Failing at retailing: the decline of the Larkin Company, 1918‐1942

Abstract

Purpose The purpose of this paper is to explore and identify the causes of the failure of the Larkin Company (Buffalo, NY), once one of the nation's largest mail‐order houses in the decades surrounding 1900. Design/methodology/approach Borrowing conceptual frameworks from both recent management and historical scholarship on organizational failure that integrates exogenous and endogenous factors, this study employs traditional historical methods to explain the causes of Larkin's failure. The main primary sources include the Larkin Company records, government documents, personal papers, trade journals, and other primary sources. Findings Begun as a modest soap manufacturer by John D. Larkin, in Buffalo, in 1875, the Larkin Company grew to become one of the largest mail‐order houses in the USA in the decades surrounding 1900 owing to its innovative direct marketing practices, called the “factory‐to‐family” plan, that relied on unpaid women to distribute its products. In 1918, anticipating the chain store boom, Larkin established two grocery store chains (other retail ventures followed). The company regularly lost money in these ventures and, combined with a shrinking mail‐order economy, struggled during the 1920s and 1930s, and eventually liquidated in 1941‐1942. A number of exogenous and endogenous factors, acting alone and in various combinations, proved too challenging to second‐ and third‐generation family members who ran the company after 1926. Originality/value This research paper tries to understand the decline of an important progressive firm during the interwar period. Whereas Sears Roebuck and Montgomery Ward were able to make the transition from mail order to stores, Larkin Company failed to navigate this transition successfully. It also adds to the small but important literature in management and business history on organizational failure and may serve as a cautionary tale for family businesses.

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