E.J. Korvette - The Dawn of Discounting

In the history of American retailing, The E.J. Korvette Story is a fairly brief chapter. This brevity does not do justice to the tremendous, arguably unparalleled influence the company and its visionary founder, Eugene Ferkauf, wielded during its halcyon years – the mid-fifties through the early nineteen-sixties.

E. J. Korvette, Inc. was founded by Brooklyn-born Eugene Ferkauf in May 1948 with a single, cramped second floor store in Manhattan, where the main product sold was luggage. The store’s name (contrary to the popular legend which said it stood for “Eight Jewish Korean War Veterans”) was derived from Ferkauf’s first initial along with that of Joe Zwillenberg, a childhood friend, who would join Ferkauf in his new business. “Corvette” was the name of a class of Canadian Naval ship. The name was modified in deference to Canadian Naval regulations of the era which apparently forbade commercialization of military nomenclature (this was several years before General Motors’ Corvette).

Small appliances (sold at very low markup) were soon added to Korvette’s product mix, and after only two years sales passed the $2 million mark. By 1957, nine years after its founding, sales were at $71 million, and only five years later were over $237 million. By the end of the 50's, Korvette had begun to place a huge emphasis on clothing and and other soft goods, which helped fuel the company's rise.

Korvette played a major role in the downfall of “fair trade” laws – where goods manufacturers were allowed to set retail prices (today’s laws only allow them to “suggest” prices). To a large extent, these laws protected traditional department stores, who sold at typical 40% markup versus the discounters who often sold at margins of 20% or less. On hundreds of occasions, Korvette was sued by manufacturers for undercutting their mandated prices. Korvette’s response in nearly every case was to switch to a different manufacturer of the same product. The court cases also resulted in a ton of free publicity for Korvette, burnishing their image as an advocate for the poor, hapless, overcharged consumer.

Korvette also led the charge toward building in suburban locations, often arriving ahead of their department store competitors, including Macy’s and Gimbels. By the early 60’s, the company was building huge 200,000-plus square feet “Korvette Cities”, consisting of a “promotional department store” (they avoided the term “discount store” like the plague) with an adjoining Korvette supermarket, furniture/carpet center and tire store.

The department photos (and exterior artist’s rendering) shown above date from 1962, as the company continued to ascend at a furious pace. That year, Korvette opened 6 stores for a total of 21 in the New York, New Jersey and Philadelphia markets. A push into the Chicago area would come the following year, with St. Louis the year after that. Most of the stores opened in ‘62 were suburban locations, with one very notable exception – the company’s new flagship store on New York City’s legendary Fifth Avenue, which opened in June. Discount retailing, still a fairly new phenomenon at the time, had from the start been rebuffed and ridiculed by critics as a passing fad. Korvette’s success was a vital factor in showing those critics (along with everyone else) that discount stores were here to stay. Undeniable proof that Korvette’s influence had expanded far beyond its geographic boundaries came in the July 6, 1962 issue of Time Magazine, which featured a glowing cover story on Eugene Ferkauf and his brainchild.