Trading stamps, paper coupons with a gummed backing, cut into perforated squares and usually with a unique, colorful design and some serial numbers printed on them, are a marketing tool that dates back more than 100 years. They were issued to merchants in the late-19th and early 20th centuries, who would hand them out to customers as an incentive for paying cash as opposed to credit, and to keep them coming back. The customer pasted them (the old lick-and-stick method) into booklets given out by the company that issued the stamps, filling the booklets up and eventually exchanging a specified number of filled booklets for merchandise -- household goods, furniture, jewelry, toys, sporting goods, tools, you name it.
A department store in Milwaukee introduced the first trading stamps back in 1891, which were exchanged for goods in the store but in 1896, the Sperry and Hutchinson Company, which began issuing S&H Green Stamps that year, was the first trading stamp company that operated as an independent business, providing stamps to different types of merchants in a community, along with booklets to paste them in, and opening their own stores where merchandise was purchased only in exchange for the company's stamps. Cold, hard cash wasn't accepted at the stores known as "redemption centers."
An entire history was quickly spawned from the concept that S&H innovated, reaping billions of dollars by the mid-20th Century. Stores, service stations and other businesses were handing out stamps of all colors to customers, with names like Gold Bond, Gift House, Triple-S, Plaid Stamps, King Korn, Blue Chip, Top Value and many others. But the green and red S&H sign was displayed by more stores and gas stations than any other. They were the only nation-wide stamp plan, while the others were mostly regional.
Trading stamp systems worked this way: the stamp company would sell large pads or reels of stamps to a retailer for a miniscule fee. Each stamp had a cash value of about one mill (one-tenth of a cent) and one stamp would be handed out to customers for every ten cents spent.
The customer would paste the stamps into the provided booklets, keep coming back to the store or other retailers who carried that brand of stamps, and eventually filled enough booklets with stamps to exchange for whatever goodies he or she wanted at the redemption center set up by the company. In the meantime the customer could pick up a catalog with color illustrations of available items and the number of booklets required.
Trading stamps still exist but they have all but disappeared from the American retail scene. The American public seemed to love the little sticky coupons, but they were controversial from their inception, stirring up the ire of some retailers, economists and state legislatures. They were described by one anti-stamp lobbyist as "prostitution at their best and economic insanity at their worst." Dozens of states introduced bills to penalize stamps in one way or another, banning them outright or imposing prohibitive taxes. Such legislative proposals were often protested by the public and ultimately defeated but when they did pass, the stamp companies, with all their economic clout, sued, often all the way to the Supreme Court.
There were questions as to whether stamps were an advantage to consumers or took advantage of consumers. The battles raged from the earliest days but ultimately it would not be politics or lobbying that would bring down the industry but the unforeseen turbulence of a changing economy. One thing was for sure, though, the trading stamp concept is something uniquely American.
TRADING STAMPS THROUGH HISTORY
The whole idea of premiums, the giving away of a little something extra as a reward for patronage, antedates recorded history. The first premium, quite possibly, was the baker's dozen. As early as 1793, a merchant in Sudbury, New Hampshire (Source: "Trading Stamps: A Long History" by James J. Nagle, New York Times, December 25, 1971) gave away copper tokens with purchases, that were redeemable for goods in his store. The idea caught on and throughout the 19th Century, merchants were handing out discount tokens that could be accumulated and redeemed. Customers returned to the same stores for more tokens, which maintained a steady cash flow and customer base for the merchant. In 1851, the B. A. Babbitt Company began putting certificates in packages of Sweet Home laundry soap. When a specified number of certificates were collected, they could be exchanged for color lithographs. When Cyrus D. Jones founded the Grand Union Tea Company in 1872, he issued cardboard tickets to customers of his Grand Union stores, which were redeemed for merchandise in a company catalog.
The Schuster and Company department store in Milwaukee introduced the first trading stamps to the public in 1891, known simply as the Blue Trading Stamp System. As with the latter-day plans, one stamp was handed out for every dime spent and customers pasted them in provided booklets, which were redeemed for merchandise in the store. The requirement that the stamps be affixed in books not only gave the customer a convenient place to put them but also helped prevent fraudulent misuse.
The phenomenal success Schuster's had with its trading stamp plan was observed by Thomas A. Sperry, a silverware salesman in Jackson, Michigan who did business in Milwaukee. Sperry theorized than an independent stamp company that supplied stamps to a number of merchants in the same community, yet would redeem the stamps itself, taking that burden off the merchant, would find even greater acceptance with customers.
With the financial backing of Michigan businessman Shelly B. Hutchinson, the Sperry and Hutchinson Company was formed in 1896. The company began issuing what they called "S. & H." Green Trading Stamps to merchants in Jackson, and soon persuaded some New England dry goods dealers to take on the plan.
The following year, the first redemption center, or "premium parlor" as Mr. Sperry preferred to call it, was opened in Bridgeport, Connecticut. The small store had a variety of quality, name-brand merchandise. The idea caught on rapidly and by the turn of the century, the Green Trading Stamps were handed out by department stores, dry goods dealers and grocers throughout the East and Midwest. Even the A&P was giving out S&H stamps in some of its stores. By 1904, the company was boasting capital of $1 million. Soon other entrepreneurs jumped on the bandwagon, starting their own stamp companies.
Stores everywhere were giving out stamps of one color or another at the turn of the 20th Century. While many of the stamp companies were legitimate, others were unscrupulous, offering shoddy merchandise and in some cases, vanishing as soon as customers turned up to redeem the stamps.
Author Edward Shenton recalled a lamp his mother received in exchange for stamps in the March, 1958 Atlantic Monthly:
"It was an enormous apparatus, with a shade the shape and almost the size of St. Paul's Cathedral in London...It took her eighteen months and 37,000 stamps to acquire this objet d'art. Unfortunately, the workmanship was not comparable to St. Paul's. Fragments of stained glass began to fall out, leaving holes of undiluted electric light.
"My father...undertook to replace the pieces. With soldering iron and molten lead he spent uncounted evenings on the job. But it was useless. As fast as he put in one section, another fell out. It was on April 5, 1917 that he blew his top. Seizing the lamp, with a word never before heard in our Presbyterian household, he hurled it through a stained-glass window which the more refined homes of that period boasted. The next day, President Wilson declared war on Germany."
When a fly-by-night stamp company abruptly pulled up stakes, as many of them did, collectors of the stamps panicked, holding what was in effect money that had suddenly become obsolete. When Benedict & McFarlane Company, issuers of B. & M. Blue Trading Stamps filed bankruptcy in April, 1905, a large crowd of women who saved the stamps besieged the company's New York offices, fighting to get in to redeem the stamps. Security guards were placed at the door and only three customers were allowed in at one time. Chaos broke out as the women pushed, shoved and tore one another's clothing to get in.
The New York Times reported: "Excited women from Staten Island, Jersey, Brooklyn, and other places flocked to the store with their stamp books, eager to redeem them before Benedict & McFarlane's supply of desks, baby carriages, chairs and numerous other articles gave out...'Stop pushing me! I didn't push you! I got here before you and it's my turn to come in! Oh, they're tearing my baby carriage all to pieces!' These are samples of things said by the angry women."
When the company's creditors insisted that the store be closed so remaining goods wouldn't go to the stamp holders to the exclusion of the creditors, the women attempted to force their way in. "At this the crowd formed sort of a flying wedge and prepared to carry the door," reported the Times. Police were called to disperse what turned into a near-riot. "By night almost everything but the pieces of furniture too big to carry had been taken away."
Stamps were indeed valuable, being currency unto themselves, and when something like that becomes so incredibly popular, there are always the unscrupulous ones willing to cash in on it. In addition to the carpetbagging stamp companies, legitimate companies such as Sperry & Hutchinson had problems with "scalpers," crooks buying up the stamps and selling them at a discount to retailers who were under contract with the company to carry them. The stamp companies also learned early on that redeemed stamps had to be carefully destroyed as quickly as possible. If they were simply thrown in the trash, there would always be someone willing to dig them up and re-redeem them, which would quickly bring the stamp company to financial ruin.
Stamps had so much impact on the culture early on that they were even the subject of satire. A turn-of-the-century cartoon in the humor magazine Puck depicting an ax-wielding fox luring gullible hens, wearing bonnets and carrying handbags, into his den with a sign reading "We Give Tinted Trading Stamps."
Trading stamps were controversial from the beginning, opposed by retail trade associations, labor unions, politicians and some merchants. Most outspoken against the stamp industry were the trade associations. Merchants had to buy the stamps from the stamp companies to participate in the programs. If every merchant in a community gave stamps, the associations contended, it would be counter-productive to any competitive benefits and ultimately, the only beneficiaries would be the stamp companies themselves.
The anti-stamp lobby attempted to sway public opinion by pointing out it wasn't a "something for nothing" deal. The money retailers paid into the stamp plans had to come from somewhere, most likely in the form of higher prices to the customers, so they weren't really "saving" anything. Legislatures in dozens of states attempted to pass laws either banning trading stamps or burdening them with punitive taxes that would ultimately force the stamp companies out of business. When stamps spread north of the border, the Canadian government banned them outright.
The trade associations further argued that in addition to adding to the overhead expenses of the retailer, the stamp companies were tyrants draining money from both consumer and merchant strictly for their own benefit. Whenever anti-stamp legislation was passed, however, the stamp companies sued on the grounds that it violated the companies' rights under the Fourteenth Amendment of the United States Constitution, which forbids states from enacting laws that abridge the privileges or immunities of U.S. citizens. The stamp interests argued that businesses were "citizens" too.
The courts generally sided with the stamp industry but the issue made it to the United States Supreme Court, which called trading stamps "an appeal to stupidity" and ruled on March 6, 1916 that the Fourteenth Amendment does not apply to businesses and that states do have the right to set limits on stamps and other premium programs.
With the outbreak of World War I, the stamp craze faded. The A&P stopped giving S&H Green Stamps and many more stamp companies folded. But in spite of severing ties with the largest grocery chain in the country, the Sperry & Hutchinson Company survived with an alliance of small, independent retailers, mostly grocery and department stores, in pockets throughout the US. They also expanded through acquisitions. Around 1906 they bought the Minneapolis Trading Stamp Company of Minneapolis and in the twenties they purchased the Legal Stamp Company of Boston and the United States Stamp Company of Toledo, and, recognizing early the benefits of diversification, entered the hotel supply business by merging with Nathan Straus & Sons.
The rapid growth did not go unnoticed by one of the company's original investors, Shelly B. Hutchinson. Hutchinson had sold his interest to partner Thomas Sperry's brother, William, in 1904 but in 1915 filed suit in federal court seeking $6 million, alleging he had actually been ousted from the company. The lawsuit was dismissed but a persistent Mr. Hutchinson appealed all the way to the US Supreme Court, which also ruled against him. In 1923, the Beinecke family of New York bought the company from Sperry's heirs after two of Sperry's daughters had married into the family. It was under the leadership of Edwin J. Beinecke that S&H survived the lean years of the twenties, thirties and forties.
There was some renewed interest in stamps during the Great Depression. While S&H continued to expand, mostly in the eastern states, a seemingly fool-hearty 23-year-old in Minneapolis named Curt Carlson borrowed $50 in 1938, printed up his own stamps and convinced a few local merchants to give out what he called Gold Bond Stamps. The fifty-dollar loan eventually grew into a diversified enterprise now called Carlson Companies, still based in Minneapolis, with revenues reaching well into the billions.