Nothing but Value

One day in 1912, a small, energetic tailor named Samuel Klein opened a one-room retail dress shop on Manhattan's Union Square. He had $600 in capital, 36 dresses on his racks. In less than 20 years, S. Klein On The Square became the world's largest women's-wear store, sold as much as $25,000,000 worth of clothes a year to bargain-hunting, women.

To Klein's this week came a bargain-hunting man, 41-year-old Hyman Philip Kuchai, president of the 45-store western chain of Grayson Shops, Inc. (of California).* He was looking for a bargain: S. Klein On The Square, Inc., for $3,000,000. Grayson would thus acquire 1) its first outlet in the East, 2) one of the country's most unusual stores.

Klein's is not a pretty place. Its floors are bare. There are no saleswomen. Customers must select dresses themselves from the crude iron racks, try them on in crowded public dressing rooms. Klein's does not advertise--except to keep customers away on holidays when the store is closed.

By eliminating all frills, Founder S. Klein (who died in 1942) cut his cost of doing business to about 7% of net sales (most large retail stores figure costs around 36%). Thus he could make money with a quick turnover and an average markup of 10% over wholesale prices. He bought as he sold--cheap. Dress manufacturers in need of money found Klein ready to buy excess stocks at cut prices. Many a $14 dress thus found its way to Klein's $7.95 racks. If it stayed there more than two weeks, it was marked down $1. If it was still there at the end of another two weeks, its price was cut again. Sometimes dresses had to be sold for $1--but they all sold. In this way Klein's turned over its stock 25 times a year (average turnover of big dress retailers: 6.8 times a year).

Klein's basic policies will remain unchanged, said new Boss Kuchai. Only the buying functions of Klein's and Grayson will be consolidated. Grayson will continue to sell medium-priced merchandise, Klein's will stick to selling cheap.

* Which made news last fortnight by hiring John Roosevelt, the late President's fourth son (TIME, Feb.11).

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