new stores, how to enter new markets such as when he formed Allstate Insurance in 1931. Allstate was one of his major successes, though there were a lot of hurtles to overcome. The insurance business was difficult to break into because it required a specific license for each state. And there was a lot of resistance encountered from exisitng insurance companies and their agents. Allstate's payment structure for it's own agents was far different from that of traditional independent agents since they were also Sears employees, and there was no additional overhead required to house the Allstate desks. So Sears was able to sell auto insurance at lower rates and still realized larger profits.

From his hiring in 1924 through 1928, Wood was the Vice-President of Sears Roebuck and Company. He was promoted upon the death of Kittle in 1928 to company President and held that position until 1939 when he became Chairman of the Board. That position he continued to hold until his retirement in 1954. But he still continued to be active with the company and held the title of Chairman of the Sears Finance comittee until 1957, then Director of the company until his death in 1969. Additionally, in 1933 he was appointed as a member of Advisory Committee., U.S. Department of Commerce, in 1939 as a member of Advisory Committee., U.S. Department of Commerce, in 1948-49 on the First Hoover Commission,, member of task force on National Security, and in 1953-54 on the Second Hoover Commission, chairman of task force on Surplus Property. He died in 1969.

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Wood, ever on the lookout for trustworthy and savy subordinates who could handle the art of product selection and vendor negotiation, in 1927 hired Arthur Barrows to oversee the Hardware division. Barrows was a long time hardware man and knew the business. Under Wood's direction and following his idea of exclusive product lines, Barrows wanted to add exclusive branding to Sears tool lines and purchased the Craftsman name from the Marion-Craftsman Tool Company. But the improvement in tools didn't come until Barrows was promoted to West Coast manager and Thomas Dunlap was hired to oversee hardware in his place. It was Dunlap who made the big shift in the Craftsman tool line, and eventually knives.

Albert Baer landed the Sears account for A. Kastor & Bros./Camillus in 1923. Empire Knife Company, formerly the near-exclusive supplier of Wilbert branded knives to Sears, was in decline and had difficulties meeting Sears ever increasing needs. Baer was already well ensconsed as the cutlery supplier when Dunlap came to Sears. I say Baer, not Camillus, as he formed a personal trust relationship with the buyers from Sears and earned a loyalty that transfered to Dunlap. By 1930, Empire was gone and Camillus provided almost all of the store branded knives to Sears for the next ten years.

Baer, at the behest of Dunlap (most likely directed to do so by Wood) developed further store branding for their knives. "Wilbert" was dropped and pocketknives at three pricepoints (good, better, best) were named Kwik Kut, Dunlap and Sta-Sharp. Fulton was added later to replace Kwik Kut, Dunlap was dropped and Sta-Sharp was a sub-branding when the Craftsman name was finally used on a line of knives circa 1941. Some of these knives can be hard to positively identify today because the branding was limited to blade etches, very often worn away from use and cleaning.

Michael
 
Michael,
:thumbup: You do some fine work, the history lessons are great I do hope you get as much enjoyment out of the researh as "I" get from reading it :D nice job and we are a lucky bunch here!!!:)

Shawn
 
Thanks Shawn. I left out a million details (though it may not seem to a reader that I did), such as Wood's political involvement, the arrest of Montgomery Ward's President, the skulduggery in keeping out unions, bait and switch tactics, the war waged by local merchants against Sears and other mail order companies, the Allstate tire action by the government against Sears and Goodyear, the Allstate car debacle (a Henry J in Allstate clothing), Sears account following Baer to Ulster when he quit/was fired by Alfred Kastor at Camillus, Sears' part ownership of the Vulcan Safety Razor company with Baer and a lot more (Forays into Canada, Spain and Mexico).

Sears catalogs are a great resource for understanding not only the knives we collect, but the tastes of the nation and the health of their pocketbooks at any particular time in the last century. In a way, they are good history books.

Michael
 
Michael, that was very nice, I love the short but informative way you write......How about writting a book? or have you already??
Mike
 
Oh! Yes, I mentioned that Richard Sears died in 1914 (at age 50), but I left out the saga of Alvah Roebuck after he left the company. Roebuck was not a firebrand dreaming big dreams like Sears. He was a tinkerer and liked fixing watches. He had however been busy:

Roebuck, after leaving the company, had amassed a modest fortune developing equipment for yet another new industry: motion pictures. Once again, he sold out early and in 1925 he moved to Florida and invested in land. The 1929 crash wiped out his investment. Broke, he returned to Chicago and, in 1933, sought work with the company that bore his name. A year later, he casually stopped by a retail store. The manager asked if he could publicize the visit of one of the founders. After Roebuck agreed, the crowds came. The advertising ploy was so successful in pulling in customers that Roebuck went on a tour for several years. Yet his prime task was writing a personal history of the company's early days. He died in 1948 at age 84, once again a sharehoolder in Sears Roebuck & Co., by virtue of his holdings in the firm's profit-sharing plan.

Quoted from Sears Roebuck, U.S.A., pg. 23
 
Thanks for the good reading.

sears_houston.jpg


I remember the day when it was indeed a treat for the whole family to load up the station wagon, drive to town, and spend half a Saturday at Sears. First store I ever went to with escalators.
 
Hey Thawk Sears was a, maybe 2-3 times /year deal for me as a kid growing up, as you are aware of Tulsa OK I grew up @50 miles East in Wagoner OK, in the mid 60's-70's it was a haul to go to Tulsa 21st and Yale Sears that old store was tore down several years ago and a new one built back albeit smaller cause there was,is 2 in Tulsa, up until @'82 21st steet was it. Can remember wearing Toughskin jeans among other things from Sears as a kid growing up still got abig ole rollaround box full of Craftsman tools :D but my how things have changed in the last 30-40 yrs! :grumpy:


Great memories!:thumbup:
 
An excellent bit of reading there, Michael!

Alot of gambles that paid off, and cutting-edge ;) marketing tactics as well.

Putting in a tool section for the men was a genius move, IMO.

An interesting window to what life was like back then.

Thanks,

Glenn
 
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