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Obituary: Eugene Ferkauf / Korvette founder reshaped discount retailing
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Eugene Ferkauf, the founder of the E.J. Korvette chain of discount department stores, whose 1950s strategy of low prices, quick turnover and high volume helped shape today's retail landscape, died Tuesday at his home in New York City. He was 91. His family announced the death.
Mr. Ferkauf was one of the first businessmen to grasp the emergence of a new breed of postwar consumer. Seeing a population of Americans financially better off, impatient to get on with their lives after World War II and susceptible to the advertising shown on the latest new thing, their television sets, he concluded that victory belonged to the very bold. Mr. Ferkauf would not only discount, he would discount more deeply than anyone ever had.
Seeing people streaming to the suburbs, he imagined the sort of sprawling, free-standing, conveniently situated, no-frills variety store that came to define U.S. retailing. After he built it, Sam Walton came to New York to pick his brain; two years later, Walton founded Wal-Mart. By the mid-1960s, the Korvette chain had dozens of stores, including one on Fifth Avenue in Manhattan, and scores of imitators had followed Mr. Ferkauf's model.
A Time magazine cover story in 1962 quoted Malcolm McNair, a retailing professor at Harvard Business School, as rating Mr. Ferkauf among the six greatest merchants in U.S. history, along with the likes of Frank W. Woolworth and J.C. Penney. (Mr. Ferkauf, however, declined to put his name on the store, giving rise to a false but widely held bit of lore that the name was a clever amalgam of ethnic, numeric and historical references.)
Discounting predates even the old five-and-dime retailers that postwar entrants like Mr. Ferkauf displaced. What was new was the almost total lack of sales service and spare decor. All kinds of merchandise, from cosmetics to carburetors, were piled everywhere. Prices were 10 percent to 40 percent below those of conventional stores.
To succeed, Mr. Ferkauf had to surmount fair-trade laws that permitted manufacturers to set a minimum price for products. The practice, known as price maintenance, was intended to protect small-store owners.
His solution was to declare Korvette a membership organization, not a retail store. This enabled him to persuade distributors to sell him wholesale merchandise at a discount, which he would then further discount. Members had only to show membership cards that Korvette passed out in front of its stores.
When competitors sued, Mr. Ferkauf simply changed suppliers. Many came back to him hat in hand not only to solicit his business, but also to offer him even lower prices in order to land his mass orders.
Eugene Ferkauf, whose last name is a form of "sell" in Yiddish, was born in New York City on Nov. 13, 1920. He attended the City College of New York for a year before enlisting in the Army in 1942. He served in the Signal Corps in the Philippines and Japan. After his discharge, he worked at one of his father's two luggage shops.
When he started discounting the merchandise more than his father could countenance, they parted company. The son rented a small second-floor loft and started his own store.
In his book "The Fifties" (1993), David Halberstam described Mr. Ferkauf's philosophy: If he could make a one-dollar profit selling a refrigerator, he could make a million-dollar profit selling a million of them.
When Mr. Ferkauf sold his share in E.J. Korvette in 1966 for more than $20 million, the company had 45 department stores and 60 supermarkets. It went out of business in the early 1980s. Mr. Ferkauf gave much of his fortune to cultural and Jewish charities.
He also made no secret of how he came up with the name E. J. Korvette. The "E" comes from the first letter of his first name, the "J" from that of Joe Swillenberg, an old high school friend who became a top company executive. Korvette is a deliberate misspelling of corvette, a reference to a class of naval ship, not the car. The name does not, as urban (or perhaps suburban) legend has it, refer to "eight Jewish Korean War veterans."
First Published June 8, 2012 12:00 am
