Lessons from the Rise and Fall of Iconic Retail Giants
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Chapter 1: Nostalgia for A&P
Reflecting on my upbringing in Sharon, Massachusetts—a quaint town with a population of around 10,000 during the early 1950s—I remember the Great Atlantic & Pacific Tea Company (A&P).
As I reminisced, the images of its narrow, creaky wooden floors came to mind. One of my cousins once joked that those floors were treated with used motor oil from a nearby garage. The store had tight aisles filled with products, accompanied by an elusive scent I can’t quite identify today. My older sister reminded me how dimly lit the store was, and I recall the S&H Green Stamps they distributed (look it up if you're unfamiliar!).
After my wife and I got married in 1967, we occasionally visited A&P, but our purchases were minimal since they primarily stocked A&P-branded products and only a few national brands.
Curious about the store's history, I consulted Wikipedia and learned that the A&P corporation shut its doors in 2015, although our local branch had probably closed long before.
A surprising detail I found was that A&P was the largest grocery retailer in the United States from 1915 until 1975, even holding the title of the largest retailer overall until 1965. In 1930, they boasted nearly three billion dollars in sales—equivalent to about fifty billion today—despite a U.S. population of under 123 million and an average annual income of less than $1,500.
Given the economic backdrop of the Great Depression, where unemployment hovered around 9%, that three billion dollars takes on a new significance. Yet, by 2015, A&P was gone, leaving investors who had once thrived in the 1950s in disbelief.
Section 1.1: The Downfall of A&P
So, what led to A&P's decline? According to Wikipedia, the downfall began with the passing of key shareholders, including John Hartford, who died in 1951, followed by his brother George in 1957.
The reasons for their failure were summarized as follows: the majority of profits were funneled into dividends, the stores remained small and predominantly stocked A&P's own brand, and they ceased expanding or modernizing their locations.
This reliance on dividends can be seen as a form of greed. Presently, major tech companies are facing similar transitions as founders contemplate retirement. Many early executives hold significant stock and voting power—Amazon’s founders, for instance, have majority control.
The topic of greed is particularly highlighted by Tim Cook, who was awarded $750 million in Apple stock in 2021. While he is known for philanthropy, the underlying issue remains: what will happen to these companies under the stewardship of future generations?
Subsection 1.1.1: The Fate of Tech Giants
Section 1.2: Lessons from History
Historical examples abound of once-prominent companies that have faded into obscurity, like Wang Laboratories, Gateway Computer, and Kodak. These names were as familiar in my youth as today’s Dow Jones companies are to many. Their rapid ascent and equally swift decline serve as a cautionary tale.
It’s not solely greed that leads to a company’s demise; often, it’s tied to an inability to adapt. Many successful firms falter not because they can’t innovate, but because doing so would cannibalize their current profits. It’s akin to holding onto an aging car for vacations instead of investing in a reliable vehicle for work.
This reluctance to change contributed to A&P's downfall, as well as that of other firms. Clayton Christensen’s "The Innovator's Dilemma" explores this concept extensively and is worth a read.
Chapter 2: The Future of Today's Giants
In examining the trajectory of large companies, we see that they often rise and fall, with greed and resistance to change playing pivotal roles. Although I invest in companies like Apple, Google, and Amazon, I remain cautious about their longevity.
Management changes—especially when influential figures step down—can signal potential challenges ahead. While I acted prematurely by selling half my Apple shares when Tim Cook took over, this experience taught me to remain vigilant without succumbing to panic.
I was unaware of A&P's significant historical impact until my recent research. I also recall my mother's trips to a different local grocery store, indicating that even then, we were diversifying our shopping habits.
If you appreciated these insights, feel free to buy me a coffee. While I may use it for tea, it's the sentiment that truly matters.