Celebration of Fools: An Inside Look at the Rise and Fall of JCPenney

At first, however, there was no competition between the buying and managing functions, as store partners and buyers were then one and the same. All the early store managers went on buying trips together. They got on a train in their small Western towns and traveled all the way to New York City with buying stops in Kansas City and St. Louis en route. Most of their buys, of course, were made as a group , but each manager also bought particulars for his own community.

It was a far less sophisticated procedure then because the first cluttered, chockablock stores presented mainly commodity items like basic shoes, yard goods, and work clothes. But James Cash Penney had also advertised "The Latest Fashions" from his first week in grungy Kemmerer. So he (or, later, Earl Sams) always accompanied the group to ensure that "fashion" at least had a token presence in every store. Managers who were not yet comfortable with style and fashion were thereby prevented from doing any damage to themselves .

From his first buying trip with Guy Johnson in 1903, Penney himself proved to be a major talent. Always a fastidious dresser who developed a keen sense of style, he was the original great company buyer. Despite the fact that New York City was at first virtually a foreign country to the Westerner Penney, as he placed ever-growing orders his sharp eye, knee-jerk parsimony, and abundance of backbone made him a highly respected player in the eyes of the trade. ^[1] They could see that Penney instinctively knew that buying led selling and that buying well meant selling well.

In time, when the number of stores made the traditional buying trips too unwieldy, Penney experimented. He formed a small group of full-time buyers and dispatched them to New York City, where, working out of a hotel (three to a room!), buys were made for the entire chain. Goods were shipped directly from factories to a Salt Lake City warehouse set up near the one-room company headquarters. But this concept failed because managers wished to continue buying at the sourcewhich, of course, was impossible and ushered in the manager/buyer tension that dogged the company for most of the twentieth century.

Penney's answer was to establish a small buying office in New York's garment district , with invitations extended to all managers to visit "in season ." This was basically continuing the former strategy with the addition of the psychological ploy of an established office and the invitation to visit. But it worked. "New York" attended company conventions at which managers now "bought." A full array of basic, quality goods was shown, with a minimal number of fashion, notion, and novelty items dressing out the presentation. Company brass stood ready to advise . Managers with particular community needs still occasionally traveled to New York, but the now formalized "buying department" fulfilled most of the store needs. In the years to come, the buying department's major lines developed such leverage that the company became a leader in private brands.

But, again, it was the idea of partnership (and Penney's execution) that drove the organization's geometric growth. As he expanded from his base in Kemmerer, Penney refined Callahan's simple and powerful formula for success: Find ambitious men with admirable personal qualities and train them in the Penney ways of honor , value, thrift, and exceptional service. Then set them up in a new store in a growing small Western town located on or near a railroad .

Importantly, of course, every new manager also owned a piece, as did the previous manager who trained him. To review, ownership of a new store was typically split into thirds , one each for Penney, the old manager, and the new manager. In turn , the new manager selected a candidate for ownership of yet another new store and began training him as his "first man." Penney and established managers financed the new store owner-managers at affordable rates. Managers took little more than clerks' wages out of the cash flow, but they shared in year-end profits in direct proportion to their percentage of ownership.

Thus, as the West grew, the chain grew, driven by well-motivated quality men who would work anywhere for any number of hours per week with solicitous interest in any community's wellbeing. It was a revolutionary concept and a bonanza.

^[1] Only in his old age did the discerning eye diminish.