Payless: A Brief Obituary
Back in 1956, there were a couple of events that helped shape the course of globalization. One, about which I wrote in my book The Box, was the first modern containership voyage. This would eventually lead to the behemoths, some carrying more cargo than 10,000 full-size trucks, that move much of the world’s trade today. The other was the most prosaic development one could imagine, the opening of a shoe store in Topeka, Kansas, by two entrepreneurial cousins, Louis and Shaol Pozez. Sixty-three years later, that company is about to go out of business, the victim of the globalization it played a small role in bringing about.
My family knew both Pozez families and we shopped in their store. Payless-National, as they ambitiously called it, aimed to offer quality shoes at discounted prices. It did so by keeping costs low. The floor was covered with linoleum, not carpet, and the wooden shelves weren’t even painted. Payless laid out its merchandise in shoeboxes. Sales clerks were few; customers were expected to find their size and try on the shoes themselves. In return for putting up with these rather austere conditions, shoppers could buy two pairs of shoes for five dollars.
The Pozez cousins were able to undercut their competitors thanks to a series of court decisions in the early 1950s that effectively prohibited manufacturers from fixing retail prices. Importing was not part of their strategy: the United States imported very little footwear in 1956. Although shoes cost far less to make in many other countries, the United States still had a vibrant shoemaking industry, with 1,900 factories employing more than a quarter-million people in places like Endicott, New York, and St. Louis, Missouri. Thousands more people were employed in tanneries and in factories that made synthetic shoe materials.
But while making footwear provided plenty of jobs, those jobs came at a cost. By today’s standards, shoes were expensive. Men’s dress shoes from Florsheim started at $18.95 a pair. That’s about $170 in today’s prices—which is far more than an equivalent shoe from Florsheim costs today. A pair of men’s loafers from Sears for went for $8.65, or about $77 in today’s money—nearly twice the price of the loafers available right now on Sears’ website. StepMaster children’s shoes cost $5.50 a pair. No wonder Payless’s offer of two pairs of shoes for five dollars seemed like a good deal to a bus driver or factory worker earning two bucks an hour. Payless became a huge success, operating thousands of stores. It was purchased by a big department store chain in the 1970s, then spun off as a publicly traded company, and eventually ended up in the hands of private equity funds.
Footwear manufacturing has proven difficult to automate, making labor costs the single most important factor in choosing production locations. As factories in low-wage Asian countries filled millions of containers with cheap plastic and synthetic shoes and shipped them across the pacific at only a few cents per pair, the U.S. shoe industry couldn’t come close on price; today, about 98 percent of the shoes sold in the United States are imported, mainly from China. To keep its lead in the discount shoe business, Payless became one of the largest shoe importers. For it, as for many other companies, globalization was not a choice, but the only alternative.
What killed it, at the end, was the same thing that made it a success—the constant quest for lower prices. According to the Bureau of Labor Statistics, the average consumer price of footwear has gone up all of 8 percent over the past 25 years. Rent and workers’ wages, meager though those may be, have been rising much faster, squeezing shoe retailers’ margins. In that environment, even globalizers can end up as road kill.Tags: chain stores, discounting, retailing