The Great A&P and the Struggle for Small Business in America (3 page)

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George Gilman entered the tea trade sometime in late 1859 or early 1860. Evidence suggests that by then he was working with not one Hartford but two: George Huntington Hartford and George’s younger brother, John S.
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George H. and John S. Hartford grew up in modest circumstances in Augusta, Maine, just twenty miles from George Gilman’s birthplace in Waterville. George Huntington Hartford was born in 1833, seven years after George Gilman. John Soren Hartford was born around 1836. Their parents kept a boardinghouse and ran a livery stable, among other ventures. The 1850 census found the brothers boarding together in Boston, working as shop clerks. After further travels, the young men surfaced in St. Louis in 1859, working for the local office of George F. Gilman’s hides and leather business at 31 South Main Street.
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The official corporate version of the Great Atlantic & Pacific’s founding has George Hartford spending two years in the leather trade in St. Louis, then moving to New York to become a clerk in Gilman’s business. Several aspects of this rendition are noteworthy. First, it places George H. Hartford alongside George Gilman at the birth of the tea company that would grow to become the world’s largest retailer. Second, it mentions John S. Hartford not at all; the younger brother does not register in any history ever published by the company. Third, the official company history has George H. Hartford moving from St. Louis to New York to work with George Gilman in 1859. The historical record confirms none of these points. The first published reference to George Gilman’s tea business, in June 1860, mentioned John S. Hartford but not George. Census takers counted both Hartford brothers at the family home in Augusta in June 1860, but John S. was listed as a “merchant” with a personal estate worth $500, whereas George H. gave his profession as “Box Maker” and claimed no assets—a hint that John, although younger, was the more established. And even if George H. Hartford did move to New York to work with Gilman in 1859, Gilman had no tea shop or other business on Vesey Street in that year. In 1860, Gilman & Company, “Importers of Tea,” was operating at the same address, 98 Gold Street, at which Gilman had dealt hides. For a year or two, Gilman may have run the tea business and the hide business simultaneously.
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Why did George Gilman start dealing teas and coffees alongside hides? The simplest answer is the most likely. Trading hides could not have been a particularly pleasant vocation. His father’s death left Gilman wealthy, and there is no question that he aspired to a higher status in New York’s increasingly stratified society; he would shortly be the owner of three carriages, two watches, one piano, and a house on Lexington Avenue in the newly fashionable Murray Hill neighborhood. Working around piles of filthy cattle and goat skins would not have suited his pretensions at a time when New York’s capitalists were distancing themselves from the physical labor performed in their firms. The tea trade, which usually involved dealing in coffee as well, was altogether more pleasant and prestigious, and offered opportunities to interact with some of the city’s most influential merchants.
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Dealing in tea and coffee drew on many of the skills and connections Gilman would have developed as a hide dealer. Like hides, tea and coffee arrived by ship; in New York, hides were second only to coffee in terms of import value in 1860. Gilman would have known his way around the docks, and would have had experience with the commission merchants who received and distributed imports. He would have been familiar with the biweekly
Shipping and Commercial List
and the daily
Journal of Commerce
, both of which were filled with intelligence about shipping and commodity trading; indeed, it was not unusual for seven or eight merchants to offer calfskins, salted goatskins, and buffalo hides on the
Journal of Commerce
’s dense front page. Undoubtedly, he would have known that tea consumption had soared since 1843, when China opened additional ports to U.S. trade. By 1860, an average of one vessel a week was arriving in New York from China. Clipper ships frequently made the run in less than three months, assuring that the tea, packed in lead-lined chests, arrived fresh. And Gilman would have been quite aware of the great public fascination with tea that began in the late 1850s, when leading magazines devoted long articles to tea plantations in distant China, the raucous tea markets of India, and the elaborate Asian rituals of tea drinking. George Gilman was certainly not the only merchant to notice these things: New York, which received 90 percent of U.S. tea imports, had some seventy-five tea dealers in 1860.
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Some New York tea merchants were willing to sell in small quantities to individual consumers. Among them was J. Stiner & Company, America’s first known chain retailer, which operated several tea shops. The main business of most tea merchants, though, was wholesaling. In some cases, an arriving tea cargo would be offered privately to a merchant, who would inspect individual leaves, taste the tea, and make an offer for hundreds of chests. In other cases, the cargo would be offered for auction one chest at a time. The merchants who bought the imports, in turn, sent samples to representatives in other cities, who would show the teas to retailers or to wholesalers serving smaller towns nearby.
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The business was arduous at a time when communications between cities were still poor; the New York dealer might have sold out of a proffered tea by the time an order arrived by post from Buffalo or Cincinnati, or local market conditions might have made the New Yorker’s price expectations unrealistic, requiring a further exchange of correspondence before a sale could be arranged. Tea merchants typically extended thirty to ninety days’ credit to their customers, and when payment finally arrived, it usually took the form of a draft on a distant bank that the New York merchant would have to sell at a discount to bankers on Wall Street. Customers faced risks, too. Merchants were known to ship tea that was not identical to their samples, that was adulterated with sawdust, or that was not the variety it was claimed to be. Consider this proposition from a sales representative in Boston to a tea merchant in New York: “I fear the Souchong will not sell @22¢ at present or as long as good Congo or Souchong is selling at 18¢. If you will have it labelled Ningyung, I think I could sell it better.”
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By the time George Gilman entered the tea and coffee business, the established merchants were facing competition from a new type of wholesale distributor, the jobber. Although the distinction was not precise, jobbers generally had less capital and operated on a smaller scale than the better-established wholesalers, filling one-off orders from retailers rather than cultivating long-term relationships with wholesalers in other cities. Gilman may have begun as a jobber. He undoubtedly had the necessary capital, and he would have been very comfortable with the requisite wholesale wheeling and dealing. In 1861, he decided to concentrate entirely on tea and coffee, apparently turning his remaining leather interests over to his brother Winthrop. The substantial building George Gilman had erected at 98 Gold Street in 1858 was not appropriate for a tea company: polite New Yorkers would not have wanted to shop for teas and coffees amid the tanneries and stables of the Swamp. At some point between June 1860 and May 1861, Gilman & Company relocated to rented quarters at 129 Front Street. George H. Hartford later claimed to have joined Gilman around this time. As for John S. Hartford, we know only that he is said to have returned to Maine and died there in 1863. No extant records mention him in connection with the business after 1860.
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Front Street, where Gilman & Company made its new home, ran parallel to the East River waterfront. South Street, along the water, was lined with four-story brick buildings occupied by shipping companies, importers, and exporters. Sailing ships docked so close that their prows reached almost into second-story windows, and the street was choked with horses, handcarts, passengers buying steamship tickets, and barrels and bags of cargo. Front Street, just a block away, had an entirely different atmosphere. Almost every one of the brick structures from Whitehall Street, at the south end, to the Fulton Market, at the north end, was occupied by the counting room and warehouse of a provisions merchant. These men dealt in the tea and coffee, whiskey and sugar, salt pork and lard arriving on the piers, storing the goods in their warehouses before sending them by ship to customers in other cities or, in the case of grains and cotton, to buyers in Europe. Sturges, Bennett & Company, one of the city’s biggest tea and coffee dealers, was at 125 Front Street, two doors down from Gilman & Company, and John Scrymser, another tea and coffee dealer, was across the street at number 126. The Front Street merchants did business with one another on a daily basis and also traded flour and grains at the rooms of the New York Corn Exchange, on South Street, so having their establishments in close proximity was a great convenience.
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Gilman & Company would not have stood out among the hundreds of food merchants on Front Street in 1861. It was far too small to merit much attention from the five largest provision dealers, who were said to “run the works,” manipulating prices. Neither Gilman nor anyone from his firm was involved in 1860 when important produce merchants formed the New York Commercial Association to construct a proper exchange building. Gilman was not among the 204 merchants and shipping executives who subscribed to the stock offering used to acquire a square block at Water and Whitehall streets and erect an impressive brick edifice. Some twelve hundred people paid the $20 fee to become members when the New York Produce Exchange opened for business on April 22, 1861, including men from at least sixty-five firms with addresses on Front Street, but there was no one from Gilman & Company. The exchange, where trading opened at 10:00 a.m., six days a week, and closed with the sounding of a gong at 1:00 p.m., did not trade coffee or tea, and Gilman apparently had no interest, yet, in sugar or other commodities.
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Nothing, beyond the Front Street location, is known of Gilman’s business in 1861 and 1862. The imposition of steep import duties in 1862 to finance the Civil War, fifteen cents per pound of tea and four cents per pound of coffee, probably hurt profits; coffee imports collapsed, and much of the available supply was purchased by the U.S. government, which is unlikely to have patronized dealers as small as Gilman & Company. Even if the firm was prospering, it was doing so on an extremely small scale. George H.’s role during those years is as mysterious as the firm’s performance. The New York postmaster Abram Wakeman, who claimed to have known Gilman well at the time, recalled that the Front Street store was run by one Alex. Davidson. Hartford did not earn a mention in Wakeman’s memoir.
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Whatever the case, being a tiny tea dealer did not satisfy George Gilman’s ambitions. After taking a couple of years to learn the business, he struck out on a radical course, establishing himself as a marketer of no small genius. First came a new name. At some point between June 1861 and early 1863, Gilman & Company became the Great American Tea Company—a startling departure from the universal practice of merchants putting their names on their businesses. The Great American banner was soon attached to five different storefronts selling tea and coffee, and Gilman identified himself as both a “retail dealer” and a “wholesale dealer” when paying his federal income tax. By 1863, the company office and warehouse had moved to the five-story brick building at 51 Vesey Street that would later become part of the foundation myth. The Vesey Street location, on the Hudson River side of the island, was just steps from Washington Market, a large produce market, in an area crowded with housewives and servants making their daily purchases of food.
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In the most nontraditional departure of all, Gilman began to advertise massively. The company’s first known advertisement appeared on May 27, 1863, in
The New York Herald
, announcing, “The Great American Tea Company’s New Wholesale Tea House no 51 Vesey street, N.Y.” That initial foray into marketing promised that Great American would sell to wholesale customers at a profit of two cents per pound. Three days later, Gilman took out three separate advertisements in a single column of the
Herald
. “The organization of the Great American Tea Company of New York, created a new era in the history of retailing tea,” one proclaimed, as if Great American were a brand-new undertaking rather than an ongoing concern. The advertisements promised teas at “old prices, without the duty,” and repeated a phrase that was to become a staple of Great American’s advertising for years to come: “ALL TEAS sold at TWO CENTS PER POUND PROFIT.”
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Unbranded tea, sold loose by the pound as “black tea” or “imperial tea,” was one of the most profitable items sold by grocers all over the country. Gilman’s new strategy was to go directly after that market. By July 1863, Great American was advertising in newspapers outside New York, soliciting both wholesale and retail purchases and—in a frontal assault on the established distribution system—publishing the prices at which it would sell various grades of teas and coffees. The days when the sales representatives of New York merchants could hope to extract an extra cent or two per pound from customers ignorant of market conditions were numbered; Great American touted roasted coffee for thirty-five cents per pound and best-quality young hyson tea for a dollar. “The Company are determined to undersell the whole TEA trade,” one advertisement declared.
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George H. Hartford had the good fortune to have signed on with a man who possessed not only big ambitions and ample capital but also a remarkable flair for marketing. Gilman was a promoter in the mold of P. T. Barnum, the showman whose famed American Museum, located in lower Manhattan from 1841 to 1865, was a veritable laboratory for testing methods of persuading Americans to part with their money. Drinking tea and coffee was a long-established custom, but no one had ever promoted it quite as aggressively as Great American did. Teams of coal-black horses with white harnesses crisscrossed New York, pulling delivery wagons bearing the sign “An organization of capitalists for the distribution of teas and coffees at one small profit.” Even as the Civil War was at its height, Great American advertisements proclaimed, “SIGNS OF PEACE! THE WAR SOON WILL BE OVER!” and shamelessly thanked the police for maintaining order in the company’s crowded stores.
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