Sol Price

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Sol Price (born ca. 1916) is considered a pioneer of the "warehouse store" retail model. He is a 1934 graduate of San Diego State University, and in 1938 earned a law degree from the University of Southern California Law School. Sol Price was admitted to the California Bar in November 1938, his California bar number is 16491.

Price launched the first FedMart in 1954 and founded the Price Club in 1976. In 1993 Costco merged with Price Club to form PriceCostco. Leadership in the new organization was shared between Sol Price's biological son, Robert, and his surrogate son, James Sinegal. After just eight months, PriceCostco spun off a separate company called Price Enterprises, led by Robert Price. The company evolved into PriceSmart, which operates warehouse clubs overseas.

Price began his storied career in the mid-1950s, when he was working as an attorney in San Diego. His first venture sprang from the coincidence of two fateful events: the inheritance of a vacant warehouse in his home town and a knock on the door of his law office. Price needed to find a tenant for his warehouse, and the solution to his problem was answered by the knock on his office door. A couple of Price's clients had stopped by to ask him to take a short trip to Los Angeles to give his opinion on an unusual business they had come across. The clients were involved in the wholesale jewelry business, and they had been selling watches to a non-profit, member-owned, retail operation in Los Angeles called Fedco. Price made the trip north and noticed that Fedco's facility was similar to the warehouse he had inherited. He asked his clients to look at his warehouse, suggesting that his building could be used for the same purpose. His clients agreed, marking the beginning of FedMart and the first traces of the membership club industry.

The business was begun in 1954, started with a $50,000 capital investment. Price solicited the help of eight individuals, who each invested $5,000, and he convinced his law firm to invest the remaining $10,000. Price obtained his inventory from his clients, beginning with the two jewelry wholesalers. Another client, who was involved in the furniture business, provided Price with a small selection of furniture. A third client sold liquor, giving Price's FedMart the odd merchandise mix of jewelry, furniture, and liquor. He opened membership to government employees of all levels—federal, state, and local. Despite the less than comprehensive selection of goods, Price's business thrived from the start, collecting $4.5 million during its first year in business, four times the total projected by Price and his investors.

Success spawned the establishment of other warehouse stores and a more coherent merchandising strategy. FedMart developed into a chain of stores, and along the way, Price pioneered several innovations in the retail industry. FedMart became the first retailer to sell gasoline at wholesale prices. The chain was the first to open an in-store pharmacy. FedMart also opened in-store optical departments, establishing a format that was aped widely decades later. Aside from developing several industry firsts, Price guided the company into food retailing, a product line that would underpin the chain's development. Price was joined in his business by his son, Robert, who served as FedMart's executive vice-president until the father-and-son team sold the chain in 1975. After 21 years, Price's start-up had flowered into a 45-store chain with sales exceeding $300 million.

Price Club Debuting in the 1970s

After selling FedMart, the Prices searched for an idea for their next business venture. "We spent a lot of time walking up and down streets of San Diego talking about it," Sol Price remembered in a November 1990 interview with Supermarket Business. "Then," Price continued, revealing the inspiration for his second venture, "we spent a lot of time talking with small business owners—grocery store owners, restaurateurs, the people who ran newspaper and candy stands. We'd ask them where they bought their merchandise, and we discovered a gap in the distribution system just waiting to be filled." The gap was filled by The Price Co., started by Sol and Robert Price in 1976. The pair opened their first store, called Price Club, on the outskirts of San Diego. Although FedMart bore many of the markings of a club warehouse, industry pundits generally ascribed the birth of the industry to the opening of the first Price Club.

Seeking to be a wholesaler to businesses that lacked the financial clout to demand the wholesale prices commanded by larger businesses, the Prices tried to tailor their merchandise mix to meet their customers' needs. Office supplies was first on the list, followed by tires, food, paper products, and a range of other goods, all stacked on metal shelves in a spartan, cavernous, 100,000-square-foot store. To qualify for membership in Price Club, customers were required to show proof of business activity, either presenting a business license or a resale permit.

In contrast to FedMart's first year of business, Price Club performed terribly. "We almost went off the cliff for about the first seven months," Sol Price admitted in his interview with Supermarket Business. By the end of the first year, the San Diego store had collected $16 million in sales, but posted a loss of $750,000. The Prices had no idea what the problem was until a customer suggested opening membership to government employees as FedMart had done. Soon, membership was opened to employees of the government, hospitals, financial institutions, and utilities, the type of customers who were unlikely to bounce checks (one of Sol Price's enduring business credos was never to accept credit cards: "it's against my religion for people to go into debt to shop," he remarked in a Supermarket Business interview). The less discriminatory membership policy turned Price Club into an unmitigated success story, fueling the expansion of the concept into a chain and convincing many onlookers to start membership clubs of their own.

The Prices took Price Co. public in 1980, enabling eager investors to share in the rapid growth of the chain. By the time of the company's initial public offering, the chain was generating nearly $150 million in sales and earning $6 million before taxes. The stores, which looked "like something the Red Cross might set up for disaster relief," according to the April 1985 issue of Dun's Business Month, represented the fastest growing format in U.S. retailing, and Price Co. by far ranked as the segment's dominant player. The stores by this point carried everything from appliances to auto supplies and from liquor to luggage, but the merchandise diversity belied the soundness of the Prices' business strategy. "Price is the most disciplined retail organization I have ever seen," an industry analyst stated in the April 1985 issue of Dun's Business Month. Midway through the 1980s, Price Co. had 20 warehouses in operation, 14 of which were located in California. The success of the chain had created many imitators, including Costco Wholesale Club, BJ's Wholesale Club, and Sam's Club, but Sol Price and his son enjoyed a large lead over all rivals. The sales of the eight largest companies combined did not equal the revenue volume maintained by Price Co. Put another way, the warehouse club industry had become a $2 billion industry by 1985, the year Price Co. collected $1.8 billion in sales.

By the end of the 1990s, Price Co. operated more than 50 warehouse stores. Its revenue at the beginning of the decade exceeded $5 billion. The company continued to hold sway as an industry leader, but competition inspired by its own success had set the stage for a fierce battle in the 1990s, a battle the Prices opted to wage with the help of a rival. In 1993, when Price Co.'s leadership position had been usurped by Wal-Mart's Sam's Wholesale Club, the Prices decided to merge with Costco. At the time, Price Co.'s revenues totaled $7.5 billion, about a billion dollars more than third place Costco, creating a $16 billion wholesale club that counted Robert Price as its chairman. For less than a year, the merged company operated with two headquarters, one in Kirkland, Washington, where Costco was based, and the other in San Diego, Price Co.'s hometown. The arrangement failed to work, leading to a spinoff that put the company back under the control of the original Costco management team. Robert Price left the organization in 1994, leaving with control over Price/Costco's commercial real estate operations and controlling interests in merchandising opportunities in certain international markets, including Australia, New Zealand, and Central America. These assets became part of a new company, aptly named Newco, but they eventually formed the foundation for another company, PriceSmart.

Sam Walton of Wal-Mart writes in his book "Made in America" that he has "borrowed" "as many ideas from Sol Price as from anybody else in the business." He even says that he especially liked the idea of calling his discount chain "Wal-Mart" because he "really liked Sol's Fed Mart name..". In 1983 he dined with Sol Price and later that year, the first Sam's Club was opened in Oklahoma City, Oklahoma.

In the late 1980s, Price donated $2 million to the construction of a new student center on the campus of University of California, San Diego. Named for Sol Price, the Price Center, which houses the main student bookstore, food court, movie theater, ballrooms and meeting rooms, was opened on April 21, 1989.

He is responsible for injecting money and aiding the renaissance being experienced in a San Diego midcity neighborhood City Heights, where he originally resided in the 1930s. Price was a member of the Board of Trustees for the Urban Institute in Washington, D.C. and also the Board of Directors for the Center on Budget and Policy Priorities. In the past he has served as a member of the Consumer Affairs Advisory Committee of the U.S. Securities and Exchange Commission, and the San Diego Financial Review Panel.