Last year saw the passing of one of the most influential
figures in retailing history, one who deserves more recognition than he
receives today, I’m afraid. Eugene Ferkauf, founder of the legendary E.J.
Korvette chain of promotional department stores, passed away on June 5, 2012 in
New York City at the age of 91.
In the early sixties, Ferkauf found himself the subject of a
fair amount of media attention as his company ascended. By all appearances, E.
J. Korvette looked to be on the verge of breaking out into a national chain. As
the decade rolled on, however, things changed drastically – the company ran
into trouble, the dreams were scaled back, and with Ferkauf’s departure in
1968, “Korvettes” (as it was then officially known) began to wane rapidly. His
influence continued, but more on the discount industry as a whole rather than
on the company he founded.
The origins of E.J. Korvette, which have been discussed to
some extent here before, fall squarely within the realm of the bootstrapping
American dreamers of the mid-20th Century: Eugene Ferkauf, a young man from Brooklyn, seeks
a career in retail upon his discharge from the Army. Offered a slot in R.H. Macy
& Co.’s training program, he turns it down and instead follows in the
footsteps of his father, opening in 1948 a luggage store in an East 46th
Street second floor walk-up (for you
non-New Yorkers, that means “building with no elevator”). Breaking away from his father’s approach, he sells
at reduced markups and starts to move large volumes of product, selling
everything from a simple “traveling case” for a college-bound son or daughter
to 20-piece top-grade leather luggage outfits for U.N. diplomats.
Along the way, he decides to stock some small electric
appliances - virtual red meat to ravenous postwar consumers eager to upgrade
their lifestyles now that The War was over. (Not that the words “upgrade” and
“lifestyle” were common to the American vocabulary in those days. They weren’t.
Mostly, folks were just eager to toss Grandma’s old wind-up clock in favor of a
nice, self-starting electric Telechron.) The appliances are marked well below
“manufacturer’s suggested prices”, and sales go through the roof. Ferkauf begins
to open to open more stores in the city – in first floor locations.
His employees are his friends – high school pals from
Brooklyn, with a few Army buddies peppered in - the people Ferkauf feels most comfortable
with, and whom he trusts above all others. They start as sales clerks and shelf stockers
in the early stores, and many move into executive positions as Korvette rapidly
grows into a full-blown corporate entity. Even then, they continue to call each
other by their adolescent nicknames – “Doodie” and “Schmultzie” being two
examples cited in Time Magazine’s 1962 profile of Ferkauf. Within a few years, many of these guys acquire
another nickname - “millionaire”, as a result of their association with
Korvette.
The roots of the company name itself extend to Ferkauf’s
Brooklyn boyhood. “E.J.” stands for Eugene (Ferkauf) and Joe Zwillenberg,
friend and Korvette employee from the very beginning, and “Korvette” is
inspired by the Corvette, a class of World War II warships operated by the
Royal Canadian Navy. A popular, and false, story behind the name’s origin soon
arises - that E.J. Korvette stands for “Eight Jewish Korean War Veterans.” (Where the myth started remains a mystery, but
it endures to this day. Evidence of that turned up in NBC Nightly News’ report
on Ferkauf’s passing, where Brian Williams made mention of it and briefly outlined
the name’s true origin. Personally, I was just delighted to see the story
covered on network news.)
By 1953, five years on, Ferkauf has four more stores – on Third
Avenue and 42nd Street in NYC, in White Plains, at Rockefeller
Center, and in Hempstead, Long Island. These
stores share common characteristics with the first (sans the “second floor
walk-up” aspect) in that they’re “noisy, cluttered, and so pressed for space
that they have lapped over into annexes next door or down the block”, as
Fortune magazine would put it in November 1956. The next store, however, Korvette’s
first suburban “shopping center” location near Westbury, Long Island, would be
markedly different.
And that’s where the legend of E.J. Korvette and its
founder, Eugene Ferkauf, really began.
The late author David Halberstam, in his masterwork The
Fifties, an essential read for anyone interested in that decade’s massive
effect on late 20th century American culture – consumer, popular and
otherwise, devotes an entire chapter to the rise of E.J. Korvette. Halberstam sets up a memorable scene: “As
Ferkauf looked at the potato fields of Westbury, he experienced a vision of the
new suburbia: a sparkling, huge new store with vast parking facilities.” (Surely
you’ve heard of “Westbury potatoes”, just like Idaho or Maine potatoes, right?
Well, no one else has either; that’s why they built a shopping center on top of
the place.)
More of Halberstam’s vivid picture painting: “There would be
no more taking whatever real estate agents gave him and adapting buildings that
could never be made to fit his needs. In fact, he had always wanted a store
that was not merely successful, but also beautiful – like Lord & Taylor, a
showplace the customer would also admire. Westbury would be the site for that
store; there was plenty of space, easy access to the highways that connected
Long Island to New York City, and best of all, it was only ten minutes from
Levittown.”
Korvette’s “Westbury store” (actually located in Carle
Place, L.I., on the corner of Westbury Avenue and Glen Cove Road), constructed
on an insanely short schedule and opened just in time for the Christmas 1954
selling season, soon validated Ferkauf’s line of thinking, grossing $2 million
in the month of December alone, and $28 million the following year. Ferkauf was
“one of the big boys now”, as Halberstam put it.
The Westbury store was the first of what would become known
as “Korvette Cities”, integrated shopping complexes comprising a general
merchandise discount store, a supermarket, and (eventually) carpet and
furniture centers. The supermarkets were only marginally profitable, but they
drew customers in. And Ferkauf had no desire to go into the carpet or furniture
business himself – the turnover was “too slow”, and these items “require(d) too
much after-sale service” according to the 1956 Fortune article, so he
franchised the Korvette name to two outside firms.
A popular feature was the beloved pretzel vendor, stationed
just outside the main entrance at Westbury at $800 a month rent. These would soon
become a fixture at Korvette stores and other discounters throughout the region.
(800 bucks a month in the 50’s. That was a bunch
of pretzels.)
In the ensuing years large, beautiful Korvette stores popped
up regularly in major suburban areas all over the Northeast: West Islip, Long Island
in 1956, followed by Springfield, Pennsylvania and North Brunswick, New Jersey
in 1957, Scarsdale, NY in 1958, Camp Hill and Philadelphia, Pennsylvania in
1959, Audubon and Trenton, New Jersey and Huntington, L.I. in 1961. As
Ferkauf’s fame reached a new peak in 1962, new suburban Korvette stores were
opened in Nanuet, New York, West Orange, New Jersey, the Baltimore suburbs Towson
and Glen Burnie, Maryland and at the massive new King of Prussia Mall in
suburban Philadelphia. And of course, the famous Fifth Avenue store, covered
numerous times here, opened in June of that year.
The timing for Ferkauf’s push into the suburbs couldn’t have
been better, and it put his company in a rarefied position to capitalize on the
sweeping changes taking place in American life. One trend was fairly obvious, of course – the
hordes of families actually relocating to the suburbs from the cities and
naturally desiring convenient places to shop, but there were other factors at
work.
A brilliant 1962 Fortune magazine article about the
discounters, “The Revolutionists of Retailing” by Charles E. Silberman, touches
on several of these reasons. For one thing, the suburbs were “changing
character”, and not all of the new suburbanites were high or middle income
families. Through the 1950’s, many of the country’s best known main line
department stores began to open branch stores in the suburbs. As often as not,
these branches were stunning from an architectural and design standpoint, but many
were missing a key component of their downtown flagships’ success – the
“basement store”, where bargains and discontinued items sold in volumes. “During the flush years of the early postwar
period, however, (department) store managers became infatuated with the
explosive growth of the middle income group and the consequent possibilities
for “trading up”…(but) they failed to see that their basement customers were
moving to the suburbs, too. As a result, they left unsatisfied a substantial
demand for low-priced staples and semi-staples – children’s clothing, sheets,
towels, women’s lingerie, men’s sport shirts, etc.” said Silberman. In doing
so, they created a huge opening for Ferkauf and his fellow discounters.
As far as “trading up” is concerned, the article goes on to
note an interesting countertrend that also benefited the discounters. While many
middle income consumers were indeed trading up, equally significant, maintained
Silberman, were those consumers who were “trading down.” The consumer culture was now running at full
tilt, the article noted, and “Far from being sated with goods and
services…Americans are finding it difficult to accommodate all their desires
even with their rising incomes, so they stint where stinting is possible.
Consumers who want a new car, a boat, a trip to Paris, and a college education
for their children are likely to go out of their way to save 10 to 20 percent
on the children’s underwear.” So the
discount store was finding its place even among the well-to-do, and those who felt
they were.
But the discount stores’ appeal went beyond price: “strange
as the notion may seem to devotees of Marshall Field’s or Neiman-Marcus, a good
many Americans actually enjoy shopping in discount houses.” In a survey cited
in the Silberman article, “Convenient location, good parking, self-service, and
the opportunity to browse without being browbeaten by a clerk” all ranked above
price concerns. (Funny how the notion of “being browbeaten by a clerk” seems
almost quaint today, even in full-service department stores. “Spending less
than 20 minutes searching for a clerk” might be more applicable now.)
And at the forefront
of all this, according to Silberman, was Eugene Ferkauf, “due to the chain
reaction he helped set off.” Undoubtedly the most prestigious endorsement,
cited in this article and numerous others, came from Malcolm McNair, professor
of retailing at the Harvard Business School, who in 1962 declared Ferkauf among
the six greatest merchants in history, alongside Frank W. Woolworth, John
Wanamaker, James Cash Penney, General Robert E. Wood of Sears and Michael
Cullen, founder of King Kullen, widely credited as the first supermarket. Three
of the group had long since passed on and two others, Penney and Wood, were in
the “Chairman Emeritus” stage of life, leaving Ferkauf as the greatest
contemporary retailer. And you know you’ve made it when you’re profiled in a
children’s book, as Ferkauf was in “Famous Merchants for Young People”, a 1965
title by Sigmund Lavine. (Rumors that
the book is being re-released as “Famous Hedge Fund Managers for Young People”
are unconfirmed at this point.)
Arguably it was the opening of Korvette’s Fifth Avenue store
in New York City, on March 15, 1962, that prompted the brightest spotlight on
Ferkauf and his company. Though untypical in many ways – a stately, seven-story
Roman columned building in the heart of Manhattan’s toniest shopping district
as compared to Korvette’s standard sleek, sprawling suburban shopping cities
(need more “s” words, there, don’t you think?) – the sheer boldness of the move
caught the media’s fancy.
There was a Business Week cover story on February 10 -
“Korvette’s Eugene Ferkauf pits his brand of discount selling against the
carriage-trade tradition of Fifth Avenue”, featuring a cover photo of Ferkauf,
looking natty in a trench coat on a dark, rainy New York day. In April, Ferkauf
and Korvette figured prominently in “Rise of the Superstores”, a Dun’s Review
piece about the tidal wave of discounting and its effect on manufacturers –“few
indeed can match Ferkauf’s performance in retailing –a field where only a new
concept, carefully nurtured, can bring in the millions.”
But probably the most coveted media prize in those days, long
before the decline of print sales and the rise of the “Google Doodle”, was the
cover of Time Magazine. Each week the Time cover featured a top national or
international personality from the area of government, science, sports, the
arts or business, and on July 6, 1962, it was Ferkauf on center stage in a
painted portrait, (as most Time covers were then) amid a downdraft of
discounted-price tags and a lamppost bearing the address of his new flagship
store.
The Time article itself is a fascinating account of
Korvette’s history up to that point, and it offered considerable insight into
Ferkauf’s thoughts on his company and its place in the retail world. On
Korvette’s role in the marketplace: “If
Macy’s, Gimbels and Carson’s are selling at lower prices, it’s because we’ve
inspired this competitive situation. We have done more to stretch that buck
than anyone in American distribution. I don’t know by what percentage we’ve
increased the purchasing power of the American dollar, but I know it’s
significant.” On Korvette’s lack of stockholder dividends: “As long as I have anything to do with this
company…all the profits will go to expansion. The hell with the stockholders. (and,
grinning) …don’t forget I’m the biggest one.” On the future: (and “not wholly
kidding”, as Time put it) “All we hope for this company is that it should do
all the merchandising business in the U.S.”
It also afforded an interesting glimpse into his unconventional
working style: “He has no office, no secretary, no personal files. He has never
dictated a business letter or made a speech…He shuns credit cards; he regards
them as a temptation to spend company money. He never goes to cocktail parties
or conventions; they cost time.” And into his family life as well: “No matter
how far he must travel to inspect one of his stores, whether to Hartford or
Harrisburg, he is always home before the children bed down. Only six nights
during the past 14 years (since Korvette’s founding) has Ferkauf spent away
from home, and four of them were on a recent business jaunt to Italy.” Not a
lot of us can say that.
For the next several years, Korvette’s growth continued on
the trajectory the magazines had raved about. New stores were opened in 1963 in
Paramus, New Jersey next to Bergen Mall (and a stone’s throw from Garden State
Plaza) and in Trumbull, Connecticut. Then came the company’s first stores to be
built outside the “Northeast Megalopolis” (Boston to Washington, DC, or in
Korvette’s case, Hartford to DC) – by the end of 1964, Korvette had four stores
in the Chicago area – in Oak Lawn, Elmhurst, Morton Grove and Matteson (a fifth
area unit would open in North Riverside in late 1965), three in suburban
Detroit – Southgate, Roseville and Redford Township, and two in greater St.
Louis – Sunset Hills and Cool Valley. Back in the megalopolis, two D.C. area
stores - Rockville, Maryland and Baileys Crossroads, Virginia opened around
this time as well.
But as the mid-60’s approached, problems began to surface. Some
of these were rooted in the company’s increasingly upscale approach to the
market (read: fancier stores), a progression that started with the first
suburban Korvette locations in the mid-50’s and accelerated after the
overwhelmingly positive reception to the opulent Fifth Avenue store. Business
Week succinctly described the concerns of retail observers: “How, they ask, can
you operate a palace on a discount base?” Despite the prettier (and more
costly) stores, the additional services offered, and a newly expressed
preference for the phrase “promotional department store” over “discount store”,
Korvette president William Willensky took pains to reassure them: “…when it
comes to pricing, we are a discount house, no ifs, and(s) or buts about it.” Eventually,
however, these moves began to take a toll on Korvette’s profits. As long as
volume grew it wasn’t a huge concern, but they stood vulnerable in the event of
a sales downturn. Also, they were now closer than ever to direct competition
with Macy’s and other full-line department stores at the same time these firms
were finally grasping the new rules of the price game.
Another issue concerned the company’s “Western” stores in the
expansion markets of Chicago, Detroit and St. Louis. On the whole these stores (all
massive “Korvette Cities”) did reasonably well, but the results fell short of those
Korvette enjoyed a few years earlier upon entering Philadelphia, where they
virtually crushed the competition, or of their very strong showings in
Baltimore and Washington, DC. Things were particularly contentious in Chicago,
a land rife with discount stores as it was, but also the home turf of Sears, a name
that rhymed with “unassailable retail powerhouse” in those years. They “met
Korvette’s incursion head on”, as Fortune magazine put it in February 1966. But
Ferkauf, quoted in the same article, had no regrets: “I’m glad we went in when
we did. Today we’re enjoying the fruits of the move.”
A major hassle occurred when Korvette’s longtime furniture lessee,
the H.L. Klion Company, imploded. Lacking the infrastructure to cope with
Korvette’s continuous expansion and crippled by two labor disputes, Klion’s
furniture deliveries became hit-and-miss, resulting in a whopping $2 million in
customer order cancellations in 1964, many of those with custom-ordered
upholstery. The crux of the matter, of course, was that the signs all over the
department read “E.J. Korvette”, (the customers most likely never even heard of
Klion), so Ferkauf and company were compelled to act in order to preserve
Korvette’s good name and to attempt to ameliorate the damage. In August 1965, Korvette took over the Klion
operation, and around the same time bought out their carpet lessee, the Federal
Carpet Company, as well.
But the most vexing problems stemmed from the Korvette
supermarkets. For all of their mastery at selling appliances and other products
for the home, and despite their growing experience in affordable fashion and
other relatively new areas, when it came to running supermarkets Korvette was
light on expertise. By the mid-60’s that part of the operation was raining red
ink. For one thing, there was no central warehousing capability, “(so) close
day-to-day control over the inflow of goods was impossible – a fatal flaw in
the low-margined food business”, said Fortune in 1966. Especially affected were
the supermarkets “in the unfamiliar land of Detroit and Chicago, to which
Korvette could not profitably ship staples from the East, and where it had no
experience in the local purchase of meat and produce.” They soon leased off the
Detroit and Chicago supermarkets to other operators, with several in the latter
market going to Dominick’s. The issue continued to plague their core Eastern
markets, however, and food store competition there continued to intensify,
complicating the matter. Ultimately
these problems led to a merger that, in sad hindsight, would mark the beginning
of the end for Korvette.
According to former Korvette vice president Eve Nelson, Ferkauf
was prone to “crushes” on companies, an assertion well supported in his 1977
autobiography “Going Into Business : How To Do It, By The Man Who Did It”.
(Half Korvette history, half tutorial for aspiring retailers, it’s a fun and informative
read.) From the moment Korvette hit the big time in the early 50’s, it seems he
was constantly involved in merger talks with one firm or another, often
multiple companies at once.
For the most part, Ferkauf pursued the talks with a singular
goal in mind: to bolster Korvette in areas where it was weak, creating a
combination where both parties brought complementary strengths to the table. In
the early years, when Korvette was strong in appliances and other hard goods
but lacking in soft goods experience, he focused on department stores with an
emphasis on fashion at discount prices.
Three of these were
based in New York – J.W. Mays, Ohrbach’s and Alexander’s. Ferkauf had great
respect for the merchandising acumen of Joe Weinstein, head of J.W. Mays, a
Brooklyn-based retailer with a few suburban branches, despite obvious reservations
about Weinstein’s personal manner. (He relates a story where during one
meeting, Weinstein sneezed into Ferkauf’s lasagna, “…and I was hungry.” Thus
ended the merger discussions for that day.) J.W. Mays’ arch rival, the
Bronx-based Alexander’s, had some years back moved into suburban White Plains.
When George Farkas, who controlled Alexander’s, opened the company’s huge, attractive
Rego Park, Queens branch, it set off “an undeclared war” with Mays. Nathan Ohrbach, who took a fatherly liking to
Ferkauf, opened his flagship store in NYC’s Union Square in the early 20’s
(later moving it to 34th Street) and in subsequent years opened
several branches in area suburbs. Ohrbach’s eventually flew its flag in
California as well, with a very elegant location on Wilshire Boulevard opening
in 1948. For a while, Ferkauf held out hopes a four-way merger with the above named
firms, and went to great effort to orchestrate negotiations (seating Weinstein
and Farkas on opposite ends of the table, of course) towards that end, but a
Mays-Korvette-Orhbach’s-Alexander’s combination never materialized. In 1955,
Ferkauf did acquire a 43 percent stake in Alexander’s for just under $10
million, but was never was allowed to buy the additional shares needed to wrest
majority control from the Farkas family. In 1968, the Alexander’s interest was
sold for more than double what Korvette paid for it.
Others entered the picture, including City Stores, who owned
the department stores Lit Brothers (Philadelphia) and Maison Blanche (New
Orleans), the variety store chain McCrory, and New York specialty stores
Oppenheim Collins and Franklin Simon. When City Stores’ financier, Albert M.
Greenfield (“who reminded me of Sydney Greenstreet”, said Ferkauf), made the
magnanimous offer to buy out Korvette for half of the going stock price, the
prospects there came to a swift end.
Later, there was even a brief flirtation with Montgomery
Ward, following Korvette’s move into Chicago in 1963-4. Wards were several
years into a major expansion drive by then, opening large, modern stores in
malls and shopping centers across the country, but they had alarmingly little
presence in their home base of Chicago. There, they were saddled with The Fair,
a staid department store operation and perennial fourth or fifth-fiddle to
Marshall Field’s, Carson Pirie Scott, Wieboldt’s and erstwhile others. Eager to
open mainline Montgomery Ward stores (direct competitors with Sears and
Penneys) in Chicagoland, they saw the (then four) area Korvette stores – brand
new, attractive, well-located and the right size, as an ideal way to accomplish
that. But Ferkauf considered Montgomery Ward’s consistently sluggish profit
performance, despite years of investment in exciting new stores, to be “far
from satisfactory”, and while the possibilities discussed ranged from a merger
to simply selling off the Chicago area Korvette units to Wards, nothing ever
came of it. Wards ended up converting The Fair units to standard Montgomery
Ward stores, and would go on to anchor a number of Chicago-area malls in the
ensuing decades.
And finally (in many ways), Ferkauf’s quest to merge with a supermarket
chain, an endeavor that also began early on. First up was Penn Fruit, a very
successful Philadelphia-based company that Ferkauf considered “one of the
finest food supermarket chains in the United States”. (And that I consider to
have had “some of the best-looking stores in history”.) Ferkauf was keenly
interested in them and some talks were held, but Penn Fruit’s banker ultimately
nixed the idea. Then came years of exasperating, often humiliating talks with
Food Fair, another Philly-based food titan, which mercifully came to an end
with Food Fair’s 1961 purchase of the Boston-based J.M. Fields discount chain. Ironically,
it was Ferkauf they would turn to for advice (much more humbly this time ‘round)
when J.M. Fields started to incur serious losses, and he was glad to
oblige.
The “one that got away”, according to Ferkauf, was New
Jersey-based Supermarkets General, a member of the Shop-Rite cooperative and
later the operator of Pathmark supermarkets. In his book, he professes great
admiration for SG and Pathmark (ironic in light of Pathmark’s reputation of
recent years but completely valid at the time), and describes the missed
opportunity in failing to pursue a merger with them in very emotional terms. The
failure, it turns out, was all based on a misunderstanding. As it happened, SG
executive Herb Brody had told Ferkauf in an early 60’s meeting that “Shop-Rite will
never merge with anybody”. But he meant the cooperative, not Supermarkets General
itself, Brody clarified - a good decade later.
As mentioned, by the mid-60’s Korvette’s “supermarket
problem” had reached a critical point, but at the end of 1964 it seemed the
solution lay right in Korvette’s backyard.
Hills Supermarkets, a Long
Island-based operator of 40-plus stores (mostly located on the Island) was
growing fast. Best of all, they had recently opened a state-of-the-art distribution
center smack dab in the middle of Korvette’s core territory. The song of
synergy, complete with harps and celesta, was in the air, and in February 1965
a merger between the two companies was consummated. Nelson Riddle couldn’t have arranged things
better, it seemed.
But it proved to be a disaster from the start, with zero
personal compatibility between Ferkauf and Hilliard Coan, Hills’ former
chairman, and their respective teams. With Coan installed as chairman and
Ferkauf as president and CEO of the combined organization (still under the name
E.J. Korvette, Inc.), things bumped along uncomfortably for just over a year. It
all came to a head in May 1966, when Coan tried to force Ferkauf out of the
company.
Ferkauf, still Korvette’s largest stockholder by a wide
margin, hastily put together a meeting with his friend Charles Bassine, the chairman
of Spartans Industries, Inc., with the goal of merging the two companies. The
net effect, of course, would mean a shift in the balance of power at Korvette. Spartans
operated two discount department store chains, Spartan and Atlantic Mills. They
also owned a huge garment manufacturing operation in Tennessee (Bassine’s
original business), which annually churned out zillions of men’s sport shirts (connoisseurs’ items for today’s thrift-shopping
hipsters) and other clothing items for their own discount stores and just about
everyone else’s. In just about a month,
the deal was done. Korvette was now a division of Spartans Industries, and Coan
and his deputies were shown the door. The Hills/Korvette food stores would soon
be sold off altogether, most to Pueblo Supermarkets.
Ferkauf, who sold his Korvette stock at the time of the
transaction, stayed on briefly in a largely advisory role, but by 1968 he’d had
enough and decided to retire. A historic chapter was now closed. Sadly, in the
midst of the tumult of Korvette’s previous few years, Harvard’s Malcolm McNair
had removed Ferkauf from his “greatest merchants” list. But I submit that he still belongs there, for several
important reasons:
He played a large part in defeating the “Fair Trade” laws.
These were basically a form of legal price fixing, in which retailers were obligated
not to sell products below the manufacturer’s set price. The very idea of not
being able to shop for a bargain price has been unthinkable for eons, but
through the 1950’s, Korvette was sued by company after company for daring to
breach their sacrosanct list prices . When this happened, Ferkauf either
brought in another product line or just defied them. One by one, the manufacturers
rescinded these policies, and when General Electric finally caved in 1958, it
was over. The laws were repealed. Public
sentiment had won, and discounting was now legal.
He was early to see the potential in the suburbs. I
know. You can read this site and innumerable other sources dealing with retail
history, and after a while you get the sense that everyone and their Aunt Martha
led the charge into the suburbs. But Korvette’s Westbury store opened in 1954,
and that was early.
His management style was ahead of its time in many
ways. In 1982, the book In Search of Excellence, by Peters and Waterman, was
published to wide acclaim, and it’s still regarded as one of the most important
business books ever written. One of the core principles of the book was
described as “management by walking around”, which meant exactly that - spending time on the floor, listening, interacting
with employees , seeking their opinions and inspiring the troops where needed,
as opposed to hiding out in a corner
office waiting for status reports and issuing directives. This is de rigueur among
well-run companies now, but Ferkauf excelled at it decades before it was
standard practice.
Also, Korvette arguably had the most powerful female executive
in retail in the 1950’s and 60’s, with Ferkauf’s hiring of Eve Amigone Nelson.
She was the company’s director of advertising and promotion during the halcyon
years, and was given free rein to shape their marketing program, with magnificent
results. There was little discussion of a “glass ceiling” back then, in an era when
women were rarely even allowed on the floor. Ferkauf played a part in helping
to change that.
He keyed in on the entertainment culture like no one
else. It was reported that one of
the eulogists at Ferkauf’s funeral related the story of buying his first Beatle
record at E.J. Korvette. No doubt this
story rings true for legions of record-buying fans (of the Beatles and every
other artist imaginable) in those years. He hired a record producer, David Rothfeld,
to run the operation, and throughout the 1960’s and beyond, Korvette easily had
the top-selling record departments of any mass-marketer in the country. Rothfeld’s group also developed a hugely successful
electronics line under the house brand “XAM”. (If you’re curious as to what
that stood for, it was “Max” spelled backwards. Max was Korvette’s audio equipment
buyer’s cat. Now you know.)
Well, Professor McNair
passed away in 1985. Maybe someone will create a new list at some point.
In any event, the pioneers tend to move on. They spend more
time looking forward than looking back, and with the exception of writing the
“history” portion of his book, that’s exactly what Ferkauf did in the years
following his departure from Korvette. There would be other retail ventures –
Bazar (not to be confused with “Baza’r”, the West Coast-based discounter), a
Pier 1-style import store, Clubmart, a New York-area membership discount
operation, and Sunbelt Department Stores among them. In 1976 he set up his own
retail consulting practice, Penfield Retail Services, where he worked with a
number of high-profile clients including The Southland Corporation (7-Eleven),
Playboy and Citibank. The legendary New York Times retail writer Isadore
Barmash dubbed him a “doctor for companies” in a 1981 article.
Better known than any of his post-Korvette retail endeavors,
however, was his philanthropy. In addition to their charitable organization,
the Eugene and Estelle Ferkauf Foundation, in the mid-1960’s, Ferkauf and his
wife became the founding benefactors of the highly acclaimed Ferkauf Graduate
School of Psychology, part of New York’s Yeshiva University.
In the fall of 2008, I wrote a series of short posts on the
history of E.J. Korvette. I’ve received many responses via site comments and
emails from folks who worked at Korvette since the posts first appeared, and over
the years they’ve continued to come in. For quite a few of them, it was one of
their first jobs, where they worked in high school or college. Some worked
there for just a year or two, yet looking back now from their late fifties or
sixties, virtually all consider their tenure at Korvette to be among their
happiest experiences. If their stories are any indication, it’s safe to say
that Ferkauf was very well-liked and respected by his employees.
And the Ferkaufs’ generosity even extended to me, in an
unexpected, personal way. About a year after I’d done the series of Korvette
posts, I heard from Mr. Ferkauf’s wife, Estelle, saying how much she and her
husband enjoyed them. Not long afterward, I received a warm email from their
daughter, Bobby, as well. Even the most successful business stories fade with
time, but people tend to remember how they were treated along the way, and these
acts of kindness underscored everything I’d read and heard about them.
Now, a few words about the photos that appear a couple of
miles above this paragraph. They’re vintage Korvette publicity shots of early
suburban stores, all of them sporting red signage, whereas on later stores it
was typically blue. (Note my steadfast avoidance of dropping any Prince song
titles here. Sheer willpower.) The first,
circa 1961, shows the historic Westbury store, the original “Korvette City”
prototype, packing ‘em in some seven years after its opening. The second, also
from that year, is an unknown location to me. Third up, from 1958, is the
Springfield, Pennsylvania store, the first in Korvette’s very successful launch
into the Philly area. Last, also from ’58, is what Korvette officially called their
“Westchester store”, which bore a Scarsdale address but was actually
located in an unincorporated area of Greenburgh at the Midway Shopping Center.
This store has the rarer block letter signage in lieu of the well-known script.
In a fun side note, one of these signs
was uncovered in 2010 when the former Korvette building in nearby Pelham was
redeveloped.
Excellent post, Dave. Korvettes is one of the more fascinating retail stories out there.
ReplyDeleteThanks, Steve. I've always thought so as well.
DeleteWonderful article, Dave. Being a west coast kid, I knew that they existed but that's about all. I have never really understood the old fair trade laws, but do remember some items like electronics still being sold at ridiculous fair trade prices, which usually caused me to buy the off brand for far less money.
ReplyDeleteDavid - Thanks so much, I really appreciate that.
DeleteIt's a shame, in a way, that Korvette didn't make it out west, but they had a great influence over the entire industry, and no doubt the leaders of the big California discounters were following what Korvette was doing.
For sure, a side effect of the fair trade laws was the huge growth of knockoffs and off brands.
Dave, this is absolutely stellar.
ReplyDeleteOne little correction: in the last paragraph you say the Westchester store bore a "Scarsdale, L.I." address, which of course it did not, as nobody would ever mistake Long Island for Westchester! A "Scarsdale, N.Y." address would be more accurate.
Jeff - I'm really glad you caught that - I must've had Long Island on the brain! I've fixed it.
DeleteI'm really glad that you liked this. The whole Korvette story continues to intrigue me, and this post is something I've been wanting to do for a long time. Thanks again!
Of course Jeffrey is OCD about EJ Korvettes and the Scarsdale diet.
DeleteI'm not going to say anymore about Mr. Morris and the downfall of Korvettes.
Thank you for such a wonderful post. My dad, Dave Cruhlac was one of the original executives at Korvettes. Eugene Ferkauf had introduced my dad to his "kid" sister Lauretta Ferkauf, whom my father married. So thank you Uncle Eugene.
ReplyDeleteWhat a neat story, Jolene! I'm very glad you enjoyed the post - your uncle was a true pioneer!
DeleteJust saw this today, Dave. Such a fascinating tale in the life of an iconic man. Forget Mcnair's list.
ReplyDeleteI couldn't agree more, Didi! :)
DeleteWe had one store in the St Louis area - Big Loopy Logo sign on the front my parents used to love to drive out there and walk around in the 70's
ReplyDeleteHi - There were actually two in the St. Louis area - one in Sunset Hills (Lindbergh and Rte 66) and the other in Cool Valley.
DeleteAnd "Big Loopy Logo" is the best description I've read of the classic Korvette logo! ;)
Excellent post, as always, and, if you're a sharp-eyed Mad Men viewer, you would've seen on this week's episode that Peggy had just returned home at one point from a Korvette shopping trip!
ReplyDeleteThanks very much. I've gotta check Mad Men out - I keep hearing things like this about it!
DeleteSome good friends, whose taste I have lots of confidence in, never watched it before this year but have since become totally hooked and have caught up on it by watching 5-6 hour blocks at a time. But the Korvette thing is recommendation enough for me! ;)
I was just cleaning out some stuff and ran across a Korvette's branded hair dryer.
ReplyDeleteAlso ... I remember Fair Trade laws still being in effect, at least in California, in the early '70s. You couldn't buy a Sony TV for less than MSRP. I remember buying one at the late lamented Best Products. And even today, even though there are no such laws, some manufacturers like Apple create de facto Fair Trade situations by refusing to sell to retailers who sell their products for less than MSRP.
You're absolutely right - Apple is a rare modern-day example of the price protection that used to be universal with top name brands. Though there are valid arguments to the contrary (the loss of American manufacturing is blamed at least partly on the demise of fair trade), I'm not sure that's something we want to go back to.
DeleteHello Dave,
ReplyDeleteLoved your post (and this website as well!)
I don't remember if I've ever posted here, but
I grew up on Long Island and Korvettes was ever-present. In fact when I was 4, while our
new church was being built, the parish held mass in an empty space right next to the Korvettes in West Islip (and this space then
became Korvettes Furniture Store when we moved out.) For people not from the Northeast it's
hard to describe what a huge deal Korvettes was back then. The West Islip store was about a 10-minute walk from my house and I spent so
many hours there in their small Toy Department or looking at radios and phonographs. But I must have spent half my youth browsing in the
record department. When I was a little boy I'd
see the newspaper ads that touted "The World's
Largest Record Department" and think wow, I go
there all the time! Little did I know that the
one they were talking about was in Manhattan!
But it brings back so many memories. For several years in high school and college I worked evenings after school in Korvettes, in the Hardware & Sporting Goods depts (ironically the two subjects I knew absolutely
nothing about!) But it was a great experience
because so many on the night crew were high school and college kids, and we had a blast.
The West Islip store was rather dumpy by the time I worked there (say 71-75 or so); all the
fixtures were old and the floors were hideous.
But it was probably the most fun work experience I've ever had, for the amazing salary of about 2 bucks an hour. As I grew up
and was old enough to meet my college friends in Manhattan, I would always find time to stop
at one of the Korvettes in the city, once again
drooling over records, records, records! One of
my most treasured "toys" is my "I Am A Korvettes Trainee" badge, which dates back to
those early years. I was so sad when they closed, particularly that West Islip branch where I spent so many hours gabbing with my
co-workers and lifting bags of fertilizer and
cases of anti-freeze (which helped me to lose
about 25 lbs my senior year in high school!) Time marches on, but E. J. Korvette is forever!
Jimbo - Thanks for sharing those truly wonderful memories with us. I promise you that the record department is where I would have spent 90% of my time.
DeleteHang onto that badge! :)
Korvette was a wonderful company to work for (22 years) Unfortunately the stores were too big, the average store was 250.000 square foot, they could not do the sales to support such big stores
ReplyDeleteI was at Korvette for just two years, 1979 (starting Jan. 2 of that year) until the week it closed in December of 1980, in the record department of the Fifth Avenue store. It was a wonderful, rewarding, challenging experience, especially as I was put in charge of purchasing classical LPs after just four months on the job. It provided a basis for a lot of my subsequent work in other fields, and it still proves useful as, in my 60s, I now run a record store in Manhattan.
ReplyDelete