Word: ferkaufs
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Dates: during 1960-1969
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Part of Korvette's mounting success consisted in riding a trend. In the early '503, Gene Ferkauf was only one of many brash young discounters onto a good new thing. A retailing upheaval was under way. The nationwide move to the suburbs was undercutting the downtown department stores. Not having their money tied up in huge and costly property, the discounters moved out to where the housewives and buyers were, catered to the car-borne family trade by providing huge parking lots, kept night hours, and sold on Sundays. The typical discount center became part supermarket, part department...
...Price Alone. This put Ferkauf in a two-way bind. He had expanded too fast on a small capital base-four big new branches in 1957 alone-and department stores were beginning to win back business from him. His after-tax profits on invested capital plunged from 29% in 1956 to 9% in 1958. (Currently, they stand at 23%.) Fighting back, Ferkauf determined to challenge the department stores in the place where they were strongest. This meant getting into service, style-and soft goods...
...world of soft goods is a pink jungle in which stores compete savagely for the best styles and stylists, and a great deal depends upon cozy relationships built up over the years between the manufacturer's "vendors" and the store's buyers. Almost from the start, Ferkauf had had soft goods of sorts in his stores...
Blackballs & Back Doors. To get rid of his rags, Ferkauf in 1958 abruptly sold $5,000,000 worth of them below cost and set out to restock with better goods. But to do so, he desperately needed an experienced soft-goods buyer. He ran through four merchandising managers in three years until last year he hooked boyish-looking Jack Schwadron, 36, the whip-smart scion of a family that helped to found New York's Alexander's cut-rate department stores (in which Korvette's has a 43% voting interest). Schwadron knows soft goods. More important...
Buying the name brands of soft goods is still hard for Korvette's because manufacturers who openly deal with discounters are often blackballed by conventional retailers. To get high-fashion goods, Ferkauf and Schwadron sometimes have to go through cloak-and-dagger maneuvers that the CIA might study with profit. Korvette's Fifth Avenue recently scored something of a coup by offering its customers Pringle of Scotland fur-trimmed cashmere cardigans for as little as $25.90 each, despite the fact that Pringle tries to hold the price to more than twice as much by refusing to sell...