In 1872, Montgomery Ward created the first mail-order business. The idea was simple. Ward mailed out product catalogs straight to potential consumers in the Chicago region. Customers could pick out which item they wanted, fill out a form with the item name and number, and mail it back to Montgomery Ward. Ward delivered the product straight to the customer’s door.

Ward offered huge advantages to consumers. The competitors were small family run shops and middle men with a limited selection of overpriced goods. Ward offered standard high-quality goods at a lower price. His business saved money because it did not rely on brick and mortar shops and employees. It offered a broader range of goods than any local store. Ward invented the policy of “satisfaction guaranteed or your money back” which forced all his competitors to ensure equally high standards of quality.

Montgomery Ward became a nation-wide business soon afterwards and took advantage of a national economy of scale. It was a minor revolution in business.

Basically, Montgomery Ward was the Amazon.com of the 19th century.

Montgomery Ward only recently went out of business in 2001. The original, Amazon-like business model failed much earlier. The emergence of Department Stores like JC Penny’s and Macy’s challenged the mail-order business model. New Department stores offered the same wide range of goods at similar prices, but with the added attraction of actually walking through the store browsing rather than flipping through a catalog. The Department Stores even issued their own catalogs to competedwith Ward directly. In the end, Montgomery Ward opened its own department stores.

We can also thank Montgomery Ward as the inventor of junk mail. Interestingly, his business did not just deliver junk mail at random. As the business matured, they used the best 19th century statistical knowledge of the time to create a proto-type of data-mining and predictive analysis. Ward’s marketing team collected data from across the nation to maximize their profits by finding and ranking frequent and casual customs. Random guesses and “lucky” intuition would have led to quick failure.

The junk mail math started very simple, but turned fiendishly complex as the amount of information overwhelmed even the most talented individuals. The sheer amount of unintelligible information limited data-mining’s usefulness until the advent of computers. Military intelligence picked up on these predicative analysis techniques during World War II, when many mathematicians, businessmen, and scientists joined the military and introduced a new way of thinking. After the war, major corporations were attracted by the new marketing potential of data-mining. Private corporations maintain massive databases so as to better respond to customer demand. Computers made this a more powerful tool, but it was still very expensive until the 1990s.

Today, you take a very cheap 100 terabyte hard drive, completely fill it up and tell the software crunch the numbers while you get coffee. See? Even junk mail has its uses.

Update: And so it seems, businesses can come back to life. The Wards brand name was resurrected as, you guessed it, an internet retail company.

Advertisements