E. J. Korvette
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E.J. Korvette was a New York City-based retailer, founded in 1948. It is notable as one of the first department stores to challenge the suggested retail price provisions of anti-discounting statutes[1]. It is also notable for its failure to manage its business success which led to decline and its 1980 bankruptcy and closure.[2] Founded by World War II veteran Eugene Ferkauf and his friend Joe Swillenberg (or 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 Wholesale[1].
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[edit] Notable Retailing Innovations
Eugene Ferkauf founder of E. J. Korvette began his discounting career in a 400-square-foot 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 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 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.
[edit] Discounting and Membership Program
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) 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[1]. 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.
[edit] Strip Malls and the Suburbs
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.
First of modern type store was opened in 1954, a 90,000 square foot store, which for the first time carried apparel. (Discount Merchandiser July 1988) In 1956 Korvette's had 6 stores. By 1958 it had 12 stores. At its peak, it had 58 stores[1].
Korvette's expanded into the Chicago area in the 1960s. It successfully challenged the local and state Sunday closing ordinances and laws. Once those barriers were broken, many other retailers opened on Sunday.
[edit] Decline and Closure
By the late 1970's, Korvette's started experincing financial problems and in 1979, started closing down their unprofitable stores. In 1980, they declared bankruptcy and on December 24, 1980 they closed all of their remaining 15 stores.
Korvette's decline and closure are variously attributed to inconsistent management[1], 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].
[edit] The Origin of the E.J. Korvette Name
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." [3]. This claim, and the fact that the name pre-dates the Korean War by three years, directly contradict an urban legend that the name stood for Eight (or Eleven) Jewish Korean War Veterans.
[edit] References
- ^ a b c d e f Buy and Hold: Discount Retailers, accessed October 31, 2006
- ^ a b Harvard Business School: When Giants Stumble, October 12, 1999
- ^ Claim: The discount chain E.J. Korvette took its name from a shortening of 'eight Jewish Korean War veterans,' the founding partners. Status: False. at Snopes.com
