Price Club changed America's shopping experience

By Peter Eisner
Tuesday, December 15, 2009

Sol Price, 93, a business visionary whose Price Club retail stores revolutionized the way millions of Americans shop -- in no-frills warehouses that offer bulk items at cheaper prices to consumers willing to pay membership fees -- died Dec. 14 at his home in La Jolla, Calif. His family said he had been in declining health in the last two years and did not cite a specific cause of death.

The retail models that Mr. Price pioneered with Fed-Mart in 1954 and Price Club in 1976 were the inspiration for companies such as Wal-Mart, Sam's Club and Costco, with which Price Club later merged. Sam Walton, who started Wal-Mart in 1962, later admitted he "borrowed" many of Mr. Price's innovations, to which Mr. Price half-jokingly responded, "If I was so helpful, why don't you just pay me a finder's fee?"

If Mr. Price, as the acknowledged father of warehouse superstores, found consumers receptive to his approach, the same could not always be said of manufacturers. Initially, many producers, sometimes pressured by traditional retailers, rejected selling their products to Fed-Mart and Price Club.

Mr. Price responded by creating his own store brands, guaranteeing equal quality at a lower price. The resulting sales volume forced manufacturers to give in, said Walter Loeb, a retail consultant and board member of the Washington-based National Retailers Federation. Manufacturers needed the sales. "They had to sell" to Mr. Price, Loeb said.

Mr. Price was determined to keep prices and overhead low, figuring he would make a profit on the volume of sales. He paid high wages, worked with labor unions and gave generous benefits to his employees. In return he demanded scrupulous honesty and ethics in the pursuit of the lowest possible prices.

Bob Ortega, author of a biography on Walton, "In Sam We Trust," described the differences between Walton and Mr. Price. "Sam Walton and Sol Price came from right angles to one another in their approaches to life and work," Ortega wrote. "Price liked to claim he read the Daily Worker instead of the Wall Street Journal. . . . He was considerably more generous with benefits and wages than other discounters, Walton included. And, unlike Walton in those days, Price gave money to charities generously and often, through a foundation he created and to which he handed $70 million."

Mr. Price was a San Diego lawyer when friends urged him to look into a Los Angeles area business called Fedco that offered discount products to government employees. Hoping to duplicate the model, they started Fed-Mart in a dingy warehouse neighborhood near the San Diego docks. Offering at first a limited variety of products, Fed-Mart was an immediate success and expanded into pharmacy items, liquor, clothing, photo supplies, detergent and other consumer goods. Mr. Price built Fed-Mart into a multimillion-dollar, 41-store chain across the Southwest.

In 1976 at age 60, Mr. Price found himself on the street and locked out of his office, stripped of his Fed-Mart business by a Germany-based partner. Mr. Price brainstormed ideas with his son, Robert, and within months created Price Club, a warehouse store he opened that summer in an airplane hangar once used by Howard Hughes in San Diego. Shoppers came from miles around, eager to pay a $25 annual membership fee for the right to buy super-size jars of mayonnaise and huge boxes of laundry detergent at low prices.

In 1992, at the zenith of its business, 94 Price Clubs in the United States, Canada and Mexico earned a record $134.1 million on $6.6 billion in revenue. In 1993, Price Club merged with Costco, which had been co-founded by James Sinegal, who started in the business in 1955 as a part-time stocking clerk at Mr. Price's first Fed-Mart.

After the merger with Costco, Mr. Price and son Robert spun off PriceSmart Inc., which operates 26 warehouse stores in the Caribbean and Central America.

Son of immigrants

Sol Price -- his family said it was never Solomon -- was born Jan. 23, 1916, in New York City, the son of Samuel and Bella Price, who came to the United States from Russia during the wave of Jewish immigration in the first years of the 20th century.

Mr. Price said his father had worked with organizer David Dubinsky in the creation of the International Ladies Garment Workers Union and later founded his own clothing factory in Lower Manhattan. His father, who became ill with tuberculosis, relocated the family to San Diego in the late 1920s.

After high school, the elder Price's mother decided to take the children back to New York. They traveled by car, and Sol Price, who did the driving, got a firsthand look at the results of the Great Depression. "I saw with my own eyes farmers standing with guns pointed at the sheriff, keeping them from coming on the land and foreclosing the land," he recalled.

Mr. Price received undergraduate and law degrees from the University of Southern California in Los Angeles in 1938. By that time, he and his girlfriend, Helen Moskowitz, had eloped and married in Las Vegas and after law school eventually moved back to San Diego for good.

His wife died in 2008. Survivors include two sons, Robert and Larry, both of San Diego; five grandchildren; and four great-grandchildren.

At the start of World War II, Mr. Price was classified 4-F because of an early infirmity -- a drooping left eyelid that eventually caused blindness in that eye. He began working for Convair, the predecessor of General Dynamics, training maintenance workers to service engines on B-24 airplanes. He described working 12-hour afternoon shifts at the San Diego airport, Lindbergh Field, during the war, while keeping up his law practice in the mornings.

At times he worked pro bono for Jewish organizations and also obtained work with pawnshop dealers and other local businessmen. His rates were low, but his legal work taught him life lessons about business. He learned about taxation, corporate structure and the fine points of negotiating a deal.

In addition, Mr. Price had an uncanny ability to leverage real estate deals. "He bought the worst locations in the country and made money by making the properties viable and attractive," Loeb said. Mr. Price created Price Legacy REIT, one of the first real estate investment funds, and it was fabulously successful.

Politics and philanthropy

In 1994, Mr. Price created one of his best-known philanthropic projects, after he negotiated with San Diego on a plan intended to reduce urban blight and crime in a neighborhood known as City Heights. He invested millions of dollars in what was widely called a renaissance in housing, including schools, a new police station, library and recreation center.

He established the Aaron Price Fellows Program for teaching high school students about government and civic involvement in honor of a grandson who died of cancer in 1989.

His Price Charities also provides school supplies to thousands of children in Central America and conducts philanthropic programs in Israel.

Among his many political and government activities, Mr. Price was a board member of the Washington-based Urban Institute, which advocates good government and civic responsibility, and the Center on Budget and Policy, also in Washington, which studies budget and tax policies and advocates the needs of low-income people in the United States.

Mr. Price was active in Democratic Party politics. He was an early backer of the late California Gov. Edmund G. "Pat" Brown, as well as Brown's son Jerry, another former governor. A visit with Mr. Price was standard for Democratic presidential candidates, from John F. Kennedy to Barack Obama.

Mr. Price was referred to at times as tough, even tyrannical, by his employees. But many also said that he masked his deep compassion and kindness behind a cantankerous demeanor. Recently, he recalled a request from a young African American woman who needed money for college. Giving the young woman a pencil and paper, he encouraged her to map out her daily tasks at school and recreation time and showed her she had free time to work and pay her school obligation.

"It's really depressing when I see people like this living on the edge," Mr. Price said. But in the end, "I loaned her the money."

Peter Eisner, a former editor for The Washington Post, is writing a book about Sol Price.

© 2009 The Washington Post Company