In the early days of the Roaring ’20s, Buffalo was booming, and so was an innovative retail business founded and inspired by the charismatic Leonard Rambler Steel.
Steel’s offices and shops employed hundreds at handsome wages and sold reasonably priced goods to many more at the company’s five-and-dime on Broadway, lingerie and hat shop on Main Street, cafeteria on Washington Street and candy shop at Lafayette Square.
But Steel’s impact on this community, which was both his home and his company’s headquarters, stretched far beyond employees and customers. Steel’s companies sold stock to thousands of investors, mostly middle-class people who wanted to be part of the company’s skyrocketing popularity. Steel believed this would ensure the stockholders’ loyalty as they shopped for everything from fresh eggs to his planned “special type of automobile.”
“His big idea was that people would be more loyal to the store if they actually owned it, and he didn’t like the big Wall Street guys, the bankers and brokers,” said Houston businessman and financial writer Dave Dyer, who has written “Steel’s” (157 pages, Syracuse University Press, $24.95).
The “House of Steel,” as Steel’s many interwoven companies came to be known during the four years of swift expansion, lofty plans and lavish spending, seemed invincible, until Jan. 26. 1923, when the company came up short on a huge loan payment. In the resulting crash, most investors, including Steel, lost everything.
Dyer will tell the fascinating story of Steel’s vision, early successes and crushing failure during appearances at 7 p.m. Wednesday in Talking Leaves Books, 3158 Main St., and at noon Thursday in the Central branch of the Buffalo and Erie County Library, 1 Lafayette Square.
On that fateful January day, Steel’s executives, meeting in downtown Buffalo, persuaded him to resign. But even their more conservative leadership could not save the company. An audit found that 60,000 people had invested $20 million in Steel’s enterprises, which had few liquid assets. Some creditors were paid and parts of the company, including a store on Hertel Avenue, hung on until 1930, but after that, the grandiose House of Steel was just a painful memory for most.
Undefeated, Steel began a cross-country train trip to meet with bankers. On March 21, 1923, while the train was passing through Ohio, Steel suffered a massive stroke and died at age 44. His grave in Forest Lawn is marked by a small, ground-level stone engraved with just his name and the years of his birth and death.
Mystery within a mystery
Dave Dyer came across the story of Steel’s empire while he was trying to solve a family mystery.
His grandmother’s only brother, Clayton Pickard, married with three children, vanished without a trace in 1923. Although Dyer’s grandmother lived to be 93, she never found out what happened to Clayton.
Dyer explored several possible theories before finally locating a grandson of Clayton. That man’s father, Clayton’s son, who was in his 80s, knew nothing about Clayon’s whereabouts, but did have a copy of a company newsletter called “Steel Sparks,” published in Buffalo, which contained an article about Clayton, then a rising young executive.
Dyer then made a lucky guess that Clayton may have changed the spelling of his name slightly. He immediately found both a record of his grand-uncle’s death in Buffalo in 1962, some 40 years after he abandoned his family, and a published obituary.
The obituary revealed where Clayton was – he had spent years living with a woman in Cheektowaga – but shed no light on why he had left his family. Looking for clues, Dyer began to research the L.R. Steel Co.
On eBay, he found a pristine box of the Steel Sparks newsletters. “I bought it instantly,” Dyer said. “I bought a second box, too, but it took a long time before I realized that this might have some historical significance. My interest was only to find out what happened to Clayton.” This almost complete record of the company, produced for both the sales force of 5,000 and for investors, provides a detailed record of the rise and fall of the House of Steel.
Leonard Steel’s vision
Chain stores that offered a variety of low-cost merchandise were, Dyer said, the “hot new business concept” as the 1920s dawned, with Woolworth’s leading the way. Steel worked for Woolworth’s, then joined Metropolitan Stores, a job that brought him to Buffalo. He bought a home on Lafayette Avenue near Ashland, and in 1919, at age 40, founded his company. By 1922, the firm had 225 business locations, including cafeterias, candy stores, women’s apparel stores, five-and-dimes and sales offices.
Steel immediately hit on the idea of selling stock to the public at $100 a share, often on a payment plan. “As in any business, he focused on where his money was, and his money came from selling stock,” Dyer said. “There was a real business, but that wasn’t profitable, and it didn’t have to be profitable, because when he needed more money, he would just start a new business” with a slightly different name. The 1921 Buffalo City Directory lists five Steel offices with varied names.
Steel had many innovative ideas. In his offices, women were treated equally, selling stock and becoming executives. “They made tons of money,” Dyer said. An 83-year-old man was lauded as the company’s oldest salesman.
Steel threw lavish parties and banquets for his employees, and on Christmas Day in 1921 rented Loews Theater in Buffalo to show movies to 2,500 poor children, each of whom also received a bag of gifts.
He used the “loss leader” technique of getting customers into the stores, offering kitchen staples at cost. He planned centrally located warehouses to supply stores in small towns, a concept used by Walmart today. He had a bungalow inside a Buffalo office building completely furnished with goods from Steel’s. “It was his idea that you walk through and you see things in the context in which they can be used – and that’s IKEA,” said Dyer. In 1922, Steel made what Dyer argues is the first infomercial, a three-hour silent film about Steel and his company.
His final triumph, a massive store in Denver, was fully paid for by employee donations. It opened on Dec. 9, 1922. When Steel’s empire collapsed less than two months later, the Denver store was the main asset of a company built on vision and promises. It was sold, but the proceeds fell far short of the millions that would have been needed to reimburse all creditors, much less stockholders.
Dyer has high hopes for his book. He would love to see the story of Steel’s rise and fall told in a movie or documentary. He also hopes to eventually find a copy of the Steel film. “I think there is a copy of that film out there somewhere,” he said.
For Dyer, the failure of Steel’s enterprise helps explain Clayton’s secret life, too. Although Dyer says “there must have been some family problems, too,” he said, “I expect the reason that he vanished is that he was embarrassed about this horrible thing where tens of thousands of people had lost their investments.”