Hill realized that transportation costs often amounted to more than the cost of goods being transported. For example, from a shipping receipt in 1864 Hill noted that it cost $1,200 to ship 560 barrels of salt from Milwaukee to St. Paul, even though the cost of the salt itself was only $1,000. Of the transportation cost, $400 covered shipment by rail from Milwaukee due west to the Mississippi River town of Prairie du Chien, Wisconsin, and the remaining $800 covered steamboat passage up the Mississippi to St. Paul. Knowing that the distances of rail and steamboat legs of the journey were roughly the same, Hill also realized that railroad transportation was cheaper than steamboat transportation, in part because no reliable railroad had been built to compete with the steamboats. To earn more business, Hill lowered his own charges, noticeably reducing the shippers’ exorbitant transportation costs while raising his profits through increased volume. A quick success on his own, Hill was soon hired as the shipping agent for the Davidson Steamboat line, a position in which he set the shipping rates for goods throughout the line. As he had done on his own, Hill reduced rates to increase volume, and the Davidson line thrived as more and more businesses took advantage of the bargain. This strategy of low prices and high volume would become a mainstay of Hill’s business practices. In 1866, Hill started his own company and made a substantial improvement to the transportation network in St. Paul. He leased property between the terminals of two railroads—the Milwaukee Railroad heading north from Chicago, and the St. Paul & Pacific heading northwest toward Canada—and built there a warehouse with an elevator. The elevator eliminated the dangerous transfer of goods up the slippery bluffs, and the warehouse provided an easier and more secure way to transfer goods from boat to dock along with extra storage space in which to protect the goods from weather while awaiting transfer. In May 1866, the St. Paul Pioneer & Democrat wrote of Hill’s achievement: The levee was a busy scene yesterday. Several boats from above were unloading, and the levee was crowded with grain and merchandise. The splendid freight transfer house of J.J. Hill greatly facilitates business. It gives in effect just so much more levee room. A boat can be unloaded and a tremendous quantity of freight stored away there, without any confusion or crowding. Both the steamboatmen and mercantile public vote it a big thing. In 1872, Hill expanded his business interests by establishing a steamboat line on the Red River. Together with former St. Paul mayor and Hudson Bay Company fur trader Norman Kittson, he formed the Red River Transportation Company. Hill and Kittson then bought two Mississippi River steamboats, disassembled them, packed them on ox carts, and drove them across the prairie for reassembly and use on the Red River. The sight of steamboat parts tottering on overloaded carts across the prairie caused the press to proclaim the venture “Hill’s Folly.” Yet Hill and Kittson successfully put their boats into service on the Red River and earned back their investment in the first year. . . . Full article via subscription or PDF: https://theobjectivestandard/issues/2011-spring/james-hill-great-northern-railroad/
Posted on: Sun, 19 Oct 2014 17:17:14 +0000
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