Fortunoff Fine Jewelry and Silverware Inc.

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Fortunoff Fine Jewelry and Silverware Inc.

70 Charles Lindbergh Boulevard
Uniondale, New York 11553
U.S.A.
(516) 832-9000
(800)937-4376
Fax: (516) 832-9361
Web site: http://www.fortunoff.com

Private Company
Founded: 1922
Employees: 2,500
Sales: $375 million (1997 est.)
SICs: 5719 Miscellaneous Homefurnishings Stores; 5944 Jewelry Stores

Fortunoff Fine Jewelry and Silverware Inc. provides customers in the New York City metropolitan area with jewelry and watches, silverware, tabletop and kitchenware items—including the world’s largest selection of flatware—bedroom and bathroom items, outdoor furniture, and leather goods. During the 1990s its jewelry sales were consistently rated among the top 10 of any retailer in the United States. There were six stores in 1998, including one on Fifth Avenue in midtown Manhattan.

Discount Home Retailer: 1922-79

Fortunoff was founded in 1922 by Max and Clara Fortunoff under the elevated rapid-transit tracks in the East New York section of Brooklyn. The Russian-born Max Fortunoff, who had left school to join his father’s wholesale pots-and-pans business, wanted to strike out on his own when he married. The couple at first stocked only pots and pans and other household articles in what was—and remained—a very poor neighborhood. They settled in an apartment behind the store and raised three children, all of whom took part in the business.

Fortunoff was later described as the first discount operation in the metropolitan New York area. The emphasis at the time was on a wholesale business—the store priced its goods at the wholesale level, or about 30 percent less than normal retail price. The original unit at Livonia Avenue grew over time to a sprawling complex of six or eight stores within a two-block area. According to one industry expert, “They probably furnished every house in Brooklyn and Queens in the 1940s, ’50s, and ’60s before they moved to Long Island.” Sundays were particularly active, with pretzel vendors and other sidewalk hawkers offering their wares as lines of shoppers waited to enter the complex.

As East New York fell into urban decay, Fortunoff became plagued by increasing pilferage of goods. Management followed the practice of some larger retailers and installed dog patrols, but this provoked retaliatory attacks, and after a firebombing the complex was reduced to three units. By then the Fortunoff family had decided to seek a new, larger store in suburban Nassau County, Long Island. The 150,000-square-foot Westbury site where this store opened in 1964 was about three times the size that the Fortunoffs really wanted, but they decided to take the risk. By 1969 they had added another 50,000-square-foot level to the store. In 1972 Fortunoff announced it would more than double its Westbury space, to 440,000 square feet, making the store the second largest on Long Island.

Fortunoff’s move to the suburbs was more than geographical. Its merchandise was upgraded with the addition of better-quality goods. Another unit was added in Valley Stream, Long Island. Annual volume for the chain was running at a $30 million level in 1969, with the Westbury store accounting for about 90 percent of the sales. The profit margin after taxes was estimated at two percent, or about $600,000.

Fortunoff opened a 4,000-square-foot store in a former townhouse on Manhattan’s elegant East 57th Street in 1969, devoting two floors to jewelry and silverware, with the other two floors given over to offices and repair shops. The total enterprise was now composed of five autonomous divisions, each one a separate corporation run by a family member. The merchandise consisted of jewelry, silverware, furniture case goods, lawn and outdoor furniture, china, decorative accessories, and gifts. By 1977 Fortunoff also had opened a 12,000-square-foot store in a mall in Paramus, New Jersey.

Fortunoff was slow to take advantage of improvements in data processing. It did not install paper-tape-producing cash registers until 1969 and its first electronic cash registers until 1974. The latter units were connected to a minicomputer, and the following year Fortunoff was able to accept credit cards for the first time. Upgraded data processing also allowed the company to print various weekly and monthly merchandising reports.

Fortunoff in the 1980s

Fortunoff’s sales were estimated at close to $100 million annually in 1979, when the company purchased a building at 681 Fifth Avenue, between 53rd and 54th streets in midtown Manhattan, for $5 million. Fortunoff opened a 20,000-square-foot unit here, building a new four-level Art Deco interior, and closed its smaller East 57th store. The Fifth Avenue outlet offered a full inventory of gold jewelry, diamonds, precious stones, sterling silver, silver plate, and flatware, but, unlike the Westbury store, did not stock costume or cheaper jewelry. Jewelry was accounting for about 60 percent of the firm’s business.

Upscale jewelry dealers on Fifth Avenue such as Tiffany & Co. and Van Cleef & Arpéis Inc. were not pleased to face competition in their bailiwick from a discounter like Fortunoff. In 1984 Fortunoff filed a federal antitrust suit against a Swiss watch distributor, accusing it of improperly refusing to supply Fortunoff with luxury watches. Also named was Tiffany, which Fortunoff charged conspired with this distributor to fix the prices of the watches and to deny them to any competing retailer that sold them at a discount. The distributing company conceded that it had stopped supplying Fortunoff with its products but said it had acted simply because the chain did not provide the right atmosphere for its high-priced goods. A company lawyer said, “We don’t want our watches alongside barbecues and redwood outdoor furniture.”

By 1987 Fortunoff had added stores in Wayne and Paramus, New Jersey. A Woodbridge, New Jersey, store opened in 1989. Outdoor furniture, including five-piece patio sets, chaise lounges, and charbroil barbecue grills, was an important draw at its suburban outlets, accounting for more than $20 million in annual sales. The chain was constantly promoting these items in circulars, newspaper ads, and catalogues, and by staging events such as face painting and putting ice sculptures on display.

Max Fortunoff was still chairman of the company when he died in 1987 at the age of 89. By then his only surviving child, Alan, was serving as president of the firm, having succeeded his sister, Marjorie, who assumed the presidency in 1957 and died in 1983. Alan’s wife, Helene, the secretary-treasurer of the company, was responsible for jewelry and had founded the company’s fine-jewelry business in 1958 as an extension of the gift items being sold.

Home textiles was another profitable area for Fortunoff, accounting for $65 million in sales in 1989. One reason was the company’s broad bed-and-bath assortment. The bedding ranged from top-of-the-line ensembles to items from makers considered more promotional and included a full range of juvenile bedding. The bath area included a towel department that one supplier said was the size of most retailers’ total domestics department. The new Woodbridge store featured a bed-and-bath area with each category of merchandise seemingly occupying a separate wall, thereby allowing shoppers to easily see and choose from the large selection.

By the end of the 1980s Fortunoff had moved away from its reputation for discounting. Its success, according to one observer, rested not on price but on presentation, advertising, and customer service. The company devoted considerable effort to sales training and benefited from low employee turnover. It maintained its own in-house advertising and public relations staffs and used celebrities like Lauren Bacall to convey a prestige image. Another advantage was a large inventory that enabled customers to carry home the merchandise they had just bought.

Initiatives of the 1990s

Interviewed for the New York Times in 1989, Alan Fortunoff said the company had suffered large losses over a relatively short period because of sophisticated thievery by people with drug-abuse problems, aided by the proliferation of flea markets in the metropolitan area. He also said Long Island badly needed modern malls to offer goods and services in one enclosed, vertical, air-conditioned building. Fortunoff already had signed a letter of intent, in collaboration with a California-based developer, to build such a mall in Westbury. This 60-acre mall, to be called the Fortunoff Gallería, was to be built on the parking lot of the former Roosevelt Raceway and include department stores such as Nordstrom’s and Neiman-Marcus as well as Fortunoff.

Proposals for a shopping mall at the Westbury site had circulated for many years and by 1978 involved several lawsuits and countersuits, $60 million in damage claims, and a dispute over leasing agreements between the proposed developer, Madison Square Garden Company Inc., and the two major retail concerns on Old Country Road, Fortunoff and Ohrbach’s, which both were leasing space from the Garden and trying to block the development. A plan by the Westbury Properties Group in the 1980s to build a Y-shaped, enclosed mall south of Fortunoff and Ohrbach’s and connect to both also failed.

Company Perspectives:

For 77 years, the name Fortunoff has stood for extraordinary selection, exceptional quality, and excellent service, all at everday low prices... guaranteed!

Fortunoff’s proposal, unveiled in 1990, fell victim to community opposition and a national recession. In 1991, however, he won approval for an indoor mall downscaled by about 40 percent, with two levels and enclosed atriums, and a Price Club to the west. Alan Fortunoff, who owned the 69 acre site, sold 30 acres to the Price Co. for more than $1 million an acre. Price Club Plaza, the 401,000-square-foot plaza whose centerpiece was a members only, warehouse style Price Club store, was completed in 1992.

Construction of the mall, which was renamed The Source and became Long Island’s first new regional mall in nearly 25 years, did not begin until 1996. Fortunoff’s partner was Simon DeBartolo Group Inc., the largest mall developer in North America. Built around off-price stores, themed restaurants, and specialty shops instead of department stores, the 522,000-square-foot Source opened in 1997 with half of its 75 tenants ready for business. Fortunoff, which modernized about two-thirds of its Westbury store, also connected it to the second level of the mall and opened separate outlets in The Source for baby furniture and watches on the concourse of the structure. By late 1997 The Source was drawing more than 100,000 cars a week.

Fortunoff began sponsoring home shopping on cable television in 1994, when it started offering, on a trial basis, programs displaying its upscale women’s jewelry. The company signed an agreement with Cablevision Systems Corp. and its programming arm to offer a 30-minute “Direct Source” program four times a day, displaying merchandise ranging in price from $90 to $5,295. The program was available on Cablevision cable systems in New York City, Boston, New Jersey, and on Long Island. In 1997 Fortunoff and Long Island’s Metropolitan Suburban Bus Authority applied for a federal radio license allowing “Radio Fortunoff” to air traffic information within a four-mile radius to help motorists avoid congestion.

The flagship Westbury store was attracting 60,000 shoppers weekly in 1995 and registering sales of $160 million annually. This store boasted the retail industry’s highest sales of jewelry per square foot in 1995. Silverware also was an important part of the retailer’s business, with virtually every pattern kept on display. The other five stores, in 1998, consisted of the Fifth Avenue store, outlets in Wayne and Woodbridge, New Jersey, and two in the Paramus Park Mall. Fortunoff was reported at that time to be looking in Suffolk County—the county east of Nassau—for a site to build a store as big as the Westbury outlet.