E What Glamour Industries Teach Us About Markets

I harbor the theory that so-called “glamour industries” are useful in understanding market activities because they are subject to similar psychologies borne of “champagne wishes and caviar dreams.” I still remember the mid-1970s when I came back from chasing an ex-girlfriend in Europe and settled down into my Upper West Side digs in The Big Town that turned out to be my home for the next 26 years. The economy was a mess; New York was still reeling from bankruptcy and mismanagement, garbage lined both sides of the street in piles several feet high. The subways presaged the current penchant for dystopian cinematic themes by at least 35 years, only there was nothing even remotely intriguing or charming about it. But gosh darn it, it was still “the greatest city in the world,” or so we were reminded and, with Watergate and the Nixon resignation fresh in our consciousness, this eager college grad now seasoned by cosmopolitan experience was going to be the next Carl Bernstein.

Well, it didn’t quite work out that way. Back then I was a little disappointed by that. Forty-two years later, somewhat past the midfield stripe of life and informed by the late Nora Ephron’s heartburn, maybe I’m a little wiser and a little less disappointed. I did become an editor in the publishing industry, but I wasn’t the prime mover of The Washington Post’s city desk—not by a long shot. I put together a little trade publication called Hosiery and Underwear Magazine, which covered both the retailing and manufacturing aspects of that racket. What started off as a little embarrassing was actually to become a very solid foundational element of my business education over the years, including observing how this prime element of the once great U.S. textile industry, at one time a New England economic pillar, migrated first southward, then overseas. Today the coup de grace of this segment is being completed as Amazon maintains its assault on bricks and mortar retail the high end of which once literally made a home for truly luxurious silk stocking merchandising. Back in my youth they still called the Upper East Side the Silk Stocking District, and it was no misnomer. Bobby Short played the Carlyle Hotel; the mayonnaise they served there with fresh Alaskan King Crab was hand made, and the mink coats and stoles (no, not a reference to the actress from Baltimore) stacked up under the aegis of the hat check girl rose to heights previously known only by John Jacob Astor in the early nineteenth century.

The enduring memory of this incubation period of my adult life was the excruciatingly low pay. I soon learned the deft colloquialism of my superiors in why it was necessary for me to experience abject poverty in order to report on such lavish consumer experiences: “Reid, this is a glamour industry.”

“Oh,” I replied, further reflecting on the matter during the then-35-cent ride on the IRT Seventh Avenue line home, amidst copious graffiti and dirt, breathing labored by 90-degree-plus August temperatures and no air conditioning underground.

Interestingly (I think), in those days some folklore circulated about the general business of ground-floor merchandising in department and specialty stores. Retailing the old fashioned way has always been about real estate; that is, the rents paid by merchandisers for the space occupied by the goods they sell and the people who sell them. It’s a fascinating if now rapidly obsoleting model. Quantitatively, it comes down to gross profit margin turns per square foot. Fascinating because if you can find something with high margins that moves fast and doesn’t take up much space, you’ve got a winner. That’s why the street floors of department stores featured the hosiery, accessories, ties, perfumery and other goods with major price points, popularity and compactness. The really high-margin stuff, such as cosmetics, was so profitable that the big manufacturers paid their share of the rent and populated the stores with their own personnel; these were the origins of what are known as percentage leases in retail space. The department-store model was also used in other industries, such as outfitting whaling ships for their voyages in the era made famous by Herman Melville. After all, those expeditions required a lot of different things; what whaling ventures and consumers of postwar America had in common was the desire for convenient, quality one-stop shopping, whether anchors to lines to hooks for the ships, or cuff links to silk stockings to ties for the retail shopper. These are the real roots of B2B and B2C parallels.