Metropolitan News-Enterprise


Thursday, September 20, 2007


Page 11



1897: M & M Denounces ‘Trading Stamp Scheme’




A representative of a New York “trading stamp” company on Nov. 22, 1897, appeared before the Board of Directors of the Merchants’ and Manufacturers’ Assn. of Los Angeles to tell of the grand opportunities the company provided.

Merchants could buy “trading stamps” from the company based on six percent of their gross sales, then give the stamps  to cash customers at a rate of 10 stamps per every dollar spent. When the customer had accumulated 100 stamps, the stamps could be redeemed for $10 worth of merchandise at the trading stamp company’s store. The company would print the merchant’s name in a directory and in an ad published in two newspapers in the city.

The businessmen were unimpressed. Unanimously, they adopted this resolution saying “that the so-called ‘trading-stamp scheme’ that is now sought to be introduced in this city, is hereby denounced as improper and illegitimate business methods, and detrimental to the best interests of the business community, and that the merchants of this city are hereny urged not to entertain the proposition.”

What the members of the M & M board deftly grasped was that if some merchants started giving out stamps, seeming “freebies,” other merchants, to compete, would feel compelled to do so also, resulting in boosted overhead for the merchants, not outweighed by an increase in sales. While the M & M’s concern probably stopped there, this inevitably would mean hiked prices to consumers—so that merchandise that was seemingly “free” at a stamp redemption center, would in reality have been paid for.

A Los Angeles Times editorial of Nov. 25, 1897 says of the stamp company’s proposal:

“It is surprising to learn that many Los Angeles merchants are considering this proposition. The Merchants’ and Manufacturers’ Association is circulating a paper for signatures, pledging the merchants not to go into it. Such a step should scarely be necessary.

“However, all that can be said is that if this is the sort of way in which some Los Angeles like to be taken in and done for, why then, it is a matter of taste, as the old lady said when she kissed the cow.”

A variation on the plan, being peddled nationally, was a charge of $5 per 1,000 stamps.

An article appearing in a business column in the Times three days later, after noting that the M & M “has denounced the scheme, and advised merchants not to have anything to do with it,” quoted from a publication called “United States Investor” telling of the experience in New Haven, Conn.:

“Formerly, on account of the fact that a dealer had the exclusive privilege of offering trading stamps, and so holding out a special inducement which his competitor could not offer, the scheme was of some benefit to him in attracting trade. As it is now, almost every trademan is giving stamps, or some similar premium. What is the result? The dealer is either making 5 per cent. less than formerly, or the customers are paying 5 per cent. more for their merchandise, so helping to line the pockets of the schemers back of the concern. In some cases the first may be true; in most cases we believe it will be found to be the latter. In the long run, either will be fatal to the success of the plan.”

A setback to the nationally-peddled scheme occurred on Dec. 7. The Court of Appeals of the District of Columbia upheld a $100 fine in the D.C. Police Court against one Joseph A. Sperry, managing officer of Washington Trading Stamp Company, for entering into an agreement with a D.C. business, also a fined defendant, relating to the purchase and dissemination by the business of trading stamps. (Sperry was soon to be hooked up with Shelly Hutchinson, and the two would market S&H green stamps.)

The statute in issue, promulgated by Congress, prohibited any “gift enterprise” in the district. The court, in upholding the judgments, said:

“The Washington Trading Stamp Company and its agents are not merchants engaged in business as that term is commonly understood. They are not dealers in ordinary merchandise, engaged in a legitimate attempt to obtain purchasers for their goods by offering fair and lawful inducements to trade. Their business is the exploitation of nothing more or less than a cunning device.

“With no stock in trade but that device and the necessary books and stamps and so-called premiums with which to operate it successfully, they have intervened in the legitimate business carried on in the District of Columbia between seller and buyer, not for the advantage of either, but to prey upon both.”

A Dec. 17 column in the Times remarked:

“In Washington City the trading stamp has been declared illegal, so there is another good reason why our merchants should not go into the scheme. By the way, the trading stamp is being roasted and ridiculed all over the country, so we should be happy that Los Angeles did not get caught by it.”

The setback for the stamp company was momentary.

Copyright 2007, Metropolitan News Company

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