So just on that tip, we canceled it at noon.50
Sinclair fought back hard. He quickly penned The Lie Factory Starts, a manifesto in which he tried to set twisted quotations straight and reveal the underhanded tactics of his detractors. He held rallies, rodeos, and registration drives. He took to the airwaves. But the dominos continued to fall against him. The newspapers refused to publish EPIC radio program schedules, while running special features on United for California’s radio lineup. Sinclair failed to secure a public endorsement from an anxious President Roosevelt. Meanwhile, Raymond Haight, a young attorney and Democrat, joined the race as the Progressive-Commonwealth candidate, aiming for the middle ground between the radical Sinclair and the conservative Merriam.51
Don Francisco spent election night—November 6, 1934—at a sumptuous “radio party” at the Midwick Country Club in Pasadena, watching as election returns were posted on a blackboard in the ballroom. The final count pleased him enormously: Merriam won the race with 1,138,620 votes to Sinclair’s 879,537. (Sinclair’s wife wept with relief at the news; her unwanted ordeal, including death threats against her husband, was over.) Haight polled 302,519 votes; if he hadn’t been on the ballot, California probably would have elected its first socialist governor. Timing, too, played a critical role in the outcome. “If the campaign had lasted a little longer,” Belding later speculated, “the public might have found out and the whole thing might have backfired.”52
Francisco agreed: “Had the election been held a month before it was, [Sinclair] would have won, and had it been held a month or a month and a half after it was held, he would have won.”53
The California gubernatorial campaign of 1934 marked the birth of modern media politics. To that extent, at least, Lasker’s agency and its local allies changed history. Upton Sinclair’s campaign was scuttled—unfairly and brilliantly—by the stealthy wizards of Lord & Thomas. For better or worse, the democratic process was transformed.
Following his defeat, Sinclair went back to what he knew best: writing books. True to form, his first post-election book was I, Candidate for Governor—And How I Got Licked. Although he demonstrated amply his animosity toward the newspaper and the movie moguls, he noted the work of Whitaker and Baxter only briefly, and without naming them (“They had a staff of political chemists at work, preparing poisons to be let loose in the California atmosphere on every one of a hundred mornings”). He wrote nothing about the advertising agency that orchestrated the campaign against him, which begs the question of whether he ever learned about Lord & Thomas’s central role.54
Sinclair’s defeat solidified Lord & Thomas’s reputation as a force in California politics, and further raised Don Francisco’s profile. As a result, within two years, the agency was recruited to manage yet another major political contest in the land of sunshine, promise, and unconventional politics.
This time, the battleground was the state’s retail sector. Millions of independent retailers, supported by powerful wholesalers, sought to use a prohibitive tax to drive chain stores out of their state: a drama that was being played out across the nation, but that erupted in California in a characteristically colorful fashion.
The chains normally went into political battle as prohibitive favorites, but by the time California’s chain retailers approached Lord & Thomas to mount their defense, they were fighting for their economic lives. On July 21, 1935, the newly reelected Governor Merriam signed into law a chain store tax steep enough to cripple the state’s chain retailers. At the signing ceremony, Merriam issued an odd challenge: “The chain store operators feel that this legislation will prove discriminatory in its application. If so, the opportunity is theirs to prevent this act from becoming effective by invoking the referendum and submitting the question directly to the people.”55
That they would do, thanks to a rapidly mobilized Lord & Thomas campaign. Once again, Don Francisco played the leading role. And once again, he was supported by Lasker, who developed a “keen interest” in the fight and authorized a massive marshalling of company resources for the cause.56 And although Lasker mainly watched the chain store battle unfold from a distance, his behind-the-curtain approach permeated the strategy of this campaign as well. One opponent would deem it—with grudging admiration—“the velvet touch.”57
Only near the end of the fight did Francisco and his small army take off their velvet gloves and administer their knockout punch. The Lord & Thomas strategy was improbable, counterintuitive, and inspired. It left an indelible imprint on retailing in California, and—by extension—across the nation.
The first stirrings of a retailing revolution came on the eve of the Civil War, when the Great Atlantic & Pacific Tea Company opened its doors in Manhattan in 1858. By 1920, A&P was operating five thousand stores. F. W. Woolworth opened his first discount variety store in 1879; by 1920, his chain had more than eleven hundred stores.58
The 1920s brought prosperity to the nation’s urban middle class, and the chains expanded rapidly to serve this growing consumer base. By the end of the decade, they controlled 17 percent of the nation’s retail stores and 39 percent of total retail sales. A mere half-dozen grocery chains, which collectively operated more than thirty thousand outlets, virtually controlled that sector. Nine chains dominated the variety-store business, and other chains ruled in shoes, drugs, and apparel.59
Chain store success was driven by a combination of modern retailing practices and economies of scale. Whereas the neighborhood independents typically devoted little attention to their public faces, the chain outlets featured large, bold signs—uniform from one store to the next, and thus instantly recognizable—and visually striking window displays. Inside, the differences were even more striking. Independent dry-goods stores tended to be dark and cluttered environments in which customers required the assistance of the clerk to locate goods. In traditional grocery stores, proprietors selected meats and produce for their patrons. Most neighborhood shops were too cold in the winter and too hot in the summer. In sharp contrast, the display of goods inside chain outlets was “scientifically” engineered at the home office and replicated precisely from one outlet to the next. Lighting and climate were carefully considered. Clerks were trained to maximize stock turnover.60 Goods were placed directly in front of the consumer—not only giving those consumers more control over their purchases, but also minimizing staffing requirements.
Of course, the mom-and-pop stores had some appeal. They were neighborhood institutions, with their owners often living above or behind the shop. The long hours “around the cracker barrel” were filled with socializing and gossip. Customers from the neighborhood usually bought on credit, running tabs that might be settled up every few weeks.
What tipped the balance in favor of the chains was price, pure and simple. According to marketing historian Richard Tedlow, the chains charged somewhere between 3 percent and 11 percent less than their independent competitors. They did this by eliminating waste, tracking inventory efficiently, and buying directly from farmers or manufacturers.61 The chains also leveraged their size in their advertising, buying millions of newspaper and magazine column inches at bulk rates. Gradually, they gobbled up market share in key retail sectors. Contemporary observers wondered how long it would be before “the independent would be crowded out altogether.”62
Of course, the independents fought back.63 But when it came to mobilizing for collective action, they faced an acute structural vulnerability. They were, by definition, fragmented into hundreds of thousands of independent proprietorships. They banded together in trade associations—one for grocers, another for druggists, another for hardware stores, and so on—but they remained relatively incoherent as a sector.
The anti–chain store tactic that took hold most firmly was elegant in its simplicity: a prohibitive tax. Most of these tax schemes stipulated an annual levy of one or two dollars for each store under common ownership up to the first five stores, with the tax rate escalating thereafter, until a maximum rate of seve
ral hundred dollars per store was reached at about twenty stores.64 The chains lobbied hard against the bills, but by 1927, thirteen states had enacted anti–chain store tax laws.
Meanwhile, Congress in May 1928 instructed the Federal Trade Commission to launch an investigation of chain store competitive practices. Up to this point, the chains had been poorly organized, especially given their financial resources. In 1928 they transformed a grocery chain store association into the National Chain Store Association (NCSA), which immediately went to work on an ambitious national “educational” campaign.
Initially, it worked: only half a dozen of the 142 anti–chain store bills introduced in the next two years were signed into law.65 But the anti-chain forces were improving their tactics, as well. One weakness in their approach had been in calling for higher taxes on chains of five stores or more, a threshold that raised legal questions about the definition of a chain. New bills proposed higher taxes beginning with the second store in a chain.
But was there a legal foundation for this kind of “graduated” tax? The chains took this question all the way to the U.S. Supreme Court in 1931. In a sharply divided opinion, the highest Court found graduated taxes constitutional. In the majority opinion, Justice Louis Brandeis—an established tormenter of big business—argued that chains were, in fact, a fundamentally different kind of business enterprise. In the next two years, eighteen chain store tax bills were enacted into law.66
This reenergized anti-chain forces on the state level, and California—with its fast-growing population, a left-leaning streak in its political culture, powerful agricultural interests, and ever-growing numbers of chain outlets—was ripe for battle. A newly formed “Anti-Monopoly League” introduced a chain store tax bill into the 1935 session of the legislature. It included a crippling multiplier: for the first store, an owner would pay $1 for a “license” to operate in California. That would double for the second store, double again (to $8) for the third, and so on until the fee reached $256 for the ninth store. After that—for the tenth store and any more—the “license” was $500 per store. Heavy majorities of California’s lawmakers endorsed the bill. Thirty-four of thirty-eight senators, as well as sixty-eight of seventy-six members of the Assembly, approved it.67
All of this put Governor Merriam in a tough spot. The bill enjoyed strong popular support. Only a few months earlier, though, he had held onto his office against the Sinclair onslaught mainly through the intervention of the state’s well-heeled business interests, who uniformly opposed the proposed bill. Under heavy pressure from the Anti-Monopoly League, Merriam signed it. But even as he signed, he issued his none-too-subtle challenge to the chains: If you want to overturn this law, get a petition on the November ballot, and persuade the voters to back you.68 Long shot or not, the chains were compelled to take up the challenge. Under the terms of the new law, a five-hundred-store chain would be compelled to contribute more than a quarter-million dollars to the state treasury (versus the $500 paid by 500 independents).organizing quickly into the “California Chain Stores Association,” they collected 150,000 signatures by the end of the summer, far more than needed to put a referendum question on the fall election ballot.69
“The next thing, and probably the smartest thing they could have done,” recounted Chain Store Age editor Godfrey M. Lebhar, “was to recognize their own inability to shape up the kind of campaign the situation called for, or to carry it through. They realized they were in the position of a man who was desperately sick and needed the attention of the best doctor he could get.”70 So they called in a specialized sort of doctor: Lord & Thomas.
Word had spread among leading corporate interests about Lord & Thomas’s decisive role in the Sinclair campaign. In addition, an old business connection helped steer the California Chain Stores Association toward Lord & Thomas. W. G. Irwin—Lasker’s former partner in the ill-starred Van Camp enterprise—had invested in the Purity Stores chain of West Coast grocery stores. Under the astute direction of Irwin’s protégé John Niven, the former general manager of Van Camp, Purity by the mid-1930s had grown to a hundred-store chain.71 As Irwin later explained: “So when this [chain store] fight came up, [Niven] immediately thought of Albert Lasker’s organization to handle the thing—there was a fellow with enough force to present people with the idea. And I think he was in a large measure responsible for selecting Don Francisco.”72
The California Chain Stores Association vested Lord & Thomas with an extraordinary degree of control, with Francisco being given virtually complete autonomy. The reasons appear to have been twofold. First, discretion was in order; and second, there simply wasn’t enough time for the kinds of bureaucratic niceties—organizational meetings, negotiations, and so forth—normally associated with an ambitious campaign.73
What happened over the next several months was so unexpected that Francisco had to caution his clients not to judge the campaign by its appearances. (On the face of it, an odd request: after all, what was a public relations campaign if not “appearances”?) Francisco knew that as the precious weeks ticked by, little would seem to be happening. During the first phase of the effort, approximately nine months long, advertising would play only a minor role. “Indeed, at the outset,” Francisco recalled, “it was seriously questioned whether the plan should include any advertising of this sort at all.”
This was because, under Lasker’s leadership, Lord & Thomas thought in terms of “advertising in the wider and truer sense of the term.” It was a campaign in which Francisco took great pride, and which he later used to illustrate the ways of modern promotion. “It is not enough to be right,” Francisco observed, “it is also necessary to seem right.” The task at hand was to reengineer the public image of California’s chain stores; a frontal assault was unlikely to succeed, and might even backfire—it would not “seem right.” Once again, Lord & Thomas had to operate behind the curtain.74
A first step involved an honest self-appraisal on the part of the chain stores. Several long years into the Great Depression, the nation had lost its faith in corporate America—which, for millions of struggling Americans, the chains exemplified. California in particular posed “special handicaps to any attempt at interpreting business sympathetically,” Francisco observed, in his bland and understated way. “It was a stronghold for all sorts of political doctrines based on discontent.”
There were more practical matters to consider, as well. The estimated eighty thousand independent retailers in California had already demonstrated how quickly and effectively they could mobilize. The state was running a huge budget deficit, which made revenue derived from any sort of tax appealing to incumbents. The chain store tax also ran the risk of being lost amid the twenty other referenda on the fall ballot.75
In addition, the chains had made mistakes. They had expanded rapidly and, in the process, had defined “success” almost exclusively in terms of profits. As a result, Francisco told his clients, your customers are not your friends. “Motorists may buy at your service station,” he stated bluntly, “but damn you because they think you are a monopoly. They may go out of their way to save a few pennies at your chain store, and then denounce you for paying low wages.” A first and necessary step toward transforming customers into friends was to “eliminate all practices that gave the critics the slightest justification for their attacks.”
This applied to dealings with stakeholders of every stripe, but Francisco insisted the chains pay special attention to employees.76 The number of chain store employees was roughly half that of their independent counterparts—about forty-four thousand—but Francisco saw them as a sizeable army of “natural allies” to be mobilized. But this would require a change in corporate culture. Henceforth, the chain managers had to view workers not as numbers, but as “individuals with personalities, homes, families, birthdays, joys, sorrows, accomplishments, affiliations, interests.”
This was a strange new suit of clothes, but the chain store managers—under orders from headquarters—quickly donne
d it. They sent cards and letters to their employees to mark birthdays, illnesses, deaths, and other personal milestones. They gave out badges and awards. They sponsored “more parties and picnics, more orchestras and glee-clubs, more athletic teams and dances.” And, most tangibly, they shortened working hours and awarded more raises and promotions.77 These weren’t just cosmetic changes, Lord & Thomas emphasized; they were “subtler and more important, a revision of manner and spirit.”78
Chain store managers across the state invited their employees to view “The Spirit of ’36”—a Lord & Thomas-produced film that made the antitax case vividly—and then trained them in public speaking techniques so they could carry forth the message more effectively.79 Two manuals were handed out at these staff meetings: one on public speaking techniques, and the second an eighty-page booklet—produced by Lord & Thomas, and distributed by the California Chain Stores Association—entitled The Fifty Thousand Percent Chain Store Tax. This was an ingenious and rhetorically powerful expression of the mathematics involved. Just as $3 is 300 percent more than $1, the proposed $500 tax on the tenth store in a chain was 50,000 percent more than a one-dollar tax on a single independent.
To put the story before the general public, Lord & Thomas once again exploited radio. In April 1936, the agency launched a Monday-evening radio program called California’s Hour. Although the program mostly featured middle-of-the-road musical selection, it also profiled each week a California community, with locals (recruited by the Boy Scouts) performing in a talent contest. This enormously popular program auditioned ten thousand would-be stars, garnered 170,000 ballots, and ingratiated itself with each week’s featured city or town. The program ran no editorials, although the topics of its three essay contests were less than subtle: “Why I trade at chain stores,” “How the chains benefit California,” and “Why I will vote ‘No’ on No. 22.” Entry forms, conveniently available at chain store outlets, came with background “information” about the chain store tax issue.80
The Man Who Sold America: The Amazing (but True!) Story of Albert D. Lasker and the Creation of the Advertising Century Page 39
