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All in One. Answering this demand, the big, successful discounters are turning into cut-rate department stores. San Francisco's Government Employees Together, a clublike discounter aimed at Government workers, claims a wider diversity of goods than any of the city's regular department stores. Los Angeles' William Phillips Co. carries gifts, clothing, luggage and records, even added a liquor department this year. Manhattan's E. J. Korvette (estimated 1957 sales: more than $70 million), which calls itself a "promotional department store" and is even listed on the New York Stock Exchange, has quickly fanned its discount selling into the suburbs to follow population trends. Of its eleven stores, four (including two supermarkets) are in Westchester County, Long Island, suburban Philadelphia; seven of the nine new Korvette stores planned by the end of 1958 will be in other bustling suburbs.
The trouble is that such expansion costs more than most discounters can afford. Even with more and more self-service, Korvette's overhead has risen from 7% of sales in 1951 to around 14% (v. an average 33% for department stores). Korvette and other big discounters have the cash reserves they need to grow, but their smaller brothers do not. Traditionally, the discounters' main credit source has been manufacturers' wholesale distributors, who "carried" discounters through periodic slow periods. Even if the discounter failed, the distributor could rationalize his own loss as advertising for the products. The sagging appliance market has tightened that credit source just when shoestring discounters need it most. For small operators, vainly trying to wrap packages, and make deliveries and give credit to today's tougher customer, the added cost often spells ruin. Says Dun & Bradstreet: "You can't sell at 5% above cost and give the services people want." For those who can expand, the potential market was never bigger. Says Sol Polk, Chicago's top discount merchandiser: "The greatest sport in the next five years will be stretching the American dollar. The American woman wants quality merchandise at knocked-down prices. She deserves it."