As the 19th century progressed, the American retail industry was predominantly localized, featuring small, independent vendors scattered across the nation. This began to evolve with the rise of Sears and Roebuck’s well-known catalog, which facilitated the company’s expansion, while its competitor, Montgomery Ward, also grew. By the 1930s, the United States boasted 130,000 chain outlets, led by Atlantic and Pacific supermarkets (the A&P), which operated over 15,000 outlets.

Fast forward a century, the American retail scene is now significantly influenced by retail behemoths. Currently, 90 percent of Americans reside within 10 miles of a Walmart, while five of the top 10 employers in the nation — Walmart, Amazon, Home Depot, Kroger, and Target — are in the retail sector. Moreover, two additional companies in the top 10, UPS and FedEx, play a crucial role in the retail economy.

The omnipresence of these large retailers, along with the overall vastness of the U.S. shopping economy, is quite distinctive when compared to its European counterparts. Domestic spending plays a disproportionately large role in stimulating growth within the United States, and credit significantly bolsters that spending compared to Europe. The United States contains five times the retail space per capita as Japan and the U.K., and ten times that of Germany. Unlike Europe, shopping hours in the U.S. are largely unregulated.

How did this transformation occur? Certainly, Walmart, Amazon, Target, and other colossal chains possess substantial business savvy. However, the comprehensive narrative encompasses over a century of political shifts and legal discussions, which contributed to shaping the magnitude of U.S. retailing and the prominence of its large discount chains.

“The markets that we accept as given, which we regard as the natural results of supply and demand, are significantly influenced by policies and politics,” states MIT political scientist Kathleen Thelen.

Thelen delves into this topic in her newly released book, “Attention, Shoppers! American Retail Capitalism and the Origins of the Amazon Economy,” published today by Princeton University Press. Within its pages, she investigates the emergence of the distinctive model of oversized, cost-effective, low-wage retailing that now plays a pivotal role in the U.S. economy.

Focusing on affordability

While numerous analyses have been conducted regarding specific American corporations, Thelen’s book showcases unique characteristics. One aspect is its juxtaposition with the economies of Europe, a focus of much of her research. Another is her historical perspective, tracing back to the inception of chain retailing.

“It appears that every time I attempt to clarify something contemporary, I’m drawn back to the 19th century,” remarks Thelen.

For example, as both Sears and Montgomery Ward expanded, producers and consumers were still experimenting with alternative commercial structures, such as cooperatives, designed to consolidate suppliers. However, they eventually faced economic and legal obstacles. Notably, legal challenges during that era.

“Antitrust legislation in the United States was lenient toward large multidivisional corporations while being very critical of alternative arrangements like cooperatives, thus providing a significant advantage to large retailers during that timeframe,” explains Thelen. Additionally, the U.S. Postal Service was indispensable, as substantial mail order businesses like Sears depended not only on its delivery services but also on its money order system to sell products to many customers who did not have bank accounts.

During the Depression, smaller retailers opposed large chains, particularly in the South and West, which constitutes another chapter of the narrative. Yet, low-cost discounters circumvented certain regulations through regulatory arbitrage, discovering more favorable laws in some states — and occasionally through outright rule violations. Ultimately, larger retailers have prospered once again in the past fifty years, especially as antitrust legislation increasingly focused on consumer pricing as its primary metric.

Since the 1960s, most antitrust theorizing “uplifts consumer welfare, fundamentally defined as price, so anything that grants the lowest price to consumers is perfectly acceptable,” states Thelen. “We exist in an environment where large, low-cost retailers are fostering consumer welfare in accordance with the courts’ definition.”

This emphasis on affordability, she observes, extends into other economic spheres, particularly salaries and labor relations.

“When you prioritize prices, one of the primary methods for lowering prices is to decrease labor expenses,” says Thelen. “It’s no surprise that low-cost discounters frequently serve as low-wage employers. Indeed, they often push their suppliers to provide products at progressively lower prices, consequently exerting pressure on wages within their supplier networks as well.”

As Thelen’s book illustrates, the legal perspective that favored large chains was also prevalent during the initial U.S. wave of chain retail expansion. She asserts, “large, low-cost retailers have almost invariably enjoyed a favorable position within the American antitrust framework.”

In the “profound equilibrium”

“Attention, Shoppers!” clarifies that this inclination towards lower prices, diminished employee wages, and high consumer convenience is particularly evident in the U.S., where 22.6 percent of workers are categorized as low-wage earners (earning two-thirds or less of the nation’s median wage). In other countries within the Organization for Economic Cooperation and Development, only 13.9 percent of workers fall into that category. Approximately three-quarters of U.S. retail employees are classified as low-wage workers.

In other OECD nations, on average, manufacturers and producers constitute larger segments of the economy, and often face legal frameworks more conducive to manufacturers and labor. However, in the U.S., large retailers have gained even more influence over the last fifty years, Thelen notes.

“One might assume mass retailers and manufacturers would maintain a mutually beneficial relationship, but historically, there has been significant friction between them, particularly regarding pricing,” Thelen states. “During the postwar period, the balance of power shifted in favor of retailers, leaving manufacturers and labor at a disadvantage. Retailers also garnered consumer support and wielded greater influence over data, dictating the terms under which vendors would supply goods.”

At present, as Thelen articulates in her book, the United States finds itself in a “profound equilibrium” concerning this issue; many low-wage workers now depend on these low-cost retailers for financial stability — and because Americans increasingly consider it normal to receive their purchases at an astonishing speed. Things could shift, Thelen proposes, if there are modifications to U.S. antitrust enforcement, or, crucially, significant changes to labor laws, such as enabling workers to organize for higher wages across various companies, not merely within individual stores. Without such changes, the status quo is likely to persist.

“Attention, Shoppers!” has garnered commendation from other academics. Louis Hyman, a historian at Johns Hopkins University, described it as a “groundbreaking study that offers insights into not only the past but also the future of online retail.”

For her part, Thelen aspires for readers to gain a deeper understanding of an economic landscape that we often take for granted, even as we shop in vast chains, both physically and online.

“The success of these kinds of retailers was not predetermined,” Thelen states. “It was a result of political dynamics and choices.”