A Store Owner You Can Trust: John Wanamaker, Returns and the Price Tag

0:00Did you ever notice how you spend hours shopping online only to pause at checkout because you wonder if you trusted enough to hit buy now? Agentic Commerce is testing that moment more than ever. That's where PayPal comes in. With 25 years of checkouts, 400 million consumer accounts globally, and the benefit of fraud protection. So no matter where a purchase starts, it ends with trust. Built for payments, growth, and agentic. PayPal Open. Built for all business. Visit paypalopen.com.

0:36Pushkin. Too quick? No, it was perfect. Pushkit, stop. You got it. Malcolm Gladwell here. A quick note. This episode of Business History is part of a larger series exploring trust, where it comes from, the moment it's earned, and where we decide to place it. This episode is sponsored by PayPal Open, trusted by consumers built for all business. For over 25 years, they've been at the forefront of commerce, helping merchants of all sizes grow. So wherever commerce moves next, you can rest assured PayPal Open has your back. And with that, Jacob and Robert are taking you back to the 19th century, to the moment that launched a paradigm shift in the way people buy things.

1:23And it's one that sticks with us to this day. Enjoy.

1:38Robert Smith, people have been using money to buy stuff for thousands of years. Yes. But you know what did not exist for almost all of that time? The price tag. How did you know what anything cost? Anything cost what you were willing to pay for it and what the seller was willing to sell it for. Every transaction was a haggle, was a bargain. I'm sorry, I'm going to have to leave. This is way too much. Too rich for my blood. No, no, come back, come back. Have a glass of tea. But there was a moment, a specific moment we can look at in history when the price tag appeared in the world. And it appeared to solve a particular problem.

2:18It was a problem of trust. And the price tag solved that problem so well that it took over the shopping world. I'm Jacob Goldstein. And I'm Robert Smith. This is Business History. A show about the history of business. Today on the show, John Wanamaker, guy who made the price tag great. With the price tag, John Wanamaker helped to reinvent shopping in America. And then a few decades later, he re-invented shopping in America. And he solved the problem of trust in retail in the modern world. John Wanamaker was born in 1838. Let's go. Just settle in. His dad was a brickmaker. He lived in what's now South Philadelphia.

3:04Then it was south of Philadelphia. Farms, brickyards. He started in retail as a teenager when a family friend gave him a job at a store called Tower Hall Clothing Store. It was a men's clothing store. And I just want to pause here to talk about, like, what were stores in America in the early 1850s, around this time? So most Americans still lived in the countryside, right? And in the country, you shopped at the general store, a place where you knew the person who ran the store. They knew you. You were probably a farmer. You've probably known them all your life. They had everything you might need.

3:43And if they didn't, they could order it for you. And you would almost certainly be buying on credit. You'd pay up when the harvest came in. In some cases, you might even just pay directly with your crops. So this was a very personal relationship. Yes. Very one-to-one. You knew them. They knew you. You had credit. But around this time, in the mid-1800s, this is starting to change. People are moving to cities like Philadelphia. and one of the defining features of urban life is anonymity. You don't know everybody anymore like you did on the farm, you know. Maybe you've just moved to the city and you knew your local merchant all your life.

4:21Now you don't know anybody, but you need to buy something. So where do you go? You go to a store you've never been in before. And Robert, I wanted to give a sense of what this might be like. And I found this amazing description. Apparently there was a shopping district on Chatham Street, which is way downtown in Manhattan. I guess it's Chatham Square today. And this passage I'm going to ask you to read, it gets at what urban clothes shopping was like at this moment. Honesty is a stranger in Chatham Street, and anyone making a purchase here must expect to be cheated. The buildings are generally old and dilapidated, the shops are low and dark, and they are rank with foul odors and are suggestive of disease.

5:01The merchants know they are never expected to sell honestly, and they make it a rule not to disappoint their customers. So nothing's changed. Trust us. You cannot trust us. Yes. Yeah. So you can see why there is a trust problem in shopping at this moment in history. And in fact, interestingly, you know, Wanamaker is going to work selling clothes, which itself is kind of new at this point. Most people either made their own clothes or if they were rich enough, they paid someone to make clothes for them. The sewing machine was relatively new. It was allowing for the creation of ready-made clothes as a business.

5:40But people looked down on it. They called clothes stores slop shops. Like with AI. Because it was bad and they might get cheated. Poor quality. The slop part was poor quality. It's like if you're like a sailor or something, you know, maybe you buy these slops. But this store, Tower Hall, where Wanamaker is going to work, is trying to be a better kind of store. So, you know, it is this universe where clothes stores have this very poor reputation. But Tower Hall is trying to do better. It's run by a guy named Joseph Monroe Bennett. And to be honest, I'm only mentioning his name because I found a picture of him.

6:14And I can't get enough of his mustache. And I wanted to show it to you. Wow. It's incredible. His mustache, it's not waxed and big. It's just bushy and big. His mustache goes out over the collar of his jacket. Yeah, like if you picture like a hand going out from either cheek to the side, like wings, like they could start flapping and he'd fly away. Okay, so this is - Like two brooms. Two brooms is good. So putting this in just for the mustache made me realize when I'm doing sort of profiles like this, I don't tend to do visual descriptions of people. It's just not where my mind goes. But look, we're doing this guy who's just appearing for a sec.

6:53So let's do Wanamaker, the guy the show's actually about. Here's a picture of Wanamaker. You could do a whole show of just describing people what they look like. Okay, give me Wanamaker. Wanamaker looks like a very serious businessman wearing a bow tie. He's got tiny little glasses, the tiniest of tiny. Pinsnez, is that him? I think so, yeah. No arms, yeah. Yeah, tiny, tiny glasses. And he just looks like a very stern, serious person. Yeah, clean-shaven, round-faced. And, you know, I think this is in keeping with the persona he's going to create, right? This very ordinary, upright shopkeeper. I would trust him.

7:32Maybe not the guy with the mustache, but I would trust the Wanamaker. Yeah. So, okay. So who is this guy? This is an older picture of him. Who is he when he's a teenager? When he goes to work for Dr. Mustache at the Tower Hall clothing store? Not actually a doctor. Nobody has ever called him Dr. Mustache before, but you know what I'm talking about. So Dr. Mustache will later call Wanamaker the most ambitious boy I ever met. But one of the things that's interesting about Wanamaker at this moment, that's relatable, as they say, is he's ambitious, but he doesn't know ambitious for what? You know, I want to do something big.

8:07He is deeply, deeply religious, and I think earnestly so. I think he really believes it. His whole life he never drank, smoked, gambled. Also, one I didn't see coming, never went to the theater. thought he wanted to be a minister, and he really liked selling clothes and started thinking maybe I could be a great merchant. And so there is this tension between this sort of worldly pursuit of being a retailer and this otherworldly pursuit of being a minister. And he's able to resolve this tension when he discovers something called the businessman's revival, a Christian movement where businessmen pray in the middle of the day.

8:45And it's based on the idea that you can reconcile these things. You can be a good Christian and work in business. And so this is his path now. He starts leading midday prayer meetings, starts a Sunday school, brings people in with flyers and newspaper ads. So, you know, he's learning about marketing. He's making connections in town. But he's also preaching, don't cheat your customers. Like, have a relationship with them. Help them out. I think so. I think so. He's certainly learning about running a retail business. And in 1861, in April, when he's 23 years old, he opens his own clothing store with his brother-in-law.

9:24They call it Oak Hall Clothing Bazaar. It's a little store, just, you know, ground floor of a building. First day they're open, they have one customer. And let me say again, April of 1861, four days after they open, Confederate troops fire on Fort Sumter, and the Civil War is joined. Is joined? Is that what you're saying? Yeah. Wanamaker doesn't serve in the Union Army because he has bad lungs, which I think is a real thing. I don't think it's fake. So he's stuck in Philly. Business is bad. And part of the reason it's hard is because retailing has such low barriers to entry, right? At this point, especially, anybody who wants to can set up a shop.

10:05There's little storefront shops. There's people selling stuff just on, like, whatever. Push carts. Push carts going door to door. They're just set up on the street. Lots of the businesses fail every year. And Wanamaker, of course, wants to set his store apart. Like, in every story we have, how do you set your business apart? And he's going to do a few things. He's going to do a few things to distinguish his store from these other stores. The big problem, just to restate it, is trust, right? People really don't trust urban shopkeepers. And people all the time, they get shorted goods or there's a move where the shopkeeper will show them a sample and then the customer will buy it.

10:42And then what actually gets wrapped up and given to them a bag is something else. And like, you know, returns are not a thing. It's just it's it's ugly out there. And then on top of that, you got to haggle. So every time it's like stressful and antagonistic. Weirdly enough, it reminds me of the early days of Internet shopping. Where, no, where you assume that you were sending your money off and you would never see anything. Yeah, putting your credit card into the computer was... Seemed like a bad idea. Seemed like an obviously bad idea. Like, I'm not going to type my credit card onto my computer.

11:12What's even going on? So I can sort of picture how people felt. Like, this is weird. Yeah, so it's this universe of basically every man or woman for himself or herself, right? But Wanamaker actually wrote about this, Robert. Give it to us. The rules of the game were don't pay the first price asked. Look out for yourself in bargaining. Haggle and beat the seller as hard as you can. Yes. So that's one part of it. And then there's another detail he mentions. Give us the other detail. When a thing was sold, it was sold. No returns. Like law of the jungle shopping here. And it's a real problem because of what we talk about as information asymmetry.

11:49If you're the seller, you know how good your product is. I don't know. oh, I just walked in the store, so I don't know the best price for it. I don't know if you're cheating me. I don't know if the product is bad. This leads to transactions that never happen, because why would I risk it if I don't know who you are? And it leads to bad feelings, right? Like, I know that seems like hand-wavy and vibey, but this is fundamentally the trust problem. So Wanamaker is trying to walk into this cold capitalist market and set himself apart. And the first thing he does is he advertises. He advertises a lot.

12:26His first big sale, he nets$38 in profit, and he spends all of it buying ad space in the Philadelphia Inquirer, the newspaper. And on top of that, he's blanketing the city with leaflets and little booklets talking about his store. His partner, his brother-in-law's last name is Brown. And he puts actually clocks at the railroad stations with the initials W &B, Wanamaker and Brown. He buys these big 100-foot-long billboards. And so this part, right, this is brand advertising. He's creating this persona for himself and his store. Read to us from this ad. Okay, this is for a Lansdowne, which is apparently a kind of cloth.

13:02silk and wool Lansdowns made in old Philadelphia, not far from the Watermaker's store, we always knew William F. Reed and were the first to introduce and to stand for the first Lansdowns that he made. Oh, this seems like plucked from a menu in Lower Manhattan today. Yes, right. Like when the waiter comes and tells you where the chickens grew up and what music they listened to or whatever. Right, it's telling a story about a product. Yeah. And it's Wanamaker's relationship to this local artisan, right? Like, we always knew William F. Reed, and we're the first to introduce and stand for. And also, made in Philadelphia, not far from the Wanamaker store.

13:43This is like, oh, it's a country store. Like, him and Reed are just sitting there in their rocking chairs on the porch or something, right? I'm not some crooked urban merchant. I'm a friendly local shopkeeper. Down in old-timey Philadelphia. Down in old-timey Philadelphia. So, you know, Wanamaker is clearly doing something here. He has a strategy. You can see it emerging from his ads. But it is a difficult business. But he keeps putting money in, gets a contract making uniforms for Union troops, keeps him going, keeps him alive through the war. And then in 1865, Wanamaker makes this move to build trust in his store that is going to change American retail forever.

14:26He describes this moment in his memoir, The Golden Book, which I have not quoted much from because it is like incredibly self-congratulatory and sanctimonious and just not that fun to read. Kind of an ad for him in the store? He knows what he's doing. But this part is really on point. Give it to us. He says he unfurled the first Wanamaker flag of fair dealing. It was true blue and bore this revolutionary symbol, one price and return of goods. One price and return of goods. Right. So one price, no haggling, a thing costs what it costs. And then return of goods means if you don't like it, you can bring it back and we'll give you your money back.

15:09This one price thing, you walk in and the jacket says 55 cents. And of course you think it's a trick. So you're like, well, we take 40. No, I'm sorry, sir. The jacket costs 55 cents. That makes no sense. Just because you wrote it down doesn't mean we can't haggle here. of a conversation. Well, I mean, so if you think about it, so it's the pairing, right? People had actually, like, he didn't invent one price. He seems to have invented, at least in the U.S., the combination. And the combination is important, right? Because it's like, you can buy it for 55 cents. And if you find out tomorrow that I gave you a bad deal, you can bring it back.

15:46And so he is getting rid of haggling, right? And it certainly increases efficiency. It makes it more pleasant. I kind of like haggling in some settings. I don't know. You may be the only one. I do not like it. I, in fact, want to see the price get in and out as quickly as possible because I can determine if the price is fair or not. My time's worth money. What about on a big transaction? I know you're not a car guy. You live in New York and love not having a car. But, like, when you buy a car. I know. I want the one price. I really do. I really do. I just don't. I don't want the stress. I don't want the research.

16:19I just want to look at a price and determine whether it's worth it to me. But that's just me. You've told me you don't even shop around. You just go buy a shirt and you just walk in a store and pay for a shirt. So efficient. We are not the same. So I will say in this world we've been talking about, which is very antagonistic, right, where a purchase is a kind of battle. And the seller is trying to get the better of the buyer and the buyer is trying to get the better of the seller. One price gets rid of that, right? And the return kind of smooths any rough edges. It turns shopping into a sort of we're all in this together.

16:52Here's the price, sir. We believe it is a fair price. and it's the same for everyone. Would you like to make the purchase? In terms of game theory, he's turning it from a one-time game where you should try and screw the other guy as much as possible. But if you have a repeated game where you know you're going to have to have transactions over the course of a long period of time, it's best for you to be as fair as possible. You want the person to come back. And so all of these things, you check the price, it's 55 cents. You come the next day, it's also 55 cents. Other people say they spent 55 cents.

17:26Well, and also, if you don't like it, you can bring it back. Like the return policy is a big trust builder. Let's go back to the Wanamaker memoir for the impact of his one price and return of goods policy. A nitroglycerin bomb exploded in the basement of each business house in Philadelphia could not have caused greater confusion among merchants or more talk on the part of the public. He's not underselling it. He's not underselling it. It's so funny. But look, his combination of one price and return of goods did explode like a bomb. Nitroglycerin bomb. I guess so. I don't know about, but yes, sure, a nitroglycerin bomb.

18:04And Oak Hall, his clothing store, becomes the largest men's store in town. They expand into the building next door, then they take over the whole block. They open a second, fancier location in town. So that by 1875, his stores are doing several million dollars in sales per year. They employ over a thousand people. And he wants to not just grow, but he wants to invent a new kind of store. He's going to reinvent shopping in America in a way that will have implications for the next hundred years. And we're going to talk about that in just a minute.

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19:56And we're back! Like John Wanamaker. He never left. He never left. The year is 1871, and John Wanamaker goes to Europe. Write a children's book about that. Europe's going to have a huge influence on Wanamaker and on shopping in America. Takes the ship, I imagine. It's his only option. And in particular, there are two places Wanamaker goes that are going to influence this new kind of story he's going to build. first is the international exhibition in london we love a 19th century international exhibition big deal they had them all the time i feel like if in the 1800s you couldn't throw a rock without hitting an international exhibition i mean it was like watching television at the time how would you see the new gears and the new products it's true and so the 1871 london exhibition you paid an entrance fee it was like a business i guess and you got to see everything paintings lace porcelain toys a llama a live llama cloth from india ivory jewelry it was like this like a weird pop-up metropolitan museum you know the world the world in a in a place except it's new stuff that you haven't seen before that you would probably talk about endlessly to your friends and it's probably what everybody in town was talking about and wanamaker loved it he loved in particular there was this pipe organ in the middle a giant pipe organ where everybody would have sing-alongs So, okay, so put in your head the exhibition, all the stuff under one roof.

21:23Place number two, he goes around this time, I think this was a separate trip, is a store in Paris called the Bon Marche. Which I have been to in Paris, if it's still open now. But when I went to Paris, the Bon Marche was amazing. You know, big, beautiful building, everything under the sun, all sorts of foods in the basement, lots of brass. and what I loved about them, this is back before the iPhone, they gave you a free map of the city. Oh, smart. I know. With Bon Marche marked in the map right there. Big little symbol. So, yeah, I mean, Wanamaker has a somewhat similar impression, right? Of perhaps a larger magnitude.

22:02He, I think at this point, has never seen a store that sells everything, right? At the time, you could go to a men's clothes store. If you want a men's clothes, you go to a women's clothing store. But they had clothing for all people. They also sold clothes and perfume and shoes and plates and silverware and rugs. You know, it's an apartment store, but this term doesn't exist yet. And department stores are starting to show up at this time. Here's one. There are a few in the U.S. But Bon Marché was bigger and better than all the rest. And when Wanamaker was visiting, Bon Marché was building this new and even bigger building.

22:40It had giant windows. Gustav Eiffel, of Tower fame, is going to put some kind of iron and glass dome on top. And inside the store, it's like that exhibition in London, but you can buy all the stuff. You can buy the rugs hanging from the balconies and the silks on the walls, and it's bright, and anybody who wants to can come in. And this is different. You know, it used to be poor people went to stores for poor people and middle class people went to stores for middle class people. And you had to be rich to go into the store that sold beautiful stuff for rich people. And the Bon Marché is not like that.

23:21Like, you can just walk into the store and be in there. And it changed life for people in Paris to such an extent that Emile Zola, the novelist, wrote a book, a novel, basically about a fictionalized version of the Bon Marché. In translation, it's called The Lady's Paradise. And he describes just the physical space, which, you know, remember the earlier description of stores as these cramped, dark places. Here, give us Zola on what it's like at the Bon Marché. Space had been gained everywhere. Light and air entered freely, and the public circulated with ease beneath the bold curves of the wide-spaced trusses.

24:01It was the cathedral of modern business, strong and yet light, built for vast crowds of customers. Cathedral, cathedral, cathedral. Remember, Wanamaker was torn between minister and merchant. Of course he wants to build the cathedral of business, right? Of course this is what he wants. He wants to build a store that is more than just a place to buy stuff. He wants to build a store that's kind of a museum, kind of a civic center, but also a store, right? He wants to sell a lot of stuff. And so goes back to Philly, and in 1875, Wanamaker buys the old Pennsylvania Railroad Yard, this giant, I guess, train shed, train shed with a glass and iron ceiling, the largest open floor in Philadelphia.

24:53and now you look at a map and it's like the middle of town. But at the time, it was outside of the retail district where people went to shop. And, you know, of course, everybody walked everywhere at the time. And so buying a shop outside the retail district doesn't make any sense. Here, there's a businessman at the time he bought this wrote about why everybody thought it was a bad idea. The consensus of opinion was that the purchase would prove a ruinous one. The idea seemed chimerical in the extreme to start a clothing store so far from the general current of retail traffic. Chimerical in the extreme.

25:29He guffawed. He guffawed. But there are a couple of things going in Wanamaker's favor here. One, public transportation is being invented. Fun. Streetcars are new at this point. They're like trolleys, like we think of a city, but being towed by a horse, which is an image that I love. So 1800s, you know, like the modern world, but not quite. And so public transportation means you don't have to walk to do all your shopping. You don't have to have a little store next to everybody's house. You can have a big store that a lot of people take the streetcar to. Another thing going in Wanamaker's favor, Philadelphia is about to have a centennial exposition.