Montgomery Ward business background Best answer on the web
Posted in: darrelrussell.com edit
07 Jan 2009
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After its heyday in the golden mail order catalog years, Montgomery Ward spun off its catalog business in 1985. It then went through a succession of odd owners, including Mobil Oil in 1975. The company filed for bankruptcy protection in 1997. After the bankruptcy, it emerged owned by GE, its largest shareholder, and it rebranded itself as a newer, hipper "Wards." The reformation could only last until 2000, when a terrible holiday season forced the company to declare bankruptcy a second time and this time close its doors for good. Ward filed for Chapter 11 bankruptcy at the beginning of 2001. At this time, it closed its 252 stores and liquidated all its assets.
What led to Montgomery Ward's downfall?
The first bankruptcy had many causes. Ward competed heavily with Sears, and in turn both department stores had to compete with rising sellers such as Wal-Mart. However, the very roots of the problem lie with the company's management decisions as far back as the 1940s.
"In the years after the Second World War, as the country grew more
prosperous and people began moving to the suburbs, some
Montgomery Ward executives suggested to the head man that they
should start building stores in suburban shopping malls. They
were fired for their trouble.
The net result was that Sears hit the shopping malls first and
Montgomery Ward never caught up. Meanwhile, a young clerk in a
J.C. Penney store -- a man named Sam Walton -- began learning
retailing from the ground up. Later, he put his knowledge and
insights to work in his own stores, which would eventually become
the Wal-Mart chain, with sales larger than those of Sears and
J.C. Penney combined."
--Creators Syndicate
In 1997, after the first bankruptcy debacle, the company fired its management team and hired a new CEO, Roger Goddu. Goddu had previously worked for Toys 'R' Us and he attempted to implement a "back to basics" strategy at Wards, identifying the company's target customer as a 30- to 55-year-old woman with a household income of $25,000 to $50,000. The company had made a turn towards selling electronics and home interior goods. Before the new strategy could be implemented, the downturn of many companies during the 1990s befell Wards. Stores could not undergo needed remodels and systems could not be updated. The company did, however, close 44 specialty appliance stores. At the time, market reporter Lorna Jordan commented on the company's prospects:
"As with many of the general merchandise stores, Montgomery Ward has been struggling to compete against discounters on the one hand, and department stores on the other. Now trying to emerge from bankruptcy, the 125 year old retailer says it wants to focus on jewelry, clothing, and furniture. Analysts say the move to sell off Electric Avenue and Whole Image outlets makes sense so Montgomery Ward can get back to its core businesses... Unfortunately, the fate of Ward staffers is only as good or as bad as the fate of the chain itself, and the prognosis on Ward is really not very good."
The company spent most of 1997 and into 1998 trying to rebrand itself. But rather than taking Goddu's strategy of identifying itself as a midlevel fashion specializer, the company rebranded itself as a complete shopping experience, meeting all a consumer's needs. Along with this, came an overdue redesign of the retail stores. Three new stores were opened in 1998 and 40 in 1999. The opening of so many prototype stores at once contributed to the downfall of the company. The new stores were simply called "Wards" and many predicted that they would save the company. However, a poor holiday season in 2000 did the company in for good. Its parent company, General Electric, had had enough of the store's losses.
Many consumers were puzzled when their local Montgomery Wards store shut down, immediately after the company had spent money to completely remodel the store! But retail experts were not surprised. Wards had spent millions on the remodeling projects and GE decided not to continue funding the company. The company had 10 distribution centers and stores in 30 states, along with 28,000 employees.
"'This had to come eventually. The company has not been able to turn itself around,' said George Whalin, president of Retail Management Consultants in San Marcos, Calif. 'GE has dumped all this money into Wards, and they're still not a relevant retailer.'"
CEO Richard Goddu called the bankruptcy "unavoidable" and said, "weak holiday sales and a very difficult retail environment simply did not permit us to complete the turnaround that might have been possible in an otherwise thriving economy."
The Economist analyzed the situation in this way: "In retrospect, Montgomery Ward?s mistake may have been to assume that retailing was an art that only people who lived near Lake Michigan could understand. It spent so much time competing with its fellow Chicagoan, Sears Roebuck, that both failed to notice the growth of Wal-Mart. But the coup de grace was delivered by the American economy: sluggish Christmas sales get the blame for Montgomery Ward?s demise."
The company's demise may have been predicted even earlier, when it ceased sending out catalogs in 1985 and focused on specialty stores, such as jewelry. Ending its mail order business-- the fundamental on which the company had been based-- signalled an escape from its roots.
This time, there would be no more rebranding. What followed was complete liquidation, at that time the largest in American corporate history.
After the filing, Computerworld reported that MW was selling its intellectual property to pay off its debts. "In an announcement today, a partnership of three companies said they will sell Montgomery Ward's SMARTsuite integrated retail software system, as well as the former retailer's fine jewelry Web site and other software packages, at prices 15% to 30% of their original costs. Jay Lussan, a director and senior partner at Consor Intellectual Management in La Jolla, Calif., said his company and two partner firms will offer Montgomery Ward's intellectual property online to bring in cash the bankrupt company can use to pay debtors."
At that point, Ward had already sold its real estate, computer hardware and merchandise.
The SMARTSuite (Strategic Merchandising and Retail Technology) had cost Montgomery Ward $100 million to develop and was created by IBM. It included "software for managing auto maintenance facilities, merchandise management applications, a management system for warranty service and in-home repairs, an automated staff-scheduling system for retail stores, and a point-of-sale and back room application." http://findarticles.com/p/articles/mi_m0FNP/is_17_40/ai_78051936
The company even ended up selling its name.
Now goods can be bought at this website:
http://www.wards.com/wards/default.asp
and from this address:
Montgomery Ward
P.O. Box 2789
Cedar Rapids, IA
The new Internet and catalog retailer has been operating since 2004 under the auspices of Direct Marketing Services, Inc.
"Chicago-based Direct Marketing Services, Inc owns and operates several home d cor catalogs and websites, including Charles Keath (charleskeath.com), HomeVisions (homevisions.com), YourKidsDirect (yourkidsdirect.com) and Montgomery Ward (wards.com). DMSI is ranked #141 in Internet Retailer?s 2006 Top 500 Retail Web Sites." http://www.webwire.com/ViewPressRel.asp?SESSIONID=&aId=15852
Direct Marketing Services bought the Montgomery Ward name and all its intellectual s, including logos and slogans. The website wards.com operates as if it is actually run by the original Montgomery Ward. The catalog was also restarted by DMSI.
"Several years after the general merchandise catalog Montgomery Ward ceased operations, it returns to the mail this spring. The catalog comes from DMSI (Direct Marketing Services, Inc.), the same company that mails Home Visions. A tagline below the logo boasts, 'Improving American Homes Since 1872,' citing Montgomery Ward's long history as one of the first mail-order companies." http://www.directmag.com/news/mailstream/mail-stream-052206/index.html
The company wanted to buy the intellectual property of Montgomery Ward for a while, but the name had been tied up in bankruptcy. The company did not announce the deal publicly or release anything to the press. This could be so that consumers will think they're dealing with the original Montgomery Ward, in business since the 1800s, rather than a company they don't know like DMSI.
"Chicago-based multititle mailer Direct Marketing Services Inc. quietly resurrected the Montgomery Ward catalog in September 2004. The 116-page book has mailed six times since then, with the next drop planned for June. DMSI president/CEO David Milgrom says the early response has been positive. ?Circulation has been fairly small because we?re relaunching it in a small way,? says Milgrom. ?The reason we didn?t put out a press release is because we?re testing a lot of different things right now. It?s a very valuable name.?
Milgrom admits that several of his peers doubted the viability of the Montgomery Ward name, but ?we don?t think it?s dead.? What?s more, the response--both online and through the catalog--has been very positive, he says. ?We think there is great value in the Montgomery Ward brand. We thought it was a great opportunity.?" http://multichannelmerchant.com/news/montgomerward-catalog-05242006/
This is not the only name/logo/intellectual property that DMSI has acquired recently.
"CATALOG AGE has learned that Chicago-based Direct Marketing Services Inc. (DMSI) acquired the name, intellectual property, and house file of apparel and home decor catalog Charles Keath from Boca Raton, FL-based The Mark Group. Terms of the deal, which closed at the end of November, were not disclosed. New York-based investment bank Petsky Prunier advised DMSI in the deal." http://multichannelmerchant.com/news/marketing_charles_keath_changes/index.html
With all these acquisitions, DMSI is certainly diversifying, and it seems to be helping their revenues. Their annual revenues were $150 million in 2000, $150 million in 2001 and $165 million in 2002. For a company that only began seven years ago, they seem to be doing very well and their strategy of acquiring older, established domain and catalog names seems to be working. Of the annually published list of top home furnishings retailers, DMSI ranks 42nd this year. For home textiles only, they made $96 billion in revenues in 2005 and $88 billion in 2004. The list can be seen here:
http://www.tmcnet.com/usubmit/2006/07/19/1719917.htm
Since DMSI is a privately owned company and not publicly traded, it doesn't publicize its revenues. The company does seem to be doing very well, however; it took a place (#93)in the top 100 of Catalog Age's catalog retailers in 2003 seen here: http://multichannelmerchant.com/webchannel/marketing/marketing_big_bigger/index.html However, it has not made a return appearance in the Top 100 since. Its revenues appear to be holding steady at around $165 to $175 million, which would put it just below the cutoff point for the Top 100 list. The Ward name certainly hasn't been hurting the company. Ward is trusted for merchandise beyond home furnishings, merchandise such as clothes and electronics, and more department store-type merchandise than the Home Visions catalog, and so it seems that it will be a great asset to the company. With the addition of many catalog titles to cover the range of consumers, from fashion to electronics to home furnishings, and from mid-range to upscale, it seems to be a positive forecast for DMSI.
Whether the Montgomery Ward name will help revenues further in the years to come will be interesting to find out.
Sources:
http://72.14.209.104/search?q=cache:sseilgW7VMwJ:www.computerworld.com/managementtopics/management/itspending/story/0,10801,63224,00.html+montgomery+ward+bankrupt&hl=en&gl=us&ct=clnk&cd=3&client=firefox-a University of Ontario Business Library
http://www.lib.uwo.ca/business/wards-ourpage.html
http://www.everything2.com/index.pl?node=Montgomery%20Ward
http://www.economist.com/printedition/displayStory.cfm?Story_ID=505458
http://marketplace.publicradio.org/shows/1997/08/01_mpp.html
http://multichannelmerchant.com/news/montgomerward-catalog-05242006/
http://www.hometextilestoday.com/article/CA149760.html/htt?pubdate=07%2F30%2F2001
http://www.furnituretoday.com/toc/09%2F16%2F2002
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I trust that I have answered your questions. If you need any additional clarifications answered, let me know and I'll be glad to help!
Cheers,
--keystroke-ga