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Very early in the twentieth century a young Rose (founder of the Nebraska Furniture Mart) woke one night in the family’s two-room log cabin home in a village near Minsk to find her mother already hard at work making bread. She said to her mother that “she couldn’t stand that she had to work so awfully hard”, adding that when she grows up she’ll go to a big town, find a job, make money and go to America. Her mother looked after her eight children as well as running a grocery store; her father was a rabbi. Rose started work at 6 in her mother’s store. But when 13 she felt duty-bound, with so many siblings, to walk from shop to shop looking for a job. Her persistence paid off, and by the time she was 16 she was the manager, overseeing the work of six married men, despite never attending school.
Four years later, in 1914 the 20-year-old Rose married Isadore Blumkin, a shoe salesman. She remembers her mother bringing two pounds of rice and two pounds of cookies on her wedding day, “that was the wedding feast”. The war came, and Isadore avoided conscription with the “hated Cossacks” by journeying to America without Rose because they did not have enough money for both of them.
With the stirrings of the Russian Revolution of December 1916 as a backdrop the 4 feet 10 inch Rose made her way across Siberia on the Tran-Siberian Railroad with no ticket or passport. A border guard on the Russia-China frontier let her pass after she told him that she was buying leather for the Army and that she would bring him a big bottle of slivovitz on her return, “I learned all the tricks” she says. On she went to Japan and Seattle with a tag around her neck saying “Fort Dodge, Iowa”.
America
She was forever grateful for the warm welcome she received, “The people who were born in this country don’t appreciate all these wonderful things, like those who came from out of the darkness. I love the United States since the day I come here.” And later, “I respect the middle class. They stick to their kids. There’s nobody like the middle class in America. Many, many immigrants raised wonderful families. They struggled for something better. I love the American people – the immigrants who went through a struggle.”
After two years in Fort Dodge the young couple moved to Omaha, and Isadore opened a second-hand clothing store cum pawnshop. It wasn’t until Francis, her eldest daughter, started school that Rose learned English. Francis would come home to teach her mother what she had picked up that day.
A major preoccupation at that time was the saving of her Belorussian family; she would work hard selling clothing, save up 50 bucks and send it over. This was enough to get one of them to America. She brought her parents and five siblings over, one at a time, by the end of 1922.
A business legend begins
Finally settled with her four children, aged 43, Mrs B began her business career with $500. She got on a train to Chicago in 1937, then the centre of the nation’s wholesale furniture activity. There she found the American Furniture Mart. So impressed with the huge building and business, all neatly laid out, that she decided to grandly call her new business the Nebraska Furniture Mart. She bought $2,000 worth of merchandise for the store she was to open in the basement of the building where her husband’s business was located in downtown Omaha.
She worried all the way home because she only had $500 of equity and $1,500 of debt. So concerned was she that she took the furniture from her own home, refrigerator and all, to sell fast, so she could get the money to pay on time.
Mrs B was up against the toughest of competition, with large entrenched department stores and specialists. And a basement was hardly the best location. But along with her $500 she started with the notion that, “If you have the lowest price, customers will find you at the bottom of a river.” And she was correct, people did find her.
Tough opposition
But her discounted prices annoyed the carpet and furniture giants. The manufacturers and the retailers had a cosy arrangement whereby each got a large margin if they all maintained high prices. Her rivals first convinced manufacturers to boycott her. She responded by buying from suppliers elsewhere in the country or by getting other people to buy carpet and other items for her on the quiet. Thus she was able to continue to sell at low prices.
Then Mrs B was hauled before a court, not once but on four occasions, on the charge of “violation of Fair Trade laws”. She said to a judge “I pay $3 a yard [for carpet], Brandeis [main competitor, now defunct] sell it for $7.95. I sell it for $3.95. Judge, I sell everything 10 percent above cost, what’s wrong? I don’t rob customers?” Not only did the judge acquit her but he bought $1,400 worth of carpet the next day. Best of all, the papers wrote it up, which boosted sales tremendously.
You can gauge the extent of the low margin/high turnover approach from the 1946 accounts reproduced in Berkshire Hathaway’s 2013 Annual Report – see below. Starting the year with a mere £57,460 of net assets she turned over $575,096 in the next 12 months – an amazing asset turn for that type of product. Cost of sales (basically payments to suppliers) was a lot more than half the turnover figure you might generally expect for furniture retailers. It was £472,891, leaving a gross profit of $102,206, a mere 17.77% gross margin (but not quite the 10% she would frequently quote when anyone was listening). But cost control was so tight that expenditure on everything else, from advertising and salaries, and rent and truck fuel, came to only $81,521, leaving an operating profit of $20,685, and a net profit of $29,884 after some additional income.
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