The retailing industry is a continuous story of the rise and fall of companies. No enterprise stays on top forever in this highly competitive field that touches our lives every day. Today we look at a company, now long forgotten, named Gimbel Brothers.
Founded in 1842 by German Jewish immigrant peddler Adam Gimbel in 1842 in Vincennes, Indiana, by the 1920s Gimbel Brothers was the largest and most profitable department store retailer in America. The Gimbel’s name was known to everyone in New York City, Philadelphia, Pittsburgh, and Milwaukee, as well as millions of visitors to those cities. At its 1940s peak, over 500,000 people attended the Gimbel’s Thanksgiving Parade in Philadelphia, which predated the Thanksgiving Parade in New York, organized by arch-rival Macy’s. Millions more later watched the Gimbel’s and Macy’s parades on network television. Gimbel’s had a starring role in the popular 1947 movie Miracle on 34th Street.
Over the course of its extraordinary 145-year life, the company employed thousands and sold over twenty billion dollars’ worth of merchandise to millions of Americans. By the late 1980s, Gimbel’s came to an end. Understanding the rise and fall of Gimbel’s first requires some context about the retail environment in which the company prospered.
The American Department Store
For anyone who was born after about 1970, it is difficult to understand the power of the great American department stores in their glory days. Established between the Civil War and World War I, located at the busiest downtown intersections and traffic hubs across America, these often giant “palaces of trade” were works of art and entertainment. Containing multiple restaurants, auditoriums seating over 1,000, and services including day care for customers’ children, every imaginable product was offered. The closest analog today might be Disney World, in the sense that hundreds of thousands of people attended their grand openings and major events just to “see the show.”
You will note that we at the American Business History Center rarely if ever refer to today’s top retail chains as “big box” stores. The Home Depots, Costcos, Targets, and Walmarts of the world are tiny compared to the department store behemoths of the past. At 100-200,000 square feet each, current stores are one-twentieth to one-tenth the size of the largest department stores, most of which were built between 1890 and 1930. The biggest ones, approaching 2.5 million square feet, covered over fifty acres of floor space on many levels. They were among the earliest users of air conditioning, elevators, and escalators.
The impact of these big stores on people’s lives and the memories they created are reflected in the series of (so far) forty-six books on individual department stores or the stores of a particular city, published by the History Press and Arcadia Publishing (including our primary source for this article, department store historian Michael Lisicky’s excellent Gimbels Has It!).
To get a sense of these stores in their glory days now requires a visit to Macy’s Herald Square store in New York, the Macy’s on State Street in Chicago (formerly Marshall Field’s), or the Macy’s in downtown Philadelphia (formerly Wanamaker’s). Even upon visiting them, one must imagine the stores being far more crowded with merchandise of every type from books and toys to hardware and enormous numbers of customers. (To better understand huge full-line department stores, the biggest today can better be observed in Paris, London, Tokyo, Madrid, and a few other cities. Your author’s current favorite, in Mexico City, can be seen in this video tour. All of these stores were inspired by the first department stores, developed in Paris and New York City. See the full history of retailing in this video.)
The New York Market
Every major American city had two, three, or more of these big stores (for complete lists by city and pictures of them, see our previous post on department stores). But nowhere was more competitive and full of giant stores than New York City, where many retail concepts have historically first been developed and proven. The gargantuan department stores probably peaked in their market share in the 1950s but were still generating large revenues through the 1960s. To grasp the intensity of the New York retail market and the choices available to residents and visitors, this table lists the largest stores in the New York metropolitan area in 1964, with those still operating today marked in red:
(Note that Macy’s sales would equal about $1.5 billion in 2021 dollars. While this is probably more than the Macy’s store does today, it is about half the 2019 $2.7 billion revenue of the Tokyo department store Isetan Shinjuku, which likely is the highest revenue single store in the world. Also note that the definitions of full department stores and apparel specialty stores can be blurry. Most people call Saks Fifth Avenue a department store, and others marked as department stores were often mainly clothing stores. This list includes all the stores in the New York area that were doing over $20 million a year in estimated sales, plus a few others of import. Some of the branch stores listed in the suburbs, such as Abraham & Straus and Bamberger’s, are still operating under the Macy’s name today. There were also many other branch stores of these companies, each doing less than $20 million a year.)
The Gimbel’s Story
While today’s subject, Gimbel’s, began in the frontier fur-trading center of Vincennes, Indiana, in 1842, it took the family-controlled company until 1910 to develop the courage to enter the extremely competitive New York City market. The founders’ descendants achieved great success and fame when they finally arrived in Gotham. Here is their saga.
In 1835, eighteen-year-old Adam Gimbel emigrated from Bavaria in Germany to New Orleans in the United States, in search of adventure and good fortune. He sought “Real peace, equality, and freedom of opportunity for all, room to breathe and to build and to become somebody.” After working the docks in the Southern port city, he saved enough money to buy a stock of goods, such as ribbons and small notions, and begin life as a travelling peddler. Adam worked his way north, up the Mississippi River Valley. Seven years after his arrival in America, he selected Vincennes, Indiana, as the ideal spot to settle down and build a business. In 1842, the city of about 2,000 people on the Wabash River was one of the largest towns in the region, serving the fur traders and frontiersmen of Indiana and Illinois. Within a few years, Adam Gimbel opened a three-story store, the biggest in the area, selling a variety of merchandise.
Adam made regular buying trips to Philadelphia, where he met Fridolyn Kahn-Weiler. They married in 1847 and went on to have fourteen children, eleven of whom lived to adulthood: seven sons and four daughters. All seven sons went into their father’s business. Philadelphia became a second home for Adam Gimbel.
Gimbel developed a reputation for fair trading, a perhaps uncommon trait on the frontier. Rather than haggling, he set fixed prices, an innovation that was increasingly common in “dry goods” (fabrics and apparel) stores in the larger cities. He offered, “Fairness and equality to all patrons, whether they be residents of the city, plainsmen, traders, or Indians.” A classic story tells of the Catholic Bishop of Vincennes, whose archdiocese covered much of Indiana and Illinois, dropping a bag of coins on Gimbel’s counter to deposit in the Bishop’s store account. He deferred to Adam to count the money, knowing any count by Gimbel would be fair and accurate. By 1875, Gimbel had forty employees.
As the Midwest grew, Vincennes was surpassed in size and importance by such cities as Indianapolis, Chicago, and Milwaukee. The large family looked for better markets for their services, cities with a brighter future, opening one or more stores (history is unclear) in nearby towns. Milwaukee was full of fellow Germans and had prosperous brewing and meatpacking industries. In 1887, led by Adam’s sons Isaac and Jacob, the Gimbels opened a large store in Milwaukee. Within four years, the family sold their smaller stores and focused on Milwaukee. That store grew with the city and continued to expand, becoming one of the three large dry goods (department) stores of the city.
Yet this increase in the business was not enough to satisfy the ambitious sons. They considered the larger cities of America, and settled on their mother’s hometown, Philadelphia, where their parents now lived. In 1894, they opened a large store there, in the shadow of famous Philadelphia merchant John Wanamaker. This store, too, was highly successful. Two years later, Adam Gimbel died at the age of seventy-nine.
In these stores, Gimbel Brothers developed a reputation as being a “working class” store, serving everyone with excellent values, leaving the upper-class trade to other retailers. Over time, each Gimbel store added more departments, more services, and more buildings, eventually replacing some of the old buildings with newer, larger structures. Buying offices were opened in London, Paris, and Berlin to provide the stores with the latest fashions and accessories from Europe. These offices also served as a “home away from home” for Gimbel’s customers, who could arrange for easy credit in European stores through the buying offices.
But the appetites of the Gimbel family were not yet satisfied. At the urging of Isaac’s son Bernard Gimbel (born in Vincennes in 1885), the company decided to take on New York City, the biggest and most competitive market in the nation. In 1910, Gimbel’s New York opened, bravely located one block south of the city’s largest and most famous store, R. H. Macy’s, which had built a huge new store a decade earlier. The company’s headquarters also moved to New York.
The huge New York store cost $17 million (about $500 million in 2021 dollars) and contained one million square feet of space, making it one of the largest stores in the world (though smaller than Macy’s). The store had 4,780 employees and was designed by famous Chicago architect Daniel Burnham, responsible for the giant stores of Chicago’s Marshall Field, Boston’s Filene’s, and Philadelphia’s John Wanamaker. But, unlike most of those “palaces of trade,” the Gimbel store was plainer, inside and out. While the Gimbel brothers may have been economizing on the cost of the store, they also knew their working-class customers might be scared away if the store was too fancy.
With these three large retail emporiums, Gimbel Brothers claimed to operate more retail space than any other firm in the world except for the Bon Marche in Paris (one of the first true department stores).
The 1920s were a period of great activity on the part of the Gimbel empire. 1920 saw the introduction of a Thanksgiving Day Parade in Philadelphia. Over time this event grew in importance and was followed by the introduction of the Macy’s parade in New York. A highlight of the Gimbel’s parade, which drew up to 500,000 people, was the arrival of Santa Claus, who climbed a ten-story fire ladder to enter a window on an upper floor of the Philadelphia store at the end of the parade.
In 1922, Bernard Gimbel, now leading the company, took Gimbel’s pubic, giving the company access to more capital and public stock to use as a currency to buy other companies.
Situated in the one block between Macy’s and Gimbel’s on Herald Square in New York was a somewhat higher-end, smaller apparel store, Saks, operated by the Saks family. Bernard Gimbel and Horace Saks were good friends, vacationing together on the Jersey shore. Horace Saks described to Bernard his dream of opening a very high-end store much further north in Manhattan, on Fifth Avenue near St. Patrick’s cathedral. Horace had begun acquiring land, but his finances were stretched. On a 1923 train ride home from the Jersey shore, Horace and Bernard went to the baggage car to ensure privacy, according to legend sitting on a coffin. There, the two men agreed that the Gimbel Brothers company would buy out the Saks company, using Gimbel’s stock, allowing Horace to build and run his dream store, working for Bernard.
The eleven-story Saks Fifth Avenue store opened in 1924. A year later, Horace Saks died, and the Gimbels took over active management of the exclusive store. Thirty-two-year-old Adam Gimbel, named after his grandfather, took charge and led the store to international fame. The old Saks 34th Street store, which confused the Saks image, was eventually closed.
In the meanwhile, in Pittsburgh, the four Kaufmann brothers had been building that city’s leading store, Kaufmann’s. In 1913, Morris and Edgar Kaufmann bought out their brothers, and a year later those who sold out built their own store nearby, Kaufmann and Baer. With 700,000 square feet and 2,000 employees, yet another large emporium had been created. In 1925, Gimbel’s bought this store and rebranded it as Gimbel’s.
The rise of the Gimbel’s empire is illustrated by the numbers in the table below. By 1923, the company was the largest American department store company in both sales and profits. They were at the top of the pack in the most important segment of American brick-and-mortar retailing. The May Department Stores Company of St. Louis was the only other firm which operated big stores in more than one city under the shared company name. Sears, Roebuck was still a mail-order company and only began building stores in the 1920s. Future giant J.C. Penney did just $62 million in sales in 1923. Dime store chain F.W. Woolworth, with annual sales of $153 million in 1923, was the only company that sold more general merchandise (non-food) than Gimbel’s but operated far smaller stores selling very inexpensive items.
(Note that Macy’s was slightly larger in sales by 1929 because that company acquired the biggest store in Newark, New Jersey, Bamberger’s, in 1929. Gimbel’s profits tumbled as the 1929 stock market crash preceded the important Christmas season.)
Despite being a public company, control of Gimbel’s remained firmly in family hands. Over time, Bernard Gimbel turned over day-to-day management of the company to his son, Bruce Gimbel. All the family members were prominent on the New York social scene. They owned large estates. Bernard was instrumental in many Big Apple civic projects, including both New York World’s Fairs (1939-40 and 1964-65).
In 1939, disaffected Gimbel cousin Richard Gimbel tried to buy a Miami store and name it Gimbel’s, but the company stopped him. He named his stores Richard’s, which went on to become a meaningful budget competitor to Federated Department Store’s Burdine’s division which dominated the Miami market. In New York, the battle between neighbors Macy’s and Gimbel’s intensified. Macy’s adopted the slogan, “It’s smart to be thrifty,” while Gimbel’s claimed, “Nobody but nobody undersells Gimbel’s.” In one of the greatest retail battles ever recorded, both stores had teams of comparison shoppers roaming the other store to check prices, sometimes resulting in prices dropping every hour as the two tried to outdo each other. The war became part of New York lore and legend, resulting in the story portrayed in the 1947 film, Miracle on 34th Street. Behind the scenes, the Gimbels were friends with the Straus family who controlled Macy’s. The families knew the publicity was good for both of them. Nevertheless, the Macy’s store consistently generated two-and-one-half to three times the annual sales that Gimbel’s did at Herald Square.
While Gimbel’s remained (often barely) profitable during the Great Depression, Macy’s did far better in both revenues and profits. But with the post-war boom, consumer spending jumped and Gimbel’s again prospered. Despite being 20-25% smaller than Macy’s in annual total corporate revenue, from 1951 through 1962, Gimbels made a greater profit than Macy’s in at least eight years.
In the meanwhile, the large department store groups of May, Federated, and Allied grew faster, largely through acquisitions, often in the growing sunbelt. Gimbel Brothers built many branch stores in its New York, Philadelphia, Pittsburgh, and Milwaukee markets but did not make any acquisitions other than one in Milwaukee, though they tried (and failed) to buy the small Long Beach, California-based Buffum’s in 1968. Saks Fifth Avenue, on the other hand, added stores in Chicago, Detroit, and Beverly Hills early, and later added many more stores across the nation.
The post-war prosperity of Gimbel’s total results masked what was happening in the divisions. Despite the Herald Square store generating up to $100 million a year in revenue ($500 million today), the New York division sunk deep into the red, losing large amounts of money as it struggled to compete with stores perceived as “better” and newer discounters including Korvette’s and Alexander’s. The Philadelphia operation, always third or fourth biggest against competitors Wanamaker, Strawbridge & Clothier, and downscale Lit Brothers, soon followed into the red ink. Pittsburgh, with its own unique personality and style, fared better against upscale competitors Kaufmann’s and Joseph Horne, running neck and neck with Horne’s in the market, but also gradually lost traction.
The brightest spot among the Gimbel’s-branded stores was Milwaukee, which broke the three-way race with Federated’s Boston Store and longtime local leader Schuster’s by buying Schuster’s in 1962. This acquisition, relabeled Gimbel’s-Schuster’s for a few years, made the company the biggest department store retailer in the city. It is a bit ironic that this was the only city where Gimbel’s really competed head-to-head with the industry’s sales and profit leader, Federated Department Stores. (Federated’s upscale Bloomingdale’s and Brooklyn-based Abraham & Straus were not head-on competitors for Gimbel’s New York.) And yet this was the one city where Gimbel’s “dominated” the market, and the Federated division was one of that company’s smallest and least profitable operations. At one point, Milwaukee reportedly generated $12 million in annual profits for Gimbel’s while New York, Philadelphia, and Pittsburgh lost a combined $12 million.
The problem was that Gimbel’s leadership failed to keep their stores physically up-to-date, lagged behind their competitors in presenting the latest fashions, and made some strategic mistakes. Big, expensive new stores in downtown Philadelphia and on the Upper East Side of Manhattan did not work, presenting the same tired, cheaper merchandise and losing even more money.
It is also possible that the Gimbel family’s attention was absorbed by Saks Fifth Avenue, the only true growth part of the company. As Saks built stores around the nation and polished its image as a national luxury leader, alongside Neiman-Marcus, the division grew in revenues and profits. Saks was soon making over half of the corporation’s profits, and then more and more.
By 1972, Gimbel Brothers had fallen far from the top of the department store heap:
In 1973, the giant British tobacco company, British-American Tobacco (BAT), through its Brown & Williamson American division (Kool and Viceroy cigarettes), acquired Gimbel’s for about $200 million. Like other tobacco companies at the time, BAT wanted to diversify away from tobacco (a decision that was later reversed: today the company is the world’s largest tobacco company, owning the former American Tobacco and Reynolds Tobacco companies).
BAT continued to expand its American retail interests, acquiring several companies including Marshall Field in Chicago and the Kohl’s supermarket chain in Milwaukee. The Kohl family had realized that putting a low-priced department store next to their supermarkets increased their revenues and had begun a small chain of department stores. The supermarkets were ultimately sold. But over time, Kohl’s department stores rose up to pass arch-rival J.C. Penney and today publicly held Kohl’s is the second-largest U.S. department operator after Macy’s (which is the renamed Federated Department Stores after the merger of those two companies).
It took a few years, but BAT eventually realized that the Gimbel’s stores were going nowhere and had little hope, whereas Saks Fifth Avenue was a gem. By the late 1980s, all of the Gimbel’s stores were shuttered, representing the end of a retail empire. BAT later got out of the retail business, and today Saks Fifth Avenue continues as a major retailer, owned by Canada’s big retailer Hudson’s Bay Company, the oldest company in North America (founded in 1670).
And so, from a fur-trading post in frontier Indiana, to the peak of the world, and back to dust, went Gimbel’s. And the smartest decision they ever made – backing Horace Saks – ended up under the ownership of another ancient fur-trading company, Hudson’s Bay. It would be hard to write a novel with more twists and turns than the histories of America’s great enterprises like Gimbel Brothers.
American Business History Center