Science for Spiegel's

In Chicago last week the directors and principal stockholders of Spiegel, May, Stern Co. Inc., mail-order house, sat down in a buff-paneled room a mile west of Comiskey Ball Park to approve three timely measures: 1) a five-for-one split in the company's common stock, creating 1,265,000 shares out of 253,000 now outstanding; 2) an extra dividend of $2 a share on the present common; 3) a change of their corporate name to Spiegel, Inc. Each in its own way, these three acts celebrated a remarkable feat of applied business science. It was applied in 1932 with the result that Spiegel's has earned as much in the past four rocky years as in the 27 years of its previous mail-order life.

Like many another U. S. business, Spiegel, May, Stern woke up in 1932 with a bad hangover. From 1929 to 1932 it lost $2,575,000. Unlike its big neighbor, Montgomery Ward, it was shackled to no failing chain stores, but it was as badly off as Ward's in its ineffective merchandising methods. Spiegel's needed brains. For $100,000 a year, Ward's acquired this necessity from U. S. Gypsum Co. in the person of Sewell Lee Avery. Spiegel's found it in the family. Modie Joseph Spiegel Jr., ten years out of Dartmouth, had been making money in the apparel department when most other departments were falling fast. Big, jovial Board Chairman "M. J. Sr." gave him the job of general manager.

Energetic Modie Jr. decided Spiegel's required housecleaning. In place of the 2,700,000 catalogs which had been sent out hit or miss in 1929, he made up a more selective list, 900,000 shorter, on which he began to double the returns. The money he saved on publishing he spent on fancying up the catalog, testing products and types of illustration and copy. He created a department to study the costs of business getting, cut them down to about 5% of the price of each item compared to the usual 10% in mail-order houses. He discovered and concentrated on lines with the greatest profit margin: furniture, stoves, tires, men's clothes. And he developed Spiegel's two cardinal policies: 1) sell everything on credit; 2) sell more goods to fewer customers.

Time payments, Modie believed, kept the name of Spiegel's sweet in the customer's mind. So also did supplements to the old half-yearly catalogs, and other literature which he mailed out every ten days or so. More remarkable was Modie's minimum sales policy. Because it is obviously cheaper to service a few large accounts than many small ones, Spiegel's now refuses cash orders under $5. The average sale in a mail-order house is around $3. Spiegel's sales average $15.

The company now has 1,400,000 regular customers and fills about 3,000,000 orders a year. After a loss of $300,000 in 1932 it made $1,317,716 in 1933, $2,749,362 in 1934, $2,331,800 in 1935, and will make an estimated $2,700,000 this year. Spiegel common stock, which faded to 62 1/2-c- in 1932, was selling last week at $113.

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