A cash-only chain that learned to sell on credit
Penney built his chain on a refusal to sell on credit. Decades later the company had to drop that rule to keep its customers.
Success cannot come from standstill men. Methods change and men must change with them.
In 1902 James Cash Penney opened a dry goods store in Kemmerer, Wyoming, a mining town, and called it the Golden Rule. Its method was strict: one fixed price for everyone, no haggling, and cash only. In mining country, where workers commonly bought on account at the company store and paid it off from the next wage, that was a real difference. Customers knew what things cost and did not end the month in debt to the shop. The approach spread with the chain, which had hundreds of stores by the 1920s.
The line, one of several business maxims that circulate under Penney’s name without a clear first source, reads with more weight next to the company’s history. For half a century, refusing credit was part of what the stores stood for. Then postwar shoppers moved to the suburbs and grew used to buying on store accounts, and competitors such as Sears offered them. In the late 1950s J.C. Penney introduced its own credit plan. The method that had defined the business had become the thing holding it back.
That is the case where the line holds: a method adopted for good reasons in one setting outlives the setting. Cash only made sense among miners wary of running up a tab. It made less sense among salaried families who expected to spread a purchase over a few months.
The harder question is what should not change. Fixed and honest pricing survived the move to credit, and arguably it was the more important part of the original idea. A company that changes everything in response to the market can lose the reason customers chose it. The line speaks of methods, and the useful work is separating methods from principles before changing either.
For a founder the exercise is concrete. List the practices the business relies on and write next to each the reason it exists. Where the reason still holds, keep the practice. Where the circumstances behind it have gone, the practice is a candidate to change, however much it feels like part of the company’s identity.
The wording reflects its era, when business advice was addressed to men. The point applies to anyone running a shop.