The Perspective of Enterprise

In the 1920s, American electrical utilities completed the final stage of their development. The commercial central station industry had evolved from small, local distribution systems at the turn of the century to regional transmission monopolies by World War I. Holding companies then consolidated regional utilities in the decade before the Great Depression. By 1929, five holding companies controlled 80 percent of the electrical generating capacity of the nation. Electrical operating utilities grew dramatically during the 1920s. The amount of electricity generated by central station utilities rose 228 percent, from 39,519 million kilowatts in 1920 to 90,076 million kilowatts in 1930. Revenues from sales of this electricity grew by 244 percent, from $882 million in 1920 to $2,155 million in 1930. Since the vast majority of ultimate consumers of electricity were households and since domestic consumption of electricity returned a significant percentage of utilities' revenue, observers assumed that utilities as an industry eagerly mass marketed home appliances during the decade to increase domestic consumption of electricity. This was not the case.^[1]

Most utilities lacked enthusiasm for the domestic market, because their bottom line showed little profit from it. The industry in fact subsidized much household service—because governments required them to do so. As late as 1930, eight million households, or 40 percent of the nation's private utility domestic customers, did not consume enough electricity to be profitable. The utilities subsidized this service by maintaining higher flat rates to relatively high value domestic users.^[2]

The utilities naturally wished to invest their capital in the most profitable projects. In the 1920s, the sale of electricity to industry using electric power motors brought the greatest profit. Between 1923 and 1929, the percentage of total electricity distributed in the United States taken by manufacturers rose from 48.2 to 52.9 percent. Central station electrification of industry brought high returns in two ways. First, many industrial plants and large stores had their own electrical generators and distribution systems. Utilities needed only to convince their management that they could buy central station energy more cheaply than they could generate their own power. The utility then could feed electricity to the industrial plant's electricity system, in some cases requiring installation of couplers to transform AC to DC current. The utilities' industrial campaign met remarkable success. After 1923 the aggregate power generated in the United States by isolated industrial power plants declined. The second reason for the high profit from industrial sales came from the geographical concentration of industrial plant energy consumption. Industrial motors used large amounts of electricity when measured by standard criteria, such as metered connections per mile of distribution line. Other factors also affected the relative profitability of the industrial and the domestic sectors of the business. For instance, domestic consumption's higher ratio of distribution mileage to meters meant greater losses of electricity from distribution lines. More meters brought higher overhead costs for service and management. An analysis conducted in 1923 of residential service in the Middle West revealed that the carrying cost of homes averaged $2 to $2.50 a month, at a time when the average revenue from homes was less than that.^[3]

In 1929, domestic customers constituted 82.7 percent of users of central station energy but returned only 29.4 percent of total revenues. Large and small industries, by contrast, constituted 17.3 percent of customers and returned 55.5 percent of total revenues. The 1920s saw tremendous growth in household electrification, but the percentage of total customers comprised by households in 1929 changed little from 1922. Managers of the electric utilities understood their profit situation. As the utilities pulled out of the postwar depression (1920–1921), they looked to industrial electrification and electrical modernization of capital equipment for the profits they needed to attract financing for the increased generating capacity they intended to install. In an editorial of January 1923, Electrical World, the major management journal of the industry, pointed to the fact that only one-third of machine horsepower in industry came from electricity. The editors recommended conversion of the remaining two-thirds of industrial horsepower as the outstanding opportunity for the utilities. Projections of future electrical loads pointed to greater increases in industrial power loads than domestic lighting loads. In a set of ten-year projections made in 1924, industrial power clearly ranked as the planning priority, though predicted increases in domestic power sales warranted notice.^[4]

An array of problems blocked increased sale of electricity to homes for the utilities. In the early 1920s, utility marketing analysts portrayed American homes

as two distinct markets. Home illumination comprised one market for electricity; the other market called for full electrical service. Under public regulation to extend service broadly, utilities had to make capital investment to electrify new houses and to retrofit nonelectrified housing stock with wiring for illumination. Utilities thought households might install one or at most a few small electric appliances on house light lines. Managers drew back, however, from investing in electrifying dwellings for heavy appliances, because heavier appliances required heavier wiring and different neighborhood transformers, with no assurance that the investment would produce significantly greater consumption of electricity. Most utility managers simply did not believe, through the 1920s, that the home heavy appliance market would be sufficiently profitable for them to divert massive capital to it. A marketing study of 584 residential customers conducted by the Philadelphia Electric Company in 1926 demonstrated that the average light customer worked within a rigid budget for electrical service. Though households might be willing to buy appliances up to their budget limits, they resisted raising the level of budgeted expenditures for electrical service. Electrical demand was not elastic: "It would appear that considerable resistance exists to an increase in the annual expenditure even in the face of continual educational effort as to the advantages and economic benefits of a more liberal use of electric service." On the basis of analysis of federal income tax data and utility marketing, another analyst concluded flatly, "The actual demand for electric service will always be a function of the amount of the family budget that can be spent for these domestic requirements."^[5]

As a result of the segmentation of the residential market, most utilities refused to build electrical load in the illumination sector that represented four-fifths of their customers. They focused their marketing efforts, instead, on increasing consumption by the few upper-income households who could pay for full electric service. This class represented a large market, no doubt, but not a mass market. A report by Electrical World in 1927 testified to this widespread strategy. An industry analyst surveyed 376 large utilities serving an aggregate population of 54,500,000 persons. The analysis demonstrated—in his opinion—that only 28 percent of the utilities promoted "full domestic service," that is, appliances as well as lights, across all their markets. They ignored lower-income households earning $2,000 to $3,000 a year. A review of 1928 revenues from fifty-seven operating utilities led Electrical World to conclude that only 10 to 20 percent of these utilities customers were "prospects for complete electric service at indicated competitive rates." The experience of the few utilities that did attempt to market full service indicated that average customers responded to lowered appliance prices and electric rates with increased demand; nonetheless, the overwhelming majority of utilities did not lower prices, refusing to believe that those households had sufficient income to make them worth the investment. Throughout the 1920s, the industry press was filled with self-confirming studies that middle- and lower-income households were not good markets for increased electricity consumption.^[6]

For all the claims utilities made in the 1920s of marketing prowess and of the necessity for encouraging diversity of electric demand (for purposes of "load management"), the evidence in their own trade literature testifies that they had little understanding of domestic consumers and marketing. They pigeonholed households in a few large-scale categories. They expressed little appreciation for the individuality of consumer tastes and buying habits. They had little concrete information about how households actually worked inside the home or made buying decisions. Most utilities lacked appreciation for the research on rural, farm, and urban households by women social scientists of the U.S. Department of Agriculture in the 1920s and for the whole range of household management literature by housekeeping reformers. Their ignorance of the home market was not unusual. Telephone companies, for instance, could not initially imagine that households might want to use phones simply for social conversation. As the study by C. F. Lacombe revealed in 1927, most utilities had little understanding of the competitive, mass consumer marketplace.^[7]

Some of the utilities' difficulty in assessing the residential market developed because they had no standard accounting methods to analyze the domestic rate structure. They could not determine how to charge the home user of appliances to make a profit. A survey in 1923 of thirty-five midwestern utilities revealed that in small operating utilities, with less than a thousand domestic customers, the utility managers had "almost a total lack of knowledge of what it costs to carry a residential consumer." The domestic rate posed an economic conundrum not solved by the utilities until the early 1930s. On the one hand, the cheap, flat rate enabled the utilities to fulfill their political mandate for universal electrification. On the other hand, the flat rate discouraged consumption of electricity. How did this situation arise? Samuel Insull's Chicago Edison system established the pattern of charging domestic customers by a cheap, flat rate in the 1890s. Insull adopted a two-tier rate that he thought would permit massive residential consumption, though this consumption did not develop as he expected. Ordinary household customers had a flat illumination rate. Large consumers had a second, lower, rate for consumption above a base amount. The two-tier billing structure reflected the utilities' segmented domestic market conception. Shortly before World War I, state regulatory commissions enshrined the flat rate as democratic social policy and thereby threw onto the utilities the burden of justifying a departure from this historic practice. Such justification proved extremely difficult. Not until the early 1930s did the utility industry agree on accounting procedures to determine profit and loss in delivering electrical service to the individual customer.^[8]

Theoretically, the flat rate represented the average charge to the individual customer needed to cover capital and operating expenses, proportional to the aggregate ratio of capital and operating expenses for domestic customers as a whole. Being an average charge, domestic customers who consumed high amounts of electricity subsidized domestic customers who consumed low amounts. An analogous situation characterized the telephone industry before

1894. Bell systems charged users a universal flat rate. Only when telephone companies switched to per-message rates could average monthly charges drop sufficiently to make telephones attractive for homes, which used them less than did businesses. Before World War I, the electrical industry could tolerate the economics of the flat rate. Since sales to industry and electric railroads earned most of the utilities' profit, the loss due to subsidization was not great. It certainly did not seem worth the effort to put every domestic customer on a profit basis. During normal growth, the addition of profitable customers balanced the addition of subsidized customers. Subsidized customers had little reason to object. Profitable customers did not use enough kilowatt-hours of electricity monthly to make carrying a subsidized customer burdensome. Across the country, in the 1920s, the domestic flat rate ranged between nine cents and seven cents per kilowatt-hour (kwh). In 1922, a study by the Idaho Power Company demonstrated that to make a profit the company would have to charge 10.5 cents/kwh for the average domestic electric light customer (who used about 21 kilowatt-hours per month [kwh/mo.]). The flat rate did not provide for a decrease in charges as volume of consumption increased, until demand jumped to a higher step. For lower-income households, lack of incentive to increase consumption amounted to disincentive. The utility industry itself felt little motivated to try to change the flat rate structure, as long as economic prosperity continued. As late as 1928, according to an executive of the New York Power and Light Corporation, two of three cities in New York State charged a flat rate that discouraged increased residential consumption of electricity. As a result of this situation, the central station electrical generating industry halfheartedly expressed interest in the domestic market. As the editors of Electrical World put it in 1926, "As a matter of fact, frankly admitted, the central-station industry has never actually made serious, intelligent effort to develop the domestic market."^[9]

The industry closely watched the Hartford Electric Light Company's experiment with a split rate structure. Before 1922, the company attempted to induce higher domestic consumption of electricity by offering a lower flat rate of 3 cents to 4 cents/kwh for customers with heavier wiring. Only five hundred residences (Out of 15,000 served) fitted their homes with heavy wiring capable of taking heavy appliances. Prompted by this failure, in January 1922 the company offered a split schedule, whereby the customer paid 5 cents monthly per 100 square feet of floor area in the home and paid 6 cents/kwh for metered, delivered energy. For domestic customers with light wiring, this split schedule was cheaper than a flat rate of 10 cents/kwh. Over the decade, the company further reduced rates, so that in 1928, residences using over 200 kwh annually paid only 1.5 cents/kwh of delivered energy. By the company's own analysis, the experiment succeeded hugely. In 1921, only 10 percent of the domestic customers used over 480 kwh of energy a year; in 1928, 33.6 percent did.^[10]

On the basis of the Hartford experiment and other similar marketing experiments, the utility industry concluded that it had to change the domestic rate structure to reflect the distinction between capital equipment costs and operat-

ing costs. Capital investment referred to the expense of extending electrical service to a home, including distribution lines, step-down transformers, light lines, and meters. Operating expenses referred to the costs created by generating the electricity sent over the wires to the residence. If the utility could charge each domestic customer to pay for its capital investment to the residence, then it could encourage all customers to consume more electricity with delivered energy rates cheaper than the existing flat rates. By the early 1930s, utilities were applying to utility commissions for the right to bill a fixed charge to cover capital investment, with a variable electricity rate above that. This split schedule permitted utilities to drop charges as low as 3.5 cents/kwh for delivered energy. As it turned out, the split rate with a lower kilowatt-hour charge returned greater profit to the utilities than the old flat rate, because of economies of scale in central station production of energy.^[11]

In the late 1920s, scattered empirical evidence indicated that domestic demand for electricity would increase if prices fell significantly. The evidence convinced some utility managers of the potential of the domestic market. This internal persuasion in the industry never had the opportunity to ripen of its own logic, however; historical events intervened. The onset of the depression changed the context in which utilities thought about and acted in the domestic market. In response to general deflation, regulatory commissions forced domestic rates down. Because of rate experiments in the 1920s, the utilities were ready to respond to the demands of regulatory commissions. Accountants had devised standardized accounting procedures to analyze residential accounts. The new split schedule provided a convenient method for the companies to negotiate rate reductions with the commissions. Without doubt, the pressure of the regulatory commissions accelerated adoption of the new rate and accounting procedures inside the electric industry.^[12]

In the economic collapse, the electric utilities lost a huge portion of their industrial market. By 1937 the manufacturing share of distributed electricity had dropped (to 52.3 percent). Who would replace the industrial customer? They could not expect to shift their sales to commercial and retail customers. The depression halted the growth of the commercial market. Nor did electrified mass transportation promise to absorb electricity not sold to manufacturing. The shift of the nation's urban transportation away from electric streetcars in the 1920s accelerated after 1929, so streetcars, once the economic core of the utility business, offered no potential for increased sales. In desperation, the private utilities turned to the only market left—the home. Electrical World made the point clearly: "Interest has centered in the home this year.... Because of the depression, neither the factory, store nor office has presented a hopeful field for rapid development." Being compelled by the depression to promote the domestic market did not necessarily make the utilities enthusiastic about that market. A positive attitude came later, from the success of the great public power experiment of the 1930s that the utilities had fought successfully in the 1920s: the Tennessee Valley Authority. TVA provided a vast experiment in home electri-

cal modernization. Its extraordinary success in increasing domestic electrical usage among some of the poorest American households in the nation overwhelmingly proved that domestic demand for electricity could be elastic: the lower the price, the more households consumed. "While private utility managers believed in the value of electricity and its promotion, few realized that electricity demand had such a high elasticity. In other words, TVA planners demonstrated that usage could be stimulated dramatically with extremely low rates, which would be justified only if usage actually increased through promotion and appliance saturation." The depression and the TVA committed the private utility industry to the mass domestic market in a way that the prosperity of the booming 1920s could never do.^[13]

While utilities approached the home market hesitantly, manufacturers of electric appliances enthusiastically expanded production for the home market in the 1920s. The number of electrical manufacturing establishments increased from 1,333 in 1921 to 1,777 in 1927, and their sales increased from $833 million to $1.6 billion. The increase in manufacturers indicated the entrance into the domestic market of small start-up companies, which might annually build less than a thousand units of an appliance. Large and established corporations also saw opportunity in home sales. General Electric, the nation's largest electrical manufacturer, turned to the residential market to recover from the post-World War I depression, in which G.E. laid off a quarter of its workforce. When Gerard Swope became president of G.E. in 1922, he pushed the company into high-quality appliance lines, starting with refrigerators.^[14]

The complications of manufacturers' participation in the residential market, however, constrained its growth. The largest home appliance companies, General Electric and Westinghouse, were deeply involved with the electric power utilities and had to accept the basic segmentation of the residential market as strategized by the utilities. General Electric created the Electric Bond and Share Company in 1905, for instance, to finance expansion of operating utilities, which would purchase electrical equipment from their shareholder, G.E. The issue of the home electrical appliance market in the 1920s is not simply its size and dynamics. It is also the extent to which market categories prescribed by the utilities bound appliance manufacturers. A small historical literature and a few industry aggregate statistics indicate that the manufacturers, like the utilities, did not try to create a mass market for their products in the 1920s. Income segmentation of households raised market barriers for appliance manufacturers as for the utilities. For the appliance manufacturers, as for the utilities, the mass market came in the mid-1930s.^[15]

Internal business considerations also limited the interest of large manufacturing corporations in the home market. Domestic appliances represented only one product group in their diversified production. Electrical equipment manufacturers produced for a large market of value-added manufacturers. Home electrical appliance makers took only a small percentage of their production. In 1927, home heating and cooking appliances took only 4 percent of manufacturers'

sales; radio equipment, 12 percent. Manufacturers' sales to makers of electrical home appliances totaled only $73 million. The automobile and utility industries, by contrast, took a huge share of manufacturers' sales. Battery sales (9 percent) and generator sales (7 percent) grossed $265 million of revenue. Radio sales greatly exceeded all appliance sales. General Electric and Westinghouse built a wide variety of capital goods for the electric utilities and for other industries, as well as consumer appliances. In the early 1920s, General Electric marketed nearly 400,000 separate catalog items. Home market divisions of these corporations had to compete with other divisions for the corporation's investment capital. G.E.'s board of directors passed on all departmental requests for investment capital exceeding $100,000 for production purposes and $50,000 for research. This scrutiny generated intense interdepartmental competition at budget proposal time, driven by the same profit considerations as intercorporate competition. How did the home market appliance division's gross revenue, return on investment, percentage of profit to sales, and percentage of profit to value added compare to other divisions? The results of this comparison affected the capability and willingness of corporation directors to wage battle in the home marketplace, or to try more ambitiously to break down the utilities' segmentation of the residential market.^[16]

Languid price competition among appliance companies is a strong indicator of their lack of interest in breaking down segmentation of the home market. They kept prices high throughout the decade. In 1929, the average price for electric refrigerators advertised in Riverside, California, newspapers was $268, for ranges $111, for washing machines $ 16, and for radios $116. General Electric, Westinghouse, and Allis-Chambers divided the market and administered prices for industrial electrical equipment in the early 1920s. Despite Gerard Swope's exhortation that price competition in home appliances would benefit his company, manufacturers and retailers did not lower prices of large home appliances rapidly enough in the 1920s to make them affordable to the lower four-fifths of the nation's households. Nor did they have to. Deriving but a small percentage of their income from appliance sales, large diversified companies could afford to keep sales volume low and target households in the top income bracket with high-priced models. The impression is irresistible that the major manufacturers wanted to extend to the new home market the same oligopolistic, administered market structure they had for the market in industrial electrical equipment. General Electric used its patents to control the production and pricing of lightbulbs—by far the largest-grossing product for the home market in the 1920s. Westinghouse, for instance, used G.E. patents to manufacture its bulbs. They did not engage in the severe price cutting that would crush small companies and enlarge their market share at the expense of their large rivals.^[17]

Not until the depression did prices of refrigerators, ranges, and washers fall sufficiently to break the dual market barrier of the 1920s. Only when TVA created a prototype mass market did prices fall to the point at which nearly every household, as long as it had some regular income, no matter how small, could

buy a major appliance. Industry priced only small appliances—cookers and casseroles, desk fans, heating pads, irons, percolators, and toasters—for the mass market in the 1920s; yet, looking at price changes between 1921 and 1941, only the refrigerator took its largest price drop in the 1920s. Before 1934, few appliance manufacturers priced any models within reach of a true mass market. TVA compelled the large producers, particularly General Electric and Westinghouse, to develop mass market models for it; prices dropped as much as 50 percent below those of 1932. Seven of the eleven leading household appliances took their first or second greatest drop in price after 1932, almost certainly the result of New Deal pressures. At this point, aggregate sales began to soar.^[18]

The difficulties for home mechanical refrigeration illustrate the barriers to the domestic market for manufacturers. Engineers did not make key technological inventions until the 1920s. Once manufacturers commercialized these inventions, such as the best refrigerant, electric refrigerators began to flood the market in 1929, just before the depression. Problems of mass marketing of electric refrigerators were, however, just as important as the pace of technical invention in delaying the device's mass adoption. In particular, the manufacturers' acceptance of the utilities' segmentation of the residential market in the 1920s prevented them from trying to develop a truly mass market machine. Before the early 1920s, appliance manufacturers developed industrial and commercial markets for mechanical refrigeration. These markets offered greater profit per refrigerator unit than the home market. Hotels, restaurants, ice cream parlors, and meat and fruit wholesalers were early buyers of mechanical refrigerators. In agriculture in the 1920s, California, Texas, and Florida produce packers built large mechanical precoolers to prepare fresh fruit for long rail journeys to eastern markets by slowly lowering fruit temperature before railcar loading. These commercial and industrial refrigerators were usually of walk-in size and custom designed. Domestic refrigeration represented a significantly different market. Mechanical refrigerators for the home had to be much smaller than commercial refrigerators. In the home, cheap ice dominated refrigeration. In the cities, many households did without any refrigeration at all, preferring to shop as needed for fresh foods rather than storing them. In 1927, only 40 percent of the nation's households had refrigeration (nearly entirely ice refrigeration), and only 17 percent took ice year-round. Home marketing required more than simply sending salesmen out to knock on doors; it required a different product.

The major problem for manufacturers in developing a home refrigerator was lack of standardization of components used in making refrigerators and lack of market standardization in the design and capacity of the refrigerators themselves. Since the industry sold to large commercial and industrial establishments, they designed the motors, compressors, and other equipment to cool large volumes of air. The industry did not standardize fractional horsepower motors for small refrigerators until late in the decade. As late as 1925, motors required higher voltage to operate than many homes could offer. At the 1925 meeting of the National Electric Light Association, "some representatives [of refrigerator and mo-

tor manufacturers] said that they had frequently found the supply as low as 70 volts, which, of course, is altogether inadequate for this service, as well as for general service in the home. This was a very general complaint." Motor manufacturers invested in research on fractional horsepower motors reluctantly, because the market for home refrigerators was small. Refrigerator manufacturers similarly had difficulty standardizing the refrigerator itself because the market was so small. For instance, Commonwealth Edison of Chicago undertook a concerted sales campaign in 1923 for home electric refrigerators. The company contracted with a manufacturer for a single small standard box to sell to customers. In 1923 and eleven months of 1924, the giant utility installed only 279 refrigerators. Not until 1926 did the domestic refrigeration market take off, with national sales moving toward several hundred thousand units annually.

The small number of refrigerators sold in the mid-1920s meant that the product had not reached the stage of mass production. In 1925, Frigidaire, the largest manufacturer of refrigerators, had only 35,000 of its machines installed around the country. Kelvinator followed with 26,840 installed. Servel held third place with only 3,500 refrigerators in homes. In 1926, there were ninety-five different makes of home refrigerators on the market, many of them manufactured by companies with annual sales of less than twenty-five units. The distributor-dealers of large manufacturers, such as Kelvinator, Frigidaire, and General Electric, maintained such large repair shops for preservicing the units prior to installation in homes that we cannot call the machines mass produced at all. The low sales volume and the large preinstallation servicing kept prices high. Salesmen reported that potential customers resisted their sales pitch because of the high initial cost of the device. The high price meant that upper-income homes represented the only market for the device.

For prices to drop, manufacturing had to be concentrated in a small number of companies that could build refrigerators in sufficiently high volume to develop effective mass production and to gain economics of scale. Manufacturers had to increase the quality of the machines so that they could move from factory to home directly, without preinstallation services. When this happened, major retailers, such as Sears Roebuck, which did not want to finish manufacturing of low-quality boxes, could market them. At the same time, equipment manufacturers had to develop more efficient motors that worked off low-voltage domestic lines. This conjunction of events occurred in the early 1930s, and prices dropped rapidly. Nonetheless, even as late as 1935, upper- and middle-income families made up the majority of owners. A survey of Austin, Texas, showed that only 15 percent of all households had electric refrigerators but that half of all families with an annual income of $3,000 owned them. A true mass market did not exist until the federal government made refrigerators eligible for Title I insured loans under the National Housing Act and TVA forced manufacturers to build mass market models for the TVA sales programs.^[19]

In conclusion, electrical manufacturers did not attempt to break residential market segregation in the decade. Their ties to the utilities effectively bound them

to the latter's segmentation of the home market. Even Swope complained that the persistent high price for electricity doomed his ambitions for broadening the domestic market for G.E. during the decade. The depression broke the stranglehold of the utilities' conceptualization of the nation's electrical market. In 1929, electrical manufacturers sold $2.3 billion worth of products; in 1933, they sold only $549 million worth of goods. While general price deflation accounted for some of this decline, decreased sales of their industrial products accounted for most of it. In a long review of the industry in 1935, Electrical World 's editors argued that the domestic market represented the only growth market left. New Deal policies had made domestic electrical modernization a national priority. "Electrification is in popular favor. Electrical products and electric service are considered necessary to advance both economic and social standards in this country. Government spending and action are directed toward increased electrification." The electrical market created by the New Deal redirected investment of electrical manufacturing companies and enabled them to work their way toward prosperity.^[20]

Enthusiasm of appliance manufacturers for the home market produced an explosion of advertisements for appliances in the mass media. The deluge of advertisement would seem to imply that selling of consumer appliances had no obstacles. Careful study of merchandising in the 1920s shows, to the contrary, that problems in merchandising restrained electrical appliance retailing until the 1930s. The vice president of Commonwealth Edison of Chicago called the distribution of appliances so poor as to constitute a "joke." Three problems were particularly troublesome: the small number of retailers, lack of credit, and the lack of a service industry.^[21]

Five classes of retailers sold electrical appliances: the electric utilities, independent appliance specialty stores, hardware stores, department stores, and mail-order houses. The utilities and the mail-order houses used traveling salesmen to supplement walk-in trade. In 1923, electrical utilities sold 31 to 41 percent of total sales (in dollar volume) of electrical appliances, dominating retailing, especially of heavy appliances. Department store and mail-order retailing did not take significant market shares until late in the decade, when consumer advocates and other retailers politically pressured utilities to withdraw from retailing. This means that a seller—the utilities—that had little interest in the home dominated electrical appliance merchandising. Concentration of retailing in a halfhearted retailer throttled sales. Suppliers did not compete in price. Customers found shopping inconvenient. Retailers did not solicit the customer's attention. In contrast, in one of the few cities where the central station utility did not retail appliances, there were two additional classes of retailers—home furnishing stores and electric shops. Department stores had a slightly higher percentage of the trade, but retailing remained decentralized. Retailers competed in prices, a shopper could easily locate a store selling an appliance, and salesmen competed in service to the potential customer.^[22]

Retailing did not improve in the next two years. In 1925, Electrical World

surveyed the selling of electrical appliances in the geographic areas served by 174 operating utilities. Electrical utilities sold 42.5 percent of all electric appliances, in dollar volume, compared to 26.9 percent by electrical dealers (including specialty stores), 15.4 percent by department stores, and 15.2 percent by all other stores. In conclusion, the domination of retailing by the electric utilities in the first half of the 1920s constrained the market for appliances. Even Electrical World concluded that electrical modernization of the home would proceed more rapidly if electrical utilities did not dominate appliance merchandising. "If other dealers, both electrical and non electrical, could or would build up their sales volume so as to reduce the power companies' proportionately large share of the total, it would aid materially in a quicker and more complete electrification of the home." Consumers, too, wanted to end the utilities' domination of appliance merchandising. In 1931, Oklahoma and Kansas passed laws prohibiting utilities from selling appliances. With utility merchandising stopped, the number of appliance retailers increased dramatically over the next four years. Sales of appliances increased. In 1930, Oklahoma consumers bought only 2,085 clothes washers; with utilities out, in 1932 they bought 5,487 washers (in the worst year of the depression!), then increased purchases to 8,662 in 1933 and 11,067 in 1934. Sales of all other appliances similarly soared as dealers and merchants invigorated the market.^[23]

At the end of the decade, the utilities' domination of retail selling of appliances began to diminish. In 1930, they constituted only 30 percent of national aggregate sales of electric appliances. Observers thought department stores took an increasing share. In 1931, department stores made 24 to 30 percent of retail sales of appliances across the nation. While the number of stores specializing in electric appliances increased in the years 1925 to 1929, the depression reduced their ranks. The decision of Sears Roebuck, of Chicago, in 1931 to offer refrigerators through catalog sales typified the shift in merchandising. The depression rapidly completed this reorganization of the retailing structure of the domestic market for electrical appliances. By the mid-1930s, the utilities no longer dominated retailing and sales of electrical appliances rose dramatically.^[24]