ARBOR OUTLOOK: Discounts, business ventures and holiday miracles

Margaret R. McDowell
Margaret R. McDowell

"But what do you say to taking chances? What do you say to jumping off the edge?" — from "Taking Chances," as performed by Celine Dion

While serving in the Philippines in World War II, Eugene Ferkauf saved $4,000 and dreamed of an entrepreneurial career. With a wife and a baby girl, he took his chance, renting a small store space on 46th Street, one flight up from Grand Central Station in New York City. He stocked his E. J. Korvette store with appliances, passed out cards in the neighborhood promising 33% discounts, and crossed his fingers.

As David Halberstam wrote in “The Fifties,” "(Ferkauf's) philosophy was to sell as much merchandise as possible in the shortest period of time possible with a minimal markup." Here was Gene's formula: He bought goods wholesale, added 10% for handling, then doubled that price to match his competitors' rates. Then, he slashed his price by 25%.

Gene's father Harry owned two traditional appliance stores, and hired his son to manage one. But Gene wanted his own space. He also believed in discounting, which his father did not.

Harry was averaging $50 a day in gross retail receipts. If Gene failed to match that, he would not only be a business failure, but he would also likely be forced to return to working for his dad.

In spite of his trepidation, Gene sold $3,000 worth of goods that first day. The buying virtually overwhelmed his small sales force. Over the first holiday season, he averaged $13,000 in sales each day. The discounting was so popular that customers lined up outside his store, and Gene would let some of them in, while the others stood outside in the cold, waiting their chance to enter and buy. Finding and employing enough sales clerks became his biggest challenge.

During his first year Gene sold $1 million worth of goods, and made an $80,000 profit. He decided that if he couldn't discount an item by 33%, he wouldn't carry it. Large appliances were his most popular item, because customers could save as much as $100. In 1951, he opened his second store. His fifth store sat 10 minutes from a large suburban housing development (Levittown) in Hempstead.

In the winter of 1953, Gene rushed the construction of a larger, suburban discount store in Westbury, New York. It opened on Dec. 2. From day one, the store was jammed. He was forced to send out for sandwiches and coffee for his sales staff, because if they tried to leave for lunch the crowds prevented them from getting back into the store. They did $138,000 in sales that day, and $2 million in the month of December. Ferkauf took the company public in 1955 to fund new store expansion.

The holiday season is the time of personal miracles. Taking a chance on the right idea at the right time can make business miracles, too. Sharing Gene's entrepreneurial instincts, a young Army veteran named Sam was opening discount stores down South at the same time.

Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 —, a “fee-only” registered investment advisory firm located near Sandestin.