(See Cover) He is probably the most unorthodox tycoon in the land. He has no office, no secretary, no personal files. He has never dictated a business letter or made a speech. "I pay other people to do things like that," he says. He seldom makes a telephone call or negotiates a business deal personally ("I feel my people can haggle better than I can—so why waste my time?"). 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. Though he is worth $40 million, his only luxuries are homely middle-class comforts. His name is Eugene Ferkauf, he is 41 years old, and he is the founder, controlling stockholder and audacious boss of E. J. Korvette, Inc., the nation's most successful and most unusual chain of discount department stores.
Wiry, crew-cut Gene Ferkauf (the name is pronounced Fur-cowf and means "sell" in Yiddish) started out in a Manhattan loft 14 years ago with a total capital of $4.000. Today he rules a fast-growing retailing empire that consists of 17 stores in the Northeastern area between Hartford, Conn., and Harrisburg, Pa. In the past nine months alone, Korvette's profits have risen 81% to $4,268,000, and the company's sales in fiscal 1962 will amount to $230 million. All this Ferkauf has accomplished by pursuing a business philosophy that is as old as the Industrial Revolution: discard costly frills, use low prices to lure customers, and make up for low profit margins with high volume. Familiar as this philosophy is (and a lot of people are working at it), it takes acumen to practice. By succeeding at it in the sluggish 1960s, Eugene Ferkauf has seized the lead in a retailing revolution that is shaking up every U.S.
merchant from Main Street to Manhattan's Fifth Avenue.
The Strongest Leg. "Thanks to the dis count houses," says San Francisco Marketing Consultant Frank Meissner, "we in the U.S. are coming close to matching mass distribution to mass manufacture for the first time." All told, there are now an estimated 4,000 discount stores in the U.S., and the number is increasing almost daily. This year, discounters will open six new stores in Cleveland, twelve in and around Minneapolis, another twelve in Detroit and 20 in Los Angeles.
Inevitably, the swelling number of dis count houses accounts for an increasingly large share of U.S. retail sales (see chart}.
But more important, the discounters are making the pie bigger. Last year's dis count store sales of $4 billion are expected to grow this year to more than $5 billion—and conventional retailers are also ringing up increased sales.
In the beginning, nobody but the cus tomer had a good word to say about dis count houses. But it has been found that when a discount buyer pays less than he had expected for a TV set or refrigerator, he is usually in the mood to spend the extra money on other goods. Discounters thus contribute their bit to economic growth every time they induce a customer to swap dollars for goods that he would not have bought had prices been higher.
And they have done a lot to keep the consumer economy from stagnating. The U.S.