This Sunday, August 4, is the 89th anniversary of a huge innovation with a global, lasting impact – the supermarket. On August 4, 1930, Michael Cullen opened his “huge” King Kullen store in the Jamaica section of Queens, New York City.
While this date is often considered the birth of the supermarket, pinning down the exact ancestry and birth of the idea is not easy. Most inventions and innovations result from numerous experiments and ideas, recombining in new forms. While even true of “hard” inventions like airplanes, automobiles, and television, tracking origins can be even harder in social and cultural inventions – the situation comedy, movies, magazines, newspapers, fast food, the motel – or the supermarket.
First, let’s set the context.
The grocery retailing industry has been big and important since the nineteenth century. America’s first major chain store company, the Great Atlantic and Pacific Tea Company (”the A&P”), arose before 1900. By 1929, the company had over 15,000 stores and was one of only 3 or 4 companies in the world with annual revenues of over a billion dollars. Other chains like Kroger and Safeway had also built thousands of stores.
But these stores were tiny, typically 500 to 600 square feet in size. The average A&P store did about $60,000 per year in revenue. The over-200,000 other grocery stores, largely independent mom-and-pop stores, averaged one-third to one-half that level, $20-30,000 per year.
These grocery stores where America shopped were just that—grocery-only stores. No meat, no butcher, no bakery, no produce, no non-foods like paper products, and certainly no check-cashing or other services. Many did offer credit accounts and delivery. Most were on street corners, with no easy parking – customers came by bus and streetcars.
Beginning in the “sunbelt” (though not called that until many years later), automobile usage and spread-out cities drove more demand for parking. Weingarten’s and Henke & Pillot in Houston, Alpha Beta and Ralph’s in Southern California, and other grocers in these areas began to build larger stores with parking lots by the 1920s.
Even earlier, in 1916, Clarence Saunders of Memphis developed Piggly Wiggly stores, which tried the radical idea of self-service. Instead of asking clerks (usually men) to fetch each item, shoppers were handed baskets into which they placed their own hand-picked choices, then exited through a checkout lane with a turnstile. By 1921 there were 615 Piggly Wiggly stores around the US; by the early 1930s, that number grew to over 2,500.
The rise of the automobile and these experiments with self-service laid the groundwork for a new way of selling groceries. Then the hard times of the Great Depression provided a further impetus: the desire for lower prices.
With 17 years of experience at the A&P and 11 years with Kroger behind him, by 1930 Michael Cullen supervised 94 traditional Kroger stores in Southern Illinois. He dreamed up a new approach to the business, wrote it up, and mailed his ideas to Kroger headquarters in Cincinnati. Here are excerpts from that letter:
Monstrous in size – 40 feet wide by 130 to 160 feet deep.
(No more than 6,400 square feet, one-tenth to one-fifth the size of new supermarkets today.)
The kind of stores I have in mind should do a grocery business of $10,000.00 a week and a meat business of $2,500.00 a week.
(Compared to Kroger’s average weekly per-store sales of $988.62 in 1929.)
80% self-service. Plenty of parking.
On the grocery business, including fruit and vegetables, I can operate on a gross profit of 9%.
(Well below gross margins then, saving customers 10-15%.)
I want to sell 300 items at cost.
I want to sell 200 items at 5% above cost.
Can you imagine how the public would respond to a store of this kind? To think of it – a man selling 300 items at cost and another 200 items at 5% above cost – nobody in the world ever did this before. Nobody ever flew the Atlantic, either, until Lindbergh did it.
The reason I know that this proposition can be put over is that I have already put over a similar proposition right here in Southern Illinois. I operated Bracy’s Warehouse store in West Frankfort…
I was never so confident in my life as I am at the present time; and in order to prove to you my sincerity and good faith, I am willing to invest $15,000.00 of my own money to prove this will be the biggest money maker you have ever interested yourself in.
Before you throw this letter in the wastebasket, read it again and then wire me to come to Cincinnati, so I can tell you more about this plan, and what it will do for you and your company.
The one thought always uppermost in mind – How can I undersell the other fellow? How can I beat the other fellow? How can I make my company more money? The answer is very simple – by keeping overhead down, and only by keeping overhead down can I beat the other fellow.
What is your verdict?
The letter never reached the desk of Kroger President William Albers – his Vice President who received the letter did not want to waste the chief’s time on this silly idea. Cullen tried to sell his idea to A&P as well, to no avail.
Giving up on his employer, on August 4, 1930, Michael Cullen opened the 6,000 square foot King Kullen store in Queens, which he advertised as “The World’s Biggest Food Market.” With merchandise piled high on cheap shelving, the store was part circus, part bazaar. The King Kullen store immediately did over $10,000 a week in revenue ($500,000 per year). Cullen started opening other stores on Long Island, generating up to a million dollars a year each. King Kullen was the talk of the industry.
Across the nation, other grocers adopted Cullen’s principles. Many experimental stores opened. In 1932 in Elizabeth, NJ, two men opened Big Bear. This store rented 50,000 inexpensive square feet on the ground floor of a giant former defense and auto factory. The grocery department consumed 15,000 square feet in the center – an unprecedented size – and was surrounded by spaces leased to “concessionaires” selling everything from meat and produce to auto parts, tobacco, drugs, and cosmetics. By bringing all these specialists under one roof, Big Bear both drew enormous traffic and earned extra revenue.
In the first three days, Big Bear sold $31,000 worth of merchandise. Observers thought the grand opening rush would soon die down, but the next week the store did $75,000, more than most stores did in a year.
For the first full year in business, Big Bear had sales of $3.8 million. Charging the concessionaires only 5.13% of sales, Big Bear still collected $86,000 in concession lease payments. This more than covered the rental payments for the entire building of just $15,000 a year. The grocery section, though using only 15,000 of the 50,000 square foot total, generated over half of the store’s sales and profits of $80,000. Taken in total, the store made a first-year profit of $166,000 – on an investment of just over $10,000! (In today’s dollars, that would be like making a first-year profit of $3 million on an investment of about $200,000.)
No one in the industry (except perhaps Michael Cullen) believed that such numbers were achievable in one store. Newspapers across the country told the story of Big Bear, garnering even more publicity than King Kullen.
The race to convert the industry from small stores to large, self-service supermarkets was on. By 1933, even former Kroger President Albers had become a believer. He founded Cincinnati-based Albers Super Markets, Inc., the first company to use the term “supermarket” in its name. By 1937, all the big chains began to replace their tiny stores with new supermarkets of various sizes. Between 1935 and 1941, A&P went from over 15,000 stores to about 4,000, but still posted much higher total company sales due to the higher productivity (sales per store) of the new supermarkets.
Fast forward to today…
The fundamental supermarket concept of selling goods cheaper with low overhead and expenses was the foundation of the discount store industry in the 1940s and 1950s. Experimenters and entrepreneurs applied “supermarket economics” to general merchandise like clothing, shoes, toys, and electronics. 1962 saw the founding of Kmart, Target, and Walmart.
In the 1970s, Sol Price of San Diego invented a further version, the warehouse or wholesale club, today dominated in the US by Costco and Sam’s Club. Abroad, the somewhat similar hypermarket concept was developed in France and became a global phenomenon.
Retailers like Toys R Us, Home Depot, and Best Buy borrowed many of the same principles and applied them to specialty categories of merchandise.
Today Walmart’s Supercenters, the latest iteration of the supermarket ideal, make that company America’s largest seller of groceries and the world’s largest company by revenue.
Food retailing remains one of the most competitive industries. Customers can choose from gourmet stores, corner stores, gas stations, dollar stores, natural foods stores, giant chains, regional chains, and independent stores. Despite pressure from online grocers, including Amazon’s desire to take more of the business, and perhaps more importantly the dramatic rise of the restaurant industry, America’s and the world’s best grocery stores continue to prosper.
Even with tiny profit margins and massive numbers of employees, supermarket companies can be great places to work. In the most recent Fortune magazine list of “the 100 best companies to work for” in America, family-owned Wegman’s of Rochester, NY, rated third in the nation. Employee-owned Publix of Lakeland, FL, ranked 12th, but #1 among big companies with its 200,000 workers. Where I live in Texas, another top regional chain, privately-owned HEB of San Antonio, has an outstanding reputation as a place to work and as a community citizen.
Those three regional grocery chains are highly regarded in the industry and are growing profitably, building new stores. While the average Kroger or Walmart Supercenter sells $40-45 million a year worth of groceries, the average Texas HEB does about $70 million, and Wegman’s average store exceeds $90 million. Publix, founded a month after King Kullen opened, has chosen a different route, opening more but smaller stores which average about $30 million, now spread throughout the Southeast. Each of these great companies has figured out how to best serve their customers, create great jobs, and not only survive but grow in this very challenging industry. And they are not alone – at least fifty American food retailers do over a billion dollars each in annual sales.
The American Business History Center website is full of stories like this, in diverse industries, in every era. One or a few men and women. One idea. Resistance from the “smartest and most successful” people in the industry. Courage of conviction in the face of disbelief.
Such stories are not uncommon in a free economy where entrepreneurs can take a risk on new ideas, see if they work, and perhaps even have a global, lasting impact. Like Michael Cullen’s idea from 89 years ago.
The American Business History Center
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