The Dynamo Factor in Opening 70 New Stores a Year

The Dynamo Factor in Opening 70 New Stores a Year

James Cash Penney rapidly conquered the West one store at a time. By 1917, fifteen years after opening his first store in Kemmerer, Wyoming, he had 175 stores in 22 states; he had opened about 12 new stores a year. Over the next 15 years from 1917-1932, JC Penney Company opened well over 1,000 more stores. How did the huge chain stay consistent for merchandise value and customer service? In large part, that's due to the power of "The Dynamo."

The JC Penney Company newsletter "The Dynamo" started in 1917 and was published on a monthly basis until 1932. Running 20 to 30 pages, it offered motivational instruction on ethical business practices and effective sales training, as well as disseminating specific company news on employees and their stores. The 1917 newsletter stated that its purpose was "to promote friendliness, to encourage co-operation and to increase efficiency among its employees." The last page was a US map of all its stores.

The growth of the company was phenomenal, and opportunity for employee advancement made JC Penney one of the best places not just to work for but to build a career. Store managers were trained at one store and then promoted to managing their own stores. Penney was highly selective in hiring associates. In Sept. 1917, he traveled to Kansas City and St. Louis to interview several hundred men and hired only 11, as reported in the Dynamo October 1917 issue. He also encouraged current associates to recruit: "Get the men to fill the ranks so you can step up higher."

Penney advertised the positions as "Opportunity," and opportunities they were for hundreds of men to earn profit sharing and fill top management positions. Training was very thorough and proficient. In 1945 after his military service, Sam Walton the founder of Wal*mart was trained as a sales associate at JC Penney in Iowa.

In theDynamo October 1917 issue, Fred Esch of Dallas, Oregon calls for a doubling of the previous year's annual sales of $8.5 million. Well, just ten years later in 1927, its 25^th year of business, JC Penney's annual sales totaled $151 million with 892 stores: in a decade it had opened 70 stores a year at an incredible 6 new openings a month. "The company had become the largest dry goods retail chain in the United States, and Penney was popularly known as 'The Man with a Thousand Partners,'" explains SMU Texas Archival Resources Online. "The Dynamo" played a part in that rapid success, connecting all the associates as one big family with a common "responsibility."

TheDynamo May 1927 32-page newsletter celebrates the company's prosperity as "A

Nation-wide Institution of Department Stores." What I found surprising was its psychological approach to training, advertising, and selling effectively. Through experience and success, before all the high-tech marketing research and focus groups of today, JC Penney's managers shared their insightful retail knowledge and the psychology of selling in "The Dynamo."

On the 25^th anniversary of JC Penney, in theDynamo May 1927 issue, V. L. Horn, manager of the Marshalltown, Iowa store, wrote a "Then and Now" article on advertising, recalling his early days delivering advertising flyers by horse and buggy, with his wife driving, to residents in a 10-mile radius. He notes that he did it personally. He reveals that hiring an outsider often failed since "the bills were gotten rid of all right, but many of them were ditched along the way." He finishes with a compliment to the quality of JC Penney advertisements in 1927. On training managers, in the same issue, Don E. Whitman, manager of the Grand Forks, North Dakota store, focuses on training that instills "Store Management" skills, "NOT Storekeeping."

Another piece in the May 1927issue offers excerpts from the JC Penney Business Training

Course, which are sales associates' anecdotes on how to make a sale by educating customers. For example, one associate from Baker, Oregon details interacting with a female customer: "I was explaining to her our methods of operation, how she could save twenty per cent on the dollar in our Notion Department. . . we sell certain notions for four cents. Other stores charge five for the same articles. Twenty articles purchased here at four cents a piece will cost her eighty cents. Twenty articles purchased somewhere else at five cents would cost her a dollar." "The Dynamo" is filled with such stories of explaining value and savings to customers, resulting in multiple sales.

And as such, the rest of the Dynamo May 1927 is full of articles written on "Sales Talk" and sales knowledge advice. Surprisingly, the male-dominated publication even has articles written by women. One, titled "Incorrect Selling Methods Versus Correct Selling Methods" by Mrs. Grace Greenhalgh, an associate at the Miami, Arizona store, details two versions of a sales scenario. In one, the sales associate is indifferent and negative towards the customers and in the other the associate is an active participant in making a sale. Her final advice is, "Salesmanship does not mean one person forcing another to buy something that will not supply the service desired. It means, rather, two people selecting merchandise together, one, in virtue of training and experience, assisting the other to gratify his desires in the most satisfactory way." That was 1927!

By its 30^th Anniversary in 1932, JC Penney had 1,468 stores, but America was deep into the Great Depression. "The Dynamo" ended publication, but the last year's issues still reverberate a positive sales approach. No employee was allowed to use the word "depression" in the stores.

The Dynamo May 1932 issue opens with an article from JC Penney himself, "Hit that Line." Penney used a football analogy, with people in business being one team and the opposing

team being the "depression," and the scrimmage line being sales. His lesson for gaining yardage is a dressing-down to managers for inventory levels being too high, the very same factor retailers dealt with in the 2008 holiday shopping season. Definitely, history repeats itself.

Penney details scenarios of setting prices with respect to margins to effectively use leader sales. He writes, "In Kemmerer, I had miners' shoes to sell for $2.49. Everybody else in town was asking $3.00 to $3.50. Frankly, I used the miners' shoes as leaders, but these miners' shoes sold suits of clothes, overcoats, underwear and many other items for me." Retailers today still use leaders, and Penney pioneered the practice of having sales associates use the leaders to inform customers about other store merchandise, which "leads" to more sales.

Even more notable is the reference to building customer confidence in JC Penney through sales of quality merchandise. "Suggesting" quality merchandise that customers would be pleased with over the long term was repeated over and over throughout "The Dynamo." Penney admitted to buying 3-thread woolen socks instead of 2-thread, knowing that his costumers would be satisfied with the higher quality. The May 1932 issue has two pages of customer reviews and feedback exhorting long-term satisfying experiences shopping with JC Penney, to reinforce the pivotal factor of cultivating customer loyalty.

Even if "The Dynamo" didn't survive the Depression, the JC Penney Company did. In fact, it did not merely survive--it thrived. It is one of the few department stores to score in the National Retail Federation's top 10 in the 2009 Customer Choice Awards for customer service. In 2008, JC Penney's annual sales reached $18.5 billion with 1,109 stores and 150,000 associates. "The Dynamo" survives as a unique historical record of JC Penney's successful retail philosophies.

Resources

"Customers' Choice Awards." National Retail Federation. 12 Jan. 2010.

"The Dynamo: A Digital Collection." SMU: CUL Digital Collections.

"JC Penney Papers: A Guide to the Collection." SMU: Texas Archival Resources Online.

"Samuel Moore Walton Biography." Wal*mart.

"Our Company." JC Penney.