Super Markets

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Exactly 75
years ago, Michael J. Cullen, a veteran of some 27 years in the
grocery business, opened up the
very first supermarket
, King Kullen Grocery Company, on Jamaica
Avenue in Queens.

Cullen had
first presented his idea in a letter to the president of the Kroger
Grocery and Baking Company, for which he was working in 1929. The
president's subordinate rejected it summarily, not even bothering
to show it to the head honcho. As a result, Cullen handed in his
resignation and put his own money and future on the line to make
his idea a reality.

The year 1930
might not seem like a propitious time to be opening up a new business – and
it would not have been a good time were it not for the fact that
Cullen's vision was to provide a greater variety of foods to his
customers at a lower cost. Low-cost food, after all, was the thing
most needed for a people undergoing a serious economic depression,
and King Kullen supermarkets thrived. By 1936, Cullen was in charge
of an economic powerhouse, with 17 stores and $6 million of revenue
a year.

Although Cullen
died that same year following an appendectomy, the business continued
to grow under the watchful eye of his widow and other family members.
In fact, at the height of the Depression, King Kullen was performing
so well that Mrs. Cullen was able to give every employee a raise,
at least a week's vacation, and insurance.

Today King
Kullen
continues to serve New York, primarily Long Island, and
does $800
million in business annually, employing 5,000 people in nearly 50
stores
. It's still owned and operated by the Cullen family – and
all because someone at Kroger rejected Michael Cullen's innovative
and very detailed suggestions. What's more, in the end, Kroger was
forced to put Cullen's ideas into practice anyway in order to compete
with its former employee's supermarket chain.

Undoubtedly,
though, there were those who feared and loathed King Kullen when
it first came to prominence. After all, it wasn't for nothing that
Cullen billed his store as "The World's Greatest Price Wrecker":
He was undercutting all the other grocery stores in town, attracting
customers from up to 100 miles away to his stores with their spacious
parking lots and wide selections which shoppers could peruse at
their leisure. Most other stores at the time were cramped, had a
limited inventory, and required the customer to ask the clerk for
each thing he wanted to buy.

Were these
fears well founded? In the short term, perhaps they were. Surely
the rise of the supermarket sounded the death knell for many "mom
u2018n' pop" grocery stores, butcher shops, and bakeries. Possibly
the lower prices did temporarily depress wages or employment opportunities
in the grocery industry as a whole (although the fact that King
Kullen was, within a few years, able to offer its employees a grand
package of higher wages and benefits undercuts this notion).

In the long
term, however, it is clear that any dire predictions that might
have been made about the end of American business and jobs at the
time were baseless.

Yes, many small
grocery stores were put out of business by King Kullen, but then
King Kullen was, and is, very much a "mom u2018n' pop" operation
itself. Those who were put out of business either retired or found
other ways in which to maximize their economic potential, thus contributing
to a better economic picture for everyone. Obviously they were no
longer putting their resources to their best and most efficient
use once supermarkets came along, and thus those resources would
have been wasted had they continued to run their stores as they
had run them before. It was essential for their economic well-being,
as well as the economic well-being of the rest of the country, that
they redirect their resources to their most highly valued uses.

Furthermore,
there is still plenty of competition in the grocery business. The
competition may be among larger firms with big supermarkets, but
it hasn't gone away simply because Michael Cullen got there first
and managed to cream his smaller competitors.

The lower prices
King Kullen was able to offer its customers were not just a boon
for those particular shoppers. They also freed up money to be spent
on other items, thus helping the economy as a whole to prosper,
if not during the Depression then certainly in the postwar era.
If instead of spending, say, $10 a week on groceries a family could
now spend only $8 for the same or better products at a supermarket,
they then had $2 to spend elsewhere. Thus, whereas in pre-supermarket
days that $10 would have only bought food for the family, they could
now purchase, for example, both food and shoes. In turn, that same
$10 no longer contributed to the employment only of those in the
grocery business but also helped employ shoemakers and their suppliers.

If our hypothetical
naysayers had managed, through government regulations, to stifle
King Kullen and other supermarkets in order to preserve the small
businesses and high prices, would we all be better off for it? The
answer is clearly no.

What, then,
are we to make of those who argue today that Wal-Mart and other
chain stores are destroying American businesses and jobs? Wal-Mart,
too, was the brainchild of a man with years of experience in retailing,
and it has succeeded in the very same manner in which King Kullen
did: by offering superior selection, prices, and customer service.

Wal-Mart has
indeed put some smaller competitors out of business, and it has
become the new "World's Greatest Price Wrecker." As we
have seen with the example of King Kullen, however, this is something
to be celebrated, not feared and attacked. Wal-Mart customers have
more money and time (because they can do all their shopping in one
place) to spend on other things, thus helping both Wal-Mart's customers
and the economy as a whole. There are still plenty of competitors,
and those that no longer exist can now put their resources to more
highly valued uses. Wal-Mart's employees, too, enjoy better-than-average
wages and benefits, including a stake in the company itself. (For
proof, see Lew's
column
on the less-than-stellar suggestion of a Wal-Mart executive
that the federal minimum wage be raised. It's an unfortunate attempt
to stifle competition which could succeed since Wal-Mart already
pays, on average, well above the current minimum wage.)

One objection
that was raised by someone with whom I was discussing this subject
is that Wal-Mart sells us cheap foreign products, thus taking jobs
away from Americans and giving them to inscrutable Asians, whereas
King Kullen and other supermarkets did not do that at the time they
began. One doubts, however, whether Michael Cullen would have bought
flour from a mill in New York when one in Minnesota offered the
same product for far less; this would, of course, have resulted
in the transfer of jobs from New York to Minnesota, not as far away
as China but still potentially displacing some American workers.
Now, of course, supermarkets bring us foods from all over the world,
making it possible to enjoy fresh produce in January, which also
benefits consumers. Again, too, to purchase the product from the
more efficient producer, whether that producer is in Minneapolis
or Shanghai, is to maximize the potential of one's own resources
and, in turn, the resources of the economy as a whole.

Few people
today would want to live in a world with no supermarkets. We recognize
the economic benefits we derive from Michael Cullen's wonderful
invention, and we recognize that some of the temporary negative
effects of newer and more efficient businesses are outweighed by
the permanent improvements they introduce. The same goes for Wal-Mart
and other chain stores today. Instead of fearing and loathing them,
Americans need to recognize them as marvels of the free market and
look forward to the innovations that future entrepreneurs will derive
from their experiences with these companies.

November
24, 2005

Michael
Tennant [send him
mail
] is a software developer in Pittsburgh, Pennsylvania.

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