Published on: January 16, 2018by Michael Sansolo
Among all MNB readers, I probably top the list of those understanding Kevin’s most challenging references because a) I know him really well, b) we grew up in the same time and place, and c) I can call him and ask. (I even got it yesterday when he made a throwaway “Risa” reference.)
Last week he gave even me a chuckle with two throwaway references on the same day to EJ Korvette, a regional discount chain in the New York area that closed nearly 40 years ago. So most of you probably didn’t even notice the name, but the story is one you should know because it resonates more today than ever.
If you can, take a quick read through the Wikipedia entry on EJ Korvette and you’ll see a classic business story of a company that rose to success on an innovative model and then fell apart by forgetting what made everything work. In other words, it’s a timeless tale that should be required reading in these times.
Korvette was a discounter before that was even a thing, in the post World War II era when discounting was limited by law. The innovative owners used tactics like membership to get around the standard rules and practices of the time and they managed to carve out a powerful niche in the New York metropolitan area. At one point Macy’s sued Korvette claiming the discounter was illegally undercutting prices, a lawsuit that simply reinforced Korvette’s image and appeal.
As the nation began to move to the suburbs, Korvette became a standard in strip malls from New York to Detroit and Chicago and south to Virginia. Yet despite cutting edge tactics on price and innovations such as opening stores on Sundays, the company went off the rails thanks to, as Wikipedia writes, failure “to properly manage its business success.”
Among those mistakes were getting into products that didn’t meet the needs of Korvette’s core shoppers and where the company had no expertise. In the end the innovative company survived for less than four decades.
If you paid close attention to last Friday’s MNB you would have seen Korvette’s referenced in concert with A&P, Bradlees, Caldor and Circuit City, a group of companies now found only in memory or on Wikipedia. Yet at one point all of them were innovators and industry leaders and all of them somehow failed to understand the changes all around them.
At this point in my columns here on MNB I usually tie everything I’ve written into some kind of coherent statement on why this matters. However, I don’t think that’s necessary this week.
If you can possibly read this story of retail success gone bad and not find parallels, lessons or concerns for your own company I can’t imagine what business you are actually in. I’m betting it has something to do with delusions.
Michael Sansolo can be reached via email at email@example.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
- KC's View: