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             Discount Stores


             offset the lower prices, a number of different strategies and  The development of supermarkets, chain stores, and
             tactics are used, depending on the type of discount  the predecessors of the discount stores that caused greater
             retailer. Some of these strategies and tactics include: main-  price competition in the 1930s, and concern, in the midst
             taining a high sales volume; keeping expenses down;  of the Depression, for maintaining employment brought
             negotiating lower wholesale prices; and cutting profit  about legislative constraints in several states to protect
             margins. Other tactics are: using inexpensive fixtures, dec-  small retailers. These resale-price-maintenance, or “fair-
             orations, and displays; minimizing free customer services  trade,” laws provided that manufacturers could establish
             and maximizing the use of self-service; carrying overstocks  retail prices for products that carried their brand name,
             and discontinued products from other retailers and pro-  thus legally fixing prices. In 1937 these laws were
             ducers; and stocking off-season merchandise.     strengthened by federal legislation, the Miller-Tydings
                In addition, improvement of operational efficiency is  Resale Price Maintenance Act. Even though the laws were
             continually sought to control costs. Modern discount  difficult to enforce, they would present a major challenge
             stores may range from specialty shops (such as discount  to discount merchandisers over the years to come.
             bookstores) to major discount chains that typically sell a  After World War II (1939–1945), discount merchan-
             wide variety of products including hard goods (e.g., major  dising grew rapidly. This explosion in growth was fueled
             electronics, automobile supplies, toys, and small appli-  by consumer bargain hunting in the face of rising prices,
             ances), soft goods (e.g., apparel, bedding, and bath prod-  the pent-up demand for goods created by wartime short-
             ucts), groceries, and other general merchandise.  ages, and the establishment of homes and families by
                                                              returning GIs. Many consider E. J. Korvette, opened in
             HISTORY OF DISCOUNT STORES                       1948 by Eugene Ferkauf, as the first discount store. Soon
                                                              regional discount stores, such as Zayres, Arlans, Gibson’s
             Discount stores evolved from a series of retailing changes
                                                              and Two Guys, sprang up across the country to satisfy the
             that began in the United States in the late nineteenth
                                                              demand for consumer goods, including television sets and
             century. Following the Civil War (1861–1865), the devel-
             opment of mass-production processes and a mass-  other new products. Many of these new discounters sold
                                                              their merchandise out of other existing businesses or set
             distribution system, along with population increases,
                                                              up in low-cost facilities such as abandoned factories and
             paved the way for a new approach to retailing—mass mer-
             chandising. The first type of mass-merchandising opera-  lofts. Despite these often makeshift origins, the modern
                                                              discount industry was beginning to take shape.
             tion was the department store. The second was the chain
             store, which included variety stores and “junior depart-  Sparked by increased consumer confidence in dis-
             ment stores.” The third was the mail-order house. These  count stores and increased availability of goods from man-
             patterns for mass merchandising remained relatively con-  ufacturers, discounting continued to grow rapidly during
             stant through the 1920s. The genesis of discount retailers,  the 1950s and became an important part of the retail
             known as “undersellers,” also occurred in the early 1900s.  landscape. New chains were drawn to the field, and estab-
             S. Kline (1912), J.  W. May (1924), and Alexander’s  lished chains opened new outlets. Variety stores, specialty
             (1928) were the early undersellers of soft goods (e.g.,  retailers, traditional department stores, and supermarkets
             apparel).                                        were looking into discounting and, in some cases, launch-
                                                              ing ventures.
                The Great Depression of the 1930s and the accompa-
             nying economic hardships set the stage for another retail-
             ing change and the further emergences of discount  Mid-Twentieth Century. The look of discount stores also
             operations. Grocery supermarkets, the fourth type of  began to change in the 1950s as leading discounters (e.g.,
             mass-merchandising operation, appeared in 1930s. Early  Masters,  Two Guys, Korvette) took on a department-
             supermarkets, pioneered by Fred Meyer (1922) and Hen-  store-like appearance by adding household goods, apparel,
             drik Meijer (1934), were comprehensive grocery stores  and other soft goods. “Mill store” discount operations fur-
             that were designed for self-service and consumer accessi-  ther contributed to this change as they began to surface
             bility. Size and low-cost facilities enabled these supermar-  with their base of soft goods.
             kets to operate on low margins and sell below the   In addition to the national and regional chains that
             competition. The inventories of supermarkets expanded  entered the industry in the 1950s, several others opened
             to include nonprescription drugs during this time. The  their doors in the early 1960s. Many of the new additions
             starting point for the fifth type of mass merchandising,  were inexperienced and underfinanced, but among the
             discount stores, is often traced to the opening of a radio  new entries were four that would become the giants of the
             and appliance store by the Masters brothers in Manhattan  industry: Kmart, Woolco, Target, and Wal-Mart. All four
             in 1937.                                         began their operations in 1962.


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