The Discount House

One postwar phenomenon in retailing has been the development of the discount house. Originally, those running a discount house were often referred to as "the upstairs boys," because they often did business in upper floors of loft buildings, and admission into their stores was by card only. Members recommended the store to others, and the membership grew. The discount house operated in household appliances, silverware, jewelry, and similar merchandise. It was, of course, vigorously opposed by the regular merchants.
The discount house grew out of the practice of manufacturers giving large discounts to retailers on certain types of goods. Jewelry, household silverware, household appliances, and similar merchandise often carried as much as 45 per cent margin for the retailers. By adopting the minimum service principle, discount operators could sell this merchandise at discounts ranging from 15 to 30 per cent, a substantial savings to consumers.
Most manufacturers, concerned because of increasing complaints, attempted in various ways to prevent discount houses from selling their goods at a discount. Manufacturers resorted to such practices as refusing to sell to them, placing rigid resale prices on merchandise, and attempting to enforce resale price maintenance, more generally known as fair trade.
Some manufacturers were more successful than others in enforcing full price merchandising. But eventually, as will be discussed in another section of this book, fair trade lost much of its power. One after another of the manufacturers abandoned the practice of enforcing fixed prices. Household electrical-appliance manufacturers were among the last to give in. Thus, it became possible for discount houses to offer a wide variety of well-known brands at substantial discounts, thus forcing department stores and electrical-appliance dealers to reduce prices or lose sales.
By 1960, discount houses were not only generally accepted by the public, but even had been accepted into membership in the retail merchants' associations. In other words, they had attained full status as accepted merchants in most communities. They had also grown. Several of the larger discount houses are, in effect, discount department stores, offering a wide variety of merchandise at savings ranging from 5 to 25 per cent.
Most consumers do not recognize the term syndicate stores. The student of marketing should, however, be familiar with the term. It indicates a special kind of chain-store operation such as Sears, Roebuck and Company and Montgomery Ward, stores which operate chains of department stores as outgrowths of original mail-order business.
One of the chief characteristics of syndicate stores is that, while they offer a wide variety of merchandise to consumers, they seldom sell well-known brands. Most of the merchandise they sell is their own. They do very large volumes of business.
Syndicate stores are, for all practical purposes, retail chains. They buy only merchandise unbranded or under their own private brand. Syndicate stores are large customers for certain types of merchandise such as automobile tires, batteries, garden equipment, and large household appliances which are made for them by well-known manufacturers who also sell their own brands.