Bernard Gimbel was just 24 when he urged his family to open a department store in New York City.
It was a bold suggestion.
Gimbel Bros. (aka Gimbels) had been profitable in Philadelphia and Milwaukee.
The family was reluctant to challenge Macy’s (M), which had dominated New York’s market for 50 years.
Bernard had graduated from the University of Pennsylvania’s business school in 1907, started as a shipping clerk and rose to vice president of the family’s store in 1909.
A fierce competitor, he used his financial acumen to push the family to challenge not only Macy’s, but also Saks and other stores at New York’s Herald Square.
In 1910, that urging turned into results: a million-square-foot new store that cost Gimbels a jaw-dropping $17 million, worth $425 million today.
Landing On Top
Gimbels had signed a 105-year lease for the property on which its building sat, paying $655,000 a month. Then the landlord raised the stakes: Did Gimbels want to buy the land for $9 million?
Rent was $655,000 a month, and Bernard calculated that the loan payments to purchase would be cheaper. The location would become priceless. So he said yes.
“After Bernard took the helm in 1926, he made Gimbels the largest department store company in the world,” Michael Lisicky, author of “Gimbels Has It!,” told IBD. “Despite the Great Depression, he drove sales from $109 million to over $300 million in 1953 (worth $2.6 billion today), when he stepped down.”
Bernard (1885-1966) was the grandson of founder Adam Gimbel, a Jewish Bavarian immigrant, who arrived in Vincennes, Ind., in 1842 and worked as a peddler.
A year later, he married Frida, the daughter of another merchant. They would have 14 children. One was Bernard’s father, Isaac, who would become Gimbels’ president.
Adam displayed general merchandise in places such as hotel lobbies and dental offices, then in 1845 he opened the Midwest’s first department store.
By 1887, he had relocated to the boom town of Milwaukee.
Then in 1894 came the buying of the Philadelphia store, which had 1,000 employees, and moving company headquarters there.
Once Herald Square opened with 4,780 employees and $5 million in merchandise, Bernard moved to New York, “almost single-handedly driving the company’s business,” said Lisicky.
The Gimbels store’s principles were: courtesy, reliability, good values and enlightened management.
Compared with its fancy competitors, the Gimbels store looked plain, but Bernard made a virtue of this with an explanation that had middle-American appeal: “The customer pays for fancy frills.”
A two-story Bargain Basement attracted workers on limited incomes in droves. “Nobody, but nobody, undersells Gimbels,” was an effective branding slogan.
At first, the cost of living in New York was a huge drag on company resources. But as the store grew, more of the family moved there and two Gimbel women married Guggenheims, with that wealthy family joining as eager investors. Sears Roebuck also saw the potential and bought in.
With the flagship store still in Philadelphia, the family decided in 1920 to sponsor the Gimbels Thanksgiving Day Parade as a way to highlight its stores as destinations for holiday shoppers.
The Philly parade rumbled on the way to drawing 500,000 by the 1940s — and now is sponsored by Dunkin’ Donuts (DNKN).
Macy’s copied the idea in New York in 1924.
Bernard Gimbel carefully cultivated the rivalry with Macy’s, which led to a catchphrase whenever anyone would ask about some company’s success secrets: “Does Gimbels tell Macy’s?”
The strategy reaped endless publicity, including being featured in the 1947 classic film “Miracle on 34th Street.” The feud was updated for the 2003 comedy hit “Elf.”
Lucille Ball’s character, in the hit 1950s TV comedy series “I Love Lucy,” often mentioned Gimbels as a favorite shopping destination.
Gimbel’s lesson is to find an angle for your business that generates strong public interest to gain constant free media coverage.
Saks And More
By 1922, Gimbels was generating so much money, Bernard convinced the company to be listed on the New York Stock Exchange, with the family owning controlling interest.
Stock sales provided the capital to buy Saks the next year for $8.1 million, and Bernard opened a new uptown and more upscale branch, Saks Fifth Avenue.
“When founder Horace Saks died in 1925, Bernard’s cousin, Adam, was brought in to manage Saks, and Adam’s wife, Sophie, knew how to create a large, yet personal and special store for the well-to-do,” said Lisicky. “Saks turned out to be the company’s most profitable arm, thanks to Bernard’s savvy retail foresight, and he concentrated national expansion on Saks Fifth Avenue.”
Also in 1925, Gimbels expanded by buying the Kaufmann & Baer store in Pittsburgh. And Gimbels kept a grip on the cost of its commercials by buying a radio station in the western Pennsylvania city, adding to stations in its other three stores.
By 1930, the company’s various retailers would have 20 sites around the country and $123 million (worth $1.7 billion now) in sales, making it the largest chain in the world. It would reach its maximum with 53 in 1965.
In 1926, Isaac Gimbel, Bernard’s father and president of the firm, was thrown from a horse and was partially paralyzed. Bernard, 41, took charge, and Isaac formally stepped down the following year.
Also in 1926, Gimbel, an amateur boxer, gave Gene Tunney tips before the world heavyweight title fight with Jack Dempsey. After Tunney won, Gimbel was so excited that he burst into the showers fully clothed to congratulate him.
“He defied the stereotype of most department store chiefs, with his warm personality,” said Lisicky. “He seemed to know everybody and was very approachable. His granddaughter recalled that he liked to run a meticulous store and would go around to make sure everything was in its place.”
Gimbel’s lesson is that if you’re in a business heavy on customer service, develop the skills to be a people person.
By 1928, the Gimbels store in New York had to expand to handle the crowds, at a cost of $4 million.
Because it touted its affordable value — “Select, don’t settle,” was another slogan — the aisles continued to be full even after the Great Depression hit.
“Operationally, they became bastions of systematization, with assiduous methods of planning and control. Merchandising, too, experienced pronounced shifts, fostering the tendency to buy on impulse due to enhanced accessibility and arrangements designed to be more customer-George Cook, executive professor at the University of Rochester’s business school, said: “In the buildup to World War II, Bernard made his shrewdest move by buying up consumer products he thought might become scarce, and they filled warehouses. It was a risky strategy, but it paid off big-time when Gimbels was the only store with merchandise that was in high demand.”
Bernard gave up the store reins to his son, Bruce, in 1953, while remaining chairman.
Bruce lacked his father’s foresight. Most downtown department stores around the country saw their sales slump as customers moved to the suburbs. Gimbels began locating branches there too late, while the family resisted reinvesting profit to expand and upgrade.
When Bernard Gimbel died in 1966, the era of the merchandising titans had passed. He was remembered as “America’s last merchant prince,” according to Leon Harris in “Merchant Princes: An Intimate History of Jewish Families Who Built Great Department Stores.”. Gimbels became part of its Batus Retail Group, which closed the division in 1986.
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