Zion’s Cooperative Mercantile Institution

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Zion’s Cooperative Mercantile Institution

2200 South 900 West
Salt Lake City, Utah 84137
U.S.A.
Telephone: (801) 579-6000
Web site: http://www.zcmi.com

Wholly Owned Subsidiary of The May Department Stores Company
Incorporated: 1870
Employees: 4,000
Sales: $247.5 million (1999)
NAIC: 45211 Department Stores

Organized in 1868, Zion’s Cooperative Mercantile Institution (ZCMI) claims the distinction of being the first full-line department store in the United States. ZCMI was also likely the only department store to be owned by a church, namely The Church of Jesus Christ of Latter-Day Saints (LDS), until it was sold in 1999 to The May Department Stores Company. ZCMI operates 13 retail stores in Salt Lake City, Ogden, West Valley City, Murray, Orem, Sandy, Logan, Layton, and St. George, Utah, as well as stores in Idaho Falls and Chubbuck, Idaho. According to a 1999 study, ZCMI is the 18th largest department store chain in the United States and is the only major chain based in the Intermountain West.

Origins: ZCMI, a Mormon Defense Against Gentiles

In the 1830s, the LDS church moved its base from New York State, where it had been organized, to Ohio, then to Missouri, and next to Nauvoo, Illinois, and finally to the Salt Lake Valley in 1847. The move had been prompted in an effort to escape persecution from non-Mormons or Gentiles, but in the Utah Territory the church continued to face considerable opposition, such as the 1857 Utah War when the federal government sent an army to confront the church and its President Brigham Young. Still, the Mormons remained relatively isolated in the Intermountain West until the first transcontinental railroad was completed in 1869 north of Salt Lake City.

“To Brigham Young and other leaders of the LDS Church,” wrote historian Martha Bradley, “the railroad and the increased contact that it brought with national markets and the world outside presented a most serious threat to the cohesiveness and solidarity of the Saints. Because he anticipated trouble, confusion, and the inevitable cultural and social diversity that accompanied the railroad, Brigham Young planned what amounted to a frontal attack.”

At the October 1868 LDS General Conference, President Brigham Young and other church leaders urged the members to cooperate economically. Later in the month LDS businessmen from around the territory met in Salt Lake City to organize a wholesale cooperative store. Brigham Young was elected president of the “People’s Store” or ZCMI. Its initial directors were also church leaders. The store’s goal was to offer lower prices than the enemy Gentile businesses while promoting church unity.

Not all LDS merchants joined the new institution at first. In fact, some of ZCMFs early opponents were excommunicated and began the forerunner of The Salt Lake Tribune, illustrating that little separation of church, state, and business existed in that pioneer era. In 1869 ZCMFs main store, the Eagle Emporium on 200 South Main Street, opened its doors for business, with clothing, dry goods, hats, caps, boots, and shoes for sale. Soon a second wholesale store opened, with groceries, farm tools, stoves, and hardware available. From that time until 1924, ZCMI had eight departments, each with a retail and wholesale division: dry goods, grocery, hardware, chinaware, shoes, rugs, meats, and men’s clothing.

ZCMI was formally incorporated in 1870 after the territorial legislature passed its first incorporation laws. By that time, some 150 cooperatives had been established not only in the Utah Territory, but also in Wyoming, Idaho, Nevada, and even South Dakota. Such coops depended on ZCMI Wholesale for many products and were also supplied with locally made items. Brigham Young strongly encouraged home manufacturing and cooperative ventures to make the Mormons as self-sufficient as possible.

ZCMI was financially successful in its early years. By 1873 its annual sales were $4.5 million, and within just four years the Mormons enjoyed dividends of over $500,000 on their initial investment of $280,000. ZCMI expanded in the 1870s and early 1880s. New ZCMI stores were opened in Logan, Utah, in 1873 and Ogden, Utah, in 1881. Moreover, ZCMI bought the Deseret Tanning and Manufacturing Association in 1879.

However, the church’s political troubles soon engulfed ZCMI. Because of federal laws outlawing polygamy, church leaders were forced to hide from government authorities seeking to arrest them. Also, in the face of threatened government actions against the church, it sold all of its ZCMI shares to private individuals. Ironically, during the so-called “underground” years, ZCMI expanded its operations. For example, by around 1890 its Salt Lake City clothing factory employed 300 men, women, and children and was the largest factory west of Chicago.

1890-1930: An Americanized and Commercialized Store

Following the 1890 LDS Manifesto banning polygamy among church members in the United States, ZCMI began to separate itself at least partially from its parent church. In 1891, it ended the practice of sending ten percent of its cash dividends to the church. Also, for the first time, non-Mormons were allowed to buy ZCMI stock, as long as the church or its leaders retained stock control. Finally, the church ended sanctions against those who shopped with ZCMI competitors. Individual choice and capitalistic competition had triumphed over group values and enforced cooperation. Although some Mormons remained defensive against outsiders, LDS church members were allowed to make their own economic and political choices. Following these developments, Utah finally gained statehood in 1896 after decades of failed attempts.

As Utah’s population doubled between 1890 and 1920, ZCMI began appealing to all residents, not just church members. For example, after 1920 the sign proclaiming “Holiness to the Lord” was relegated to church buildings only and thus discontinued at ZCMI. All store employees began receiving their wages in cash, rather than in store goods as they had in the pioneer era.

The system of cooperatives that existed earlier ended in the early 1900s, and the Provo, Logan, and Ogden stores were sold by 1906, leaving ZCMI to operate on a centralized basis from its main Salt Lake City store, with local warehouses in several locations in Idaho and Utah.

Meanwhile, ZCMI sales continued to increase, from $3.2 million in 1896 to $5.3 million in 1906, $7.7 million in 1916, and $9.9 million in 1917. In fact, sales rose until 1921, when ZCMI business declined 27 percent; Utah in 1920 suffered through a depression, while most of the nation enjoyed prosperity.

Although leaders of the LDS church remained in control of ZCMI, the company began in the early 20th century to hire more managers who had college training and considerable professional work experience in marketing and business management. Church standards were expected of all ZCMI workers and managers, but an increasing number no longer had close personal or family ties to church leaders.

Modernization: 1930-60

During the Great Depression, Utah received a great deal of aid from the federal government. For example, New Deal farm subsidies added over $10 million to the state’s economy. This stimulated consumer spending, and ZCMI sales started to recover from their downturn in the 1920s.

After the 1935 Wagner Act strengthened labor unions, ZCMFs wholesale division organized the Wholesale Employees Association in 1937. This occurred in spite of the LDS church’s opposition to unions.

During wartime, the nation was finally rid of its depressed economic picture. ZCMI sales doubled during this time, reaching $22 million in 1945. The company supported the war effort by offering bonds as sales incentives and promoting salvage and conservation programs.

In 1946 Harold H. Bennett was chosen as the new ZCMI general manager. He modernized ZCMI with the help of managers recruited from Macy’s and Marshall Field and Company. In 1946 ZCMI added an escalator, the first in a store in the western United States, and in 1954 the company constructed Salt Lake City’s first store-side parking terrace. Bennett also began a long-term involvement with the National Retail Merchants Association in 1945, and in the early 1960s twice served as that group’s president. In 1958 Bennett became the first ZCMI president who was not also president of the LDS church.

In the 1950s ZCMI realized that its wholesale operations, which produced 40 percent of ZCMI’s sales but only 13.5 percent of its profits, were basically obsolete. So in 1960 it decided to completely end its wholesale business and use the extra money to build its retail operations.

ZCMI Expands: 1962 to the 1990s

In 1962 ZCMI opened a large new store in the Cottonwood Mall, located in the Salt Lake City suburban neighborhood of Holladay. Part of a nationwide trend as the nation’s suburbs expanded with the growing families of the “baby boom” generation, the Cottonwood Mall was the state’s “first complete suburban shopping center,” according to the October 16, 1999 Salt Lake Tribune.

Company Perspectives:

ZCMI, one of the most respected names in retailing, is the department store leader in its markets—providing an exceptional combination of merchandise selection and customer

In addition to the downtown Salt Lake City store and the Cottonwood Mall store, ZCMI had added several other large department stores by the 1990s. The new Utah stores were located in the Ogden City Mall, Layton Hills Mall in Layton, Cache Valley Mall in Logan, University Mall in Orem, Valley Fair Mall in West Valley City, Southtowne Center in Sandy, Red Cliffs Mall in St. George, Fashion Place in Murray, and Foothill Village Mall in suburban Salt Lake City. Two new Idaho stores operated in the Grand Tetón Malí in Idaho Falls and the Pine Ridge Mall in Chubbuck near Pocatello.

Efforts to expand also included plans to break into the Southwest. In 1990 ZCMI opened four new stores in Arizona (Phoenix, Scottsdale, and two in Mesa), as well as a new store in Las Vegas, Nevada. However, all five these stores were eventually closed.

In 1993 ZCMI celebrated its 125th anniversary with a hefty newspaper insert that combined ads for some of its major name brands and historical photos and text. The firm also hosted a gala evening of music by the Utah Symphony and a fashion show with styles from the past. However, ZCMFs good times were about to end.

The LDS Church’s Sale of ZCMI

In spite of optimistic statements from its leaders, ZCMI in reality lost a great deal of money in the late 1990s. Its flagship store in downtown Salt Lake City suffered as the central business district declined. Extensive construction for a new light-rail system and renovation of Interstate 15, Utah’s major north-south highway, hurt many downtown businesses, including ZCMI. Construction of a new mall in southern Provo prompted ZCMI to renovate its store in nearby Orem’s University Mall. Begun in the major retailing season in fall 1998, that expensive remodeling hurt sales of ZCMFs most profitable unit.

In addition, ZCMI faced intense competition from mass merchandisers, discount stores, catalog sales, and even electronic commerce in the 1990s. Just as Sears had shuttered its general catalog in the face of a boom in specialized catalog sales, ZCMFs general retailing declined while specialized retail chains prospered. The bottom line was that ZCMFs net income declined from $1.8 million in fiscal 1996 to just $209,410 in 1997 and to a net loss of $8.5 million in 1998.

The LDS church, owners of 51 percent of ZCMI stock, decided finally that it had to sell its historic department store. The church was growing rapidly all over the world and simply could not afford to keep losing so much money. According to Jeff Stinson, a Midwest Research securities analyst, several companies expressed an interest in buying ZCMI. “When you look at the high-quality regional chains, ZCMI was one of the last ones,” said Stinson in the December 15, 1999 Salt Lake Tribune.

After rejecting a bid by Cincinnati’s Federated Department Stores, the country’s largest department store chain, ZCMI directors reluctantly chose another buyer. Shareholders of both ZCMI and The May Department Stores Company approved a merger, effective December 31, 1999, in which ZCMI became one of May’s wholly-owned subsidiaries. Based in St. Louis, May operated 409 department stores in 34 states and the District of Columbia.

May agreed to let ZCMI operate under its historic name for two years, during which time ZCMI stores would not be forced to open on Sunday. After two years, ZCMI would become part of May’s Meier & Frank chain. The agreement also stipulated that after two years, rights to use the ZCMI name would revert back to the LDS church.

New ownership led ZCMI to conduct massive sales, especially in departments that were scheduled for elimination. For example, ZCMI, one of the few department stores that still sold electronics, was directed to close that department due to the competition from large chain stores such as Circuit City and Ultimate Electronics. The toy and book departments also were targeted for closing.

While May Department Stores acquired ZCMI, the church, through its company Zions Securities, retained ownership of the ZCMI Center, a downtown mall that housed numerous businesses. In 2000 the ZCMI Center’s owners hired a consultant to look at a possible name change.

Although the LDS church sold its hospital system, which became Intermountain Health Care, and its interest in Zion’s Bank, it remained an economic powerhouse not only in the Intermountain West, but also in many other states and even to a smaller extent overseas. It owned the largest cattle ranch in the United States, the Deseret Book Company, insurance companies, real estate, several television and radio stations through its Bonneville International Corporation, Brigham Young University and other academic institutions, and of course its rapidly growing number of chapels and temples all over the world. The authors of Mormon America detailed some of the church’s business interests and the growing role of prominent Mormons in politics, business, sports, and other secular fields. Thus, in spite of being forced to sell ZCMI, the LDS church, with about ten million members and an estimated $25 billion in assets, continued to be a major player on the world stage.

Key Dates:

1870:: ZCMI is incorporated.
1873:: A branch store in Logan, Utah, opens.
1876:: ZCMI outlets are consolidated into the “Mercantile Palace” in downtown Salt Lake City.
1886:: LDS church sells all its ZCMI stock during polygamy conflict.
1891:: Non-Mormons are allowed to buy ZCMI stock, and ZCMI quits paying tithes to church.
1901:: Rexburg store converted to warehouse.
1958:: Harold H. Bennett becomes first ZCMI president who is not president of the LDS church.
1960:: Wholesale division is closed to allow expansion of retail business.
1962:: New store is opened in Holladay’s Cottonwood Mall.
1973:: ZCMI Service Center is opened to consolidate corporate offices and service departments.
1999:: ZCMI is sold to The May Department Stores Company.