Tuesday, June 30, 2009

Get Ready Get Set...Shop E.J. Korvettes 2

image from the brownstoner
about E.J. Korvette's
E. J. Korvette was an American chain of discount department stores, founded in 1948 in New York City. It is notable as one of the first department stores to challenge the suggested retail price provisions of anti-discounting statutes. It is also notable for its failure to manage its business success which led to decline and its 1980 bankruptcy and closure. Founded by World War II veteran Eugene Ferkauf and his friend, Joe Zwillenberg, E.J. Korvette did much to define the idea of a discount department store. It displaced earlier five and dime retailers and preceded later discount stores, like Wal-Mart, and warehouse clubs such as Costco E. J. Korvette's founder, Eugene Ferkauf, began his discounting career in a 400-square-foot (37 m2) loft in mid-Manhattan, New York City. Inventory consisted of well known brands of luggage, household appliances and some jewelry. Discounts were one-third off regular price. Sales were over $2,500 per square foot. Ferkauf retired in 1968. (Discount Merchandiser July 1988)
E.J. Korvette's used several retailing innovations to propel its rapid growth. It used discounting even though most discounting was outlawed (or thought outlawed) at the time[1]. Korvette's instituted a membership program, a technique from consumers' cooperatives that had never been applied to a department store before. It also expanded into suburban locations at a time when most department stores were in a central business district.
Korvette's low-price, low-service model was in some ways similar to that of earlier five and dime retailers such as Woolworth's, McCrory's, and S.S. Kresge. But Korvette's was innovative in avoiding the anti-discounting provisions of the Robinson-Patman Act, and undercutting the suggested retail price on such expensive items as appliances and luxury pens.
Korvette used "membership cards" (which it distributed in front of its stores, and to surrounding offices) to style itself a retail cooperative. In so doing, Korvette's was able to accept deep discounts from suppliers— something that competing department stores, such as Macy's and Gimbel's, could not do. In fact, Macy's and others filed numerous "fair trade" lawsuits against Korvette's to stop it from undercutting their prices[1]. None succeeded. Arguably the lawsuits helped Korvette's by calling attention to prices so low that competitors thought them illegal.
Founder Eugene Ferkauf attributed his idea for membership cards and deep discounts to luggage wholesaler Charles Wolf. But where Charles Wolf made limited or even surreptitious use of it, Korvette's popularized it by instructing employees to distribute membership cards to any person entering any Korvette's.
While the first E.J. Korvette store was located on 46th street in Manhattan, its rapid growth in the 1950s was helped by its many stores in strip malls along arterial roads leading out of urban centers. This made E.J. Korvette ideally situated to meet the demands of the suburbs which grew in the United States during the that era.
The first of the modern type stores was opened in 1954, a 90,000-square-foot (8,400 m2) store in Carle Place, Long Island, which for the first time carried apparel. (Discount Merchandiser July 1988) In 1956 Korvette's had 6 stores, including stores in Philadelphia and Harrisburg, PA. By 1958 it had 12 stores. At its peak, it had 58 stores. A Korvette retail floor had cashiers located in individual departments, with no checkout line area. Large stores included a full supermarket, pharmacy, pets, and tire centers.
Korvette's expanded into the Chicago area in the 1960s. It successfully disputed the state and local Sunday closing ordinances and laws. Once those barriers were broken, many other retailers opened on Sunday.
Korvette's decline and closure are variously attributed to inconsistent management, failure to focus on merchandise it knew (such as appliances), and ultimately attempting to compete directly with the department stores in areas such as fashion (when it had neither the expertise nor the right store atmosphere)[2].
Of note was E. J. Korvette's venture into the home entertainment business. The retailer established a rather out of context series of high-end audio salons within selected stores. Korvettes went so far as to market its own "XAM" brand of stereo receivers, amplifiers (some manufactured by Roland Electronics of Japan) and speakers. At a number of the retail locations the audio department was, on dollar per square foot basis, one of the more profitable departments in the store.
In late 1965, Korvette's formed its own Home Furnishings Division and ceased subcontracting furniture and carpet sales. A complex warehousing and distributing network was established. A central distribution warehouse was established in Danville, VA. This location received furniture, purchased by its buyers located in East Paterson, NJ. and in turn reshipped individual customer orders based on promised delivery dates. The sold merchandise was then shipped to delivery warehouses in East Paterson, NJ, Pensauken, NJ and Jessup, MD for final prep and delivery. This well-managed furniture distribution group was active until it closed at the end of 1977.
By 1966, Korvette's had begun to decline and chose to merge with Spartan Industries, a soft goods retailer. Eugene Ferkauf was eased out of the company leadership, and Spartan managers attempted to revive the company.
From 1971 to 1979, Korvette's was owned by Arlen Realty, a land development company that used Korvette's 50 stores as a source of cash flow. Under Arlen's ownership, Korvette's stores deteriorated and lost market share relative to other retailers. Soon the company soon became worth more for its real estate assets (such as its ownership or leasehold interests in valuable locations) than its retail sales.
In 1979, Korvette's was purchased by the Agache-Willot Group of France which initially closed Korvette's least profitable stores, and began selling off merchandise, fixtures, equipment, and real estate. In 1980, they declared bankruptcy and on December 24, 1980 they closed all of their remaining 15 stores.
According to Korvette's founder, Eugene Ferkauf, the name E.J. Korvette was coined as a combination of the initials of its founders (Eugene and Joe) and a re-spelling of the naval term Corvette. This claim, and the fact that the name pre-dates the Korean War by three years, contradict an urban legend that the name stood for "Eight (or Eleven) Jewish Korean War Veterans".

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