The emergence of Chicago as a major wholesale and retail center for all manner of goods was intimately tied to its status as a railroad hub. As a traveling salesman in the late 1860s, Aaron Montgomery Ward saw that rural consumers were not being served well by their local retail establishments, which often enjoyed local monopolies and were perceived to be charging the highest possible prices for their wares. Ward decided that it would be possible to solve this problem by selling directly to customers via mail at wholesale prices. Chicago’s excellent railroad connections and its diversified manufacturing base made it an ideal place to run such an operation. Despite losing most of his assets in the Chicago Fire of 1871, Ward and his brother founded Montgomery Ward and Company in the spring of 1872. The company would go on to be one of the greatest merchandising companies in the world. Ward was able to offer such low prices because his operation had very low overhead costs. As the company had no storefronts, there were no rents or salesmen that needed to be paid. Ward bought all his merchandise in bulk, and paid only in cash, so prices would never need to be inflated to cover the cost of interest on loans. And because he sold directly to his customers, there was no retailer markup. The business model was so novel that the Chicago Tribune was quick to denounce the company as a scam operation, but after the proven success of the firm the paper retracted its statement. Any doubts held by the customers were assuaged by Ward's guarantee that any customer could examine their order at the post office and choose not to pay if they found the items to be unsatisfactory. Chicago’s burgeoning and innovative printing industry also provided Ward, and its eventual competitor Sears, Roebuck & Co., with the means to produce cheap, illustrated catalogs of their goods.
Cronon, William. Nature's Metropolis. New York: W.W. Norton & Company, 1991.
Hoge, Cecil C., Sr. The First Hundred Years Are the Toughest: What We Can Learn from the Century of Competion Between Sears and Wards. Berkeley: Ten Speed Press, 1988.
Latham, Frank B. A Century of Serving Consumers: The Story of Montgomery Ward. Chicago: Montgomery Ward, 1972.
Excerpt from Montgomery Ward catalog, Spring 1881, pp. 66-67. Newberry Library, uncataloged