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Macy was able to accomplish his plan of relying
on auctions for most of his goods.
Now, some of the goods had to still come through intermediaries, like jobbers.
But he was able to do this in New York because he was close to the wharfs.
And so through this process, he's able to actually make
enormous profits on his very low prices.
By the mid 1870s, he had a turnover of eight times per year.
That is, he completely restocked his shelves eight times a year.
This is fast, even by today's standards.
It's completely selling everything in your store every 45 days.
So how was he able to do this?
Macy did not just have an innovation in terms of his supply
but also in terms of promotion.
He was one of America's first amazing advertisers.
Macy was one of the first advertising geniuses in America.
Whereas other retailers would have long paragraphs of descriptions,
he would actually create wonderful shapes
on the page using type, including his famous star
that he began in 1872 to use as his brand for his store.
Macy spent about double his rent in advertising.
This is completely aberrant for the time,
but it was enough to drive all those wage customers, those cash customers,
into his store looking for the fancy dry goods that they wanted.
Over time, the success of Macy's allowed him
to expand into other kinds of lines, departments
that would today seem odd to us.
But it was this process of focusing narrowly on one particular kind
of goods and then expanding out that was so successful for Macy's.
In 1867, he advertised, "We have the largest fancy goods store
in New York City, the largest stock, the greatest variety, and the best
assortment of desirable goods."
Departments included things like, 1, linens and curtains, 2, laces,
embroideries, underclothing, 3, notions and trimmings, 4, flowers and feathers,
5, ribbons, hosiery, and furnishing, 6, ladies bags, 7, furs and parasols, 8,
fancy goods, jewelry, toiletries, 9, straw and felt hats, 10,
house furnishings, and 11, toys and dolls.
These are categories that do not make any sense to us today
of how to organize a store.
But this is the way in which fancy goods, dry goods,
were conceptualized at the middle of the 19th century.
In 1872, he added furniture, he added books,
he added rocking chairs and sporting goods, like ice skates.
But by the middle of the 1870s, it really began to go crazy.
He started to sell velocipedes, barometers, gardening sets, bathing
suits, and my personal favorite, potted meat.
All these different sections, departments, if you will,
meant that there could be a lower overall cost for running a total store.
These departments would increase the volume
not just of their particular area but in other areas as well.
Some departments failed.
The gardening and grocery was shuttered after two years.
But this process of the department store allowed
for the consolidation of volume, the consolidation of supply
for distribution, for retail, for consumption,
just like the factory had done for production.
And so if we understand the middle of the 19th century,
it has to be in the co-creation of these two great institutions, the factory
and the department store.
So what is this department store?
It's actually a term that's not even used at the time.
Yet by 1877, Macy's had 23 departments.
And so what is this?
Is this a managed market like a bizarre is Istanbul?
Or is this is actually a new kind of store?
It was difficult to conceptualize.
Macy's was still called Macy's Grand Central Fancy Goods Establishment.
It's cumbersome, but it also expresses how completely novel this idea is.
By the 1870's, Macy was worth over $100,000 personally,
and his store sold over $1 million a year in goods.
This is an amazing transformation.
And Macy goes from being a failed merchant from Nantucket
to being one of the greatest success stories of American--