Back in 1978 a flood in Tennessee rushed through a wholesaler`s warehouse, and dirty water soaked several truckloads of Jockey brand men`s underwear. It seemed a disaster, of course, for the wholesaler. Tens of thousands of pairs of underpants ruined. No reputable retailer would want them at any price. Luckily, the wholesaler was insured for the loss, so the disaster was passed on to his insurance company.
The insurance company wanted to cut its losses, too. It kept the underwear wet to prevent mildew and called around the country inviting various salvage buyers to bid on the stock, hoping to sell it at any price to recoup some of its loss.
One salvager who showed up was Jerry Ellis, bargain hunter extraordinaire and an entrepreneur who has built a chain of seven Massachusetts department stores on other people`s misfortunes. Ellis doesn`t remember what he bid for the wet underwear, but he bought the entire stock. He, too, kept the underwear wet and shipped it home in refrigerated trucks to impede further mildew damage, happily dreaming up a way to inflict the disaster on his customers.
When the cold, soggy merchandise reached Massachusetts he had it offloaded at each of his stores into above-ground swimming pools filled with water. Launching an advertising blitz through newspaper ads and direct-mail circulars, Ellis announced his astounding sale. Pricing the underwear at about one-third its usual retail cost, he invited his customers to bring plastic bags so they could reach into the pools, find the sizes they desired, wring them out and carry them home. Once washed, he said, the underwear would be as good as new.
”The whole idea of trying to get people to come in, wring out and buy wet underwear for some reason just disgusted me,” says Mat Brown, the star of the discount chain`s advertising department. Brown is a former high school math teacher and amateur cartoonist and caricaturist. He began working part time for Ellis 20 years ago, creating ads for Ellis` first store using outrageous humor–sometimes criticized for crossing the boundaries of good taste–in the vein invented by Mad magazine. Most ads feature a caricature of Ellis as an opportunistic, money-grubbing merchant, looking very much like megamouth comedian Joe E. Brown.
”When I was teaching school,” Brown adds, ”I had to do most of my shopping in discount and cut-rate stores, and every time I walked into one, I thought, `Jeez, I got to shop for my family in a dump like this?` It was so depressing. Now I found myself working for an outfit selling wet underwear, and I was thinking, `Isn`t this sort of demeaning or something?` ”
He answered his own question by buying several pairs of the underwear himself. A bargain, after all, is a bargain, and this was high-quality, name- brand stuff being sold at a third the normal price. And once the ads appeared, Ellis` stores had customers elbow deep in the swimming pools, buying out the entire stock within a couple of days.
Once again Ellis had turned a disaster into serendipity, making everyone happy. The wholesaler was happy because he was insured, the insurance company was happy because it got back a fair price for damaged merchandise. The customers were happy because they got a good deal. And Ellis was happy because he turned a tidy little profit himself, and had a few laughs doing it.
Tens of thousands of Massachusetts customers have grown to trust Jerry Ellis and his seven shabby, tacky stores. Most of the stores are actually old warehouse buildings on the wrong side of the tracks in Boston`s suburbs and surrounding industrial towns. The floors are sometimes sticky from the free coffee on hand at all times, spilled by careless customers as they browse through narrow aisles crammed with jumbled goods and oddments. Signs hung near exits urge customers: ”Please wipe your feet before leaving. Don`t track up the rest of the world.”
The stores, each named ”Building 19,” are something of an institution among New England shoppers who are endeared by the stores` inelegant motto:
”Good Stuff Cheap.” Ellis bills his disheveled shops as ”America`s Laziest and Messiest Department Stores.”
It`s all a good-natured ploy, however. In an era when American business ranks low in public esteem because of a perception of shoddy products and shady merchandising methods, Ellis and his stores are seemingly beloved. In 1985 his stores did $52 million in business, and in 1986, $60 million. He employs 850 people and runs a fleet of 120 semi-trailers to keep his stores and two cavernous warehouses stocked with $10 million in inventory.
At a time when much of the rest of the fiercely competitive retail industry is in a desperate, upstream swim for survival, Ellis and Building 19 are happily paddling downstream. While most retailers are shifting poorly selling new product-lines and new clothing and appliances in and out of their stores as fast as networks shuffle low-rated television shows, Ellis laughs all the way to the bank. He is the guy who ends up buying all of the leftover turkeys the others can`t sell, and he finds a way to sell them profitably.
And while retail chains, old and new alike, are going out of business all over the country and the survivors are slashing payrolls, especially at bloated middle-management levels, Ellis` biggest problem is trying to find the right piece of real estate so he can open his eighth Building 19 store.
”It`s the only direction I can go in right now,” Ellis says. ”I`ve got so many qualified managers and people I`d like to make managers, I`m going to have to open another store to keep them in the organization.”
Many of the employees Ellis is trying so hard to hold on to are themselves reconstructed bankrupts and fugitives from dead-end jobs. It seems Ellis` interest in trying to make silk purses out of sows` ears, gambling on castoff and unpromising material, is not limited to retail goods.
As Ellis` fortunes grew from one store to seven, artist Brown`s grew, too. He eventually quit teaching to work full time for Ellis, finally becoming a partner in the business. In the passing years he`s had to figure out ways to advertise a lot of unusual, damaged, downright oddball and sometimes hopeless merchandise.
There was the time, for instance, when the chain acquired thousands of perfectly good two-piece suits from a Sears warehouse. The only trouble was the two pieces consisted of only the jacket and vest, devoid of pants. The pants had been made and stored separately and then destroyed in a warehouse fire before they could be mated with the coats and vests.
Ellis` warehouses are wondrous places, jammed to the rafters with sows`-
ear merchandise others have given up on. That is how Ellis acquired it–as junk. The warehouses boast huge walk-in freezer rooms filled with waterlogged fabric goods. Most of these frozen items were damaged, like the underwear, in floods, or by fire hoses in warehouse fires, or by accidentally triggered warehouse sprinkler systems. The goods include everything from living-room sofas and chairs to hundreds of thousands of turtleneck sweaters to thousands of skeins of yarn.
When Ellis wants to merchandise any of the goods in his freezers, he has them transferred to a huge, airtight dehumidifying chamber in the warehouse. The chamber at once thaws the goods and removes the moisture from the fabric, saving it from mildew. If any goods contain an odor from smoke or water damage, they are moved to an ozone chamber that removes the smell
electronically.
Water-stained furniture gets a thorough shampoo and refurbishing by Ellis` warehouse crews before going into his stores. Water-stained clothing goes off for professional cleaning before presentation to his customers.
”All this stuff is somebody else`s junk,” Ellis says, ”but it`s junk to them only because they don`t want to deal with it. When we get done with it, it isn`t junk anymore, it`s a bargain for our customers and a tremendous business for us.”
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By any measure, you`d think Ellis and his operation would be something of a community joke, if not embarrassment. You`d think he`d be regarded somewhat like the used-car entrepreneurs who wear loud suits and sell autos of suspicious pedigree. Instead, throughout Massachusetts Ellis is held in extraordinarily high esteem by his customers, his business associates and his own employees. He has earned the esteem by building his business on a foundation of elegant, old-fashioned verities–integrity and conscience–that might seem odd in a trade that has all the outward appearances of being so schlocky.
”The guy is a local retailing genius,” says Sidney Schwartz, editor of Discount Merchandiser, a national trade publication for discount retailers.
”He`s made it seem like a treasure hunt every time a customer walks into one of his stores. He kids people along, but he is very honest and very straight with them, and so he`s developed a customer following that is extremely loyal.”
Building 19 shoppers have come to know that underneath Ellis` zany approach to retailing there is real, honest-to-gosh value backed up by a fastidiously honest man. When Ellis puts out merchandise in his stores, he explains through his advertisements where he got it, why, whether it`s in perfect condition, slightly imperfect, or damaged, but usable.
And he has an absolute rule: If a customer who has purchased something from Building 19 becomes disenchanted for any reason, he can bring the item back within 30 days and get a full refund, no questions asked.
”We don`t lie to people,” says Ellis, who at 59 still exudes an air of youthful impishness, ”not because we`re altruistic, but because it`s good business. Eventually people come to realize that we don`t lie and come to trust us. And if somebody gets home with a purchase from one of our stores and has second thoughts, he knows he can bring it back and get his money refunded. I don`t care how bad his reason is, he gets his money back. Why not? An unhappy customer is an ex-customer, but a happy one will keep on coming back and keep doing business with me.”
Simple as it sounds, Ellis` business philosophy seems to work. Customers talk about the stores in a genuinely affectionate way most people would reserve for talking about a particularly hospitable neighborhood bar, perhaps, or a well-run family amusement park, but rarely a place to shop.
”I don`t know, it`s just fun coming into these places,” says Stephen Bonarrigo, a retired electronic equipment designer from Stoughton, Mass., who was shopping in Ellis` Hingham, Mass., store recently. ”I started coming here maybe 20 years ago when they had just this one store, and the place just started growing on me. At first it looks like they`re just selling a lot of junk, but you begin to see it`s good junk, and a lot cheaper than anywhere else. You never know what kind of stuff they`re going to be selling here from one week to the next, so it`s just interesting to come in and see what they`re doing.
”Actually, my wife and I have a lot of time on our hands now, and she`s a great one for bargain-hunting, so we come in here two or three times a week to just browse.”
”When the owner of this place says he sells good stuff cheap, he really means it,” says George Peters, a Brockton, Mass., laborer. ”If we have to buy a specific item, like a color TV or a baby stroller, we come here first to see if they have it, because we know they stand behind what they sell, even though it`s maybe half the price of any other store. Even if we`re not looking for anything in particular, we still check out this store every two weeks or so to see what they`re selling. We`ve been doing it for 10 years.”
Building 19 might seem like the ideal place for a workingman`s family or a retiree to shop, but those are not the only people to be found there. Ellis` first store and headquarters are in Hingham, one of Boston`s tonier suburbs, and a lot of customers in that store look more like they should be in Bloomingdale`s or Neiman-Marcus than in the funky confines of Building 19.
”Look, I`m not crazy,” says Mary Fitzmaurice, a Hingham homemaker shopping in Ellis` store. ”I buy brand names, whether it`s in Building 19 or a shop in downtown Boston. But if they have it here, I know it`s going to be at half the price of anywhere else.
”This morning I was leaving the house to go into the city and get a ski jacket for my daughter. She`s like any other kid. It couldn`t be just any ski jacket, it had to be a ”CB” brand ski jacket because that`s what everybody else has to have. Just as I was going out the door, the phone rang, and it was my best friend saying, `Hold everything. Building 19 just got a shipment of CB ski jackets.` So here I am, and here it is.”
Indeed, Fitzmaurice had, among other things in her shopping cart, a CB ski jacket in apparently perfect condition. The price tag on it was $51, marked down from the normal retail price of $104. The reason Ellis could sell it so cheaply was simple. Thousands of pieces of the ski wear had been stored in the manufacturer`s warehouse awaiting shipment to retailers around the country when the sprinkler system accidentally went off, dousing the collected goods. Even though ski wear, almost by definition, is waterproof, it could no longer be shipped to retailers as new. So Ellis bought all of it for about half the normal wholesale price and passed the savings on to his customers.
Almost any Building 19 customer you talk to at some point uses the word
”fun” in describing why he or she goes there to shop. Last year a Boston magazine devoted an entire article to Building 19 customers, shopping junkies all of them, who consider Ellis` chain akin to Disneyland. Declaring bargain hunting the ”second-greatest indoor sport,” the article described the illicit thrills bargain hunters, most of them seemingly well-heeled, find while cruising Ellis` various emporia.
In a recent week it was easy to see why. Besides the half-price ski wear, there were also thousands of high-quality sweaters from a national manufacturer that went bankrupt. There were thousands of clothing items purchased from Gimbels, the failing department store chain.
There were loaves of bread just a day or so away from their sales expiration date, offered at a third the normal price. Ketchup at half-price, acquired because a single bottle broke in shipment, oozing its contents onto the cartons below it and making it unsaleable to other retail outlets. Thousands of drinking glasses acquired through the year from manufacturers unloading ”shakers” (a carton full of perfectly good glasses, except for one, usually broken in shipment, making it undeliverable to most merchants). Thousands of lead crystal goblets and wine glasses unloaded by manufacturers because of slight flaws.
Name-brand toys in perfect condition, half-price because the boxes they come in are torn, battered or somehow defaced. Television sets at half price because they were purchased in a dealer`s liquidation sale. Pet supplies, nuts and bolts, power tools, underwear, bedroom slippers, and on and on.
And Ellis has a lot of other things most department stores might not normally carry, as well.
A few months ago a Michigan piano dealer had a fire in his store, and Ellis was the first salvage buyer the insurance company called about taking the surviving stock, most of which was undamaged. Ellis says he bought it sight unseen over the telephone. Thus, a couple of weeks later, a corner of his Hingham store was filled with gleaming grand and upright pianos. An ebony baby grand Tokai, list price, $10,500, Ellis-priced $4,899.99. An oak, 40-inch Everett console, list price $2,995, Ellis-priced $899.99. A Schimmel ebony, 44-inch upright console, list price $5,400, Ellis-priced $3,219.99.
If your taste runs to oriental carpeting, Building 19 stores are among the biggest dealers in the country. Ellis` son, Bill, periodically makes buying trips to the big carpet manufacturers in the U.S. and Europe, buying in bulk. But he also makes trips to India, China and Pakistan, buying huge lots of handmade carpets. These are carpets of the heirloom variety, woven knot-by- knot by peasant artisans and usually sold in elegant, big-city gallery shops by well-turned-out salesmen, at heirloom prices. But if you`re knowledgeable, you can buy a $6,000 carpet for $3,000. Waiting on you will be one of Ellis`
salesmen, who might not know a double-knot from a doubleknit and is more than likely dressed in jeans and a flannel workshirt.
A large portion of each Building 19 store is given over to furniture. Some of the items are in perfect condition, perhaps survivors of large lots involved in truck crashes or train wrecks. Many are pieces manufactured expressly for Ellis by name-brand makers who use Building 19 as an outlet to sell off the last of a discontinued line of upholstery.
The quality of Building 19 furniture ranges from pieces that would satisfy the taste of any respectable, upper-middle class householder to the junk you would expect to see in a beaten-up college rooming house. In fact, in early autumn each year the Boston-area Building 19 stores are awash with college students looking for cheap but new beds, mattresses, tables and chairs as they set up housekeeping for the academic year.
When Building 19 comes into a line of top-quality, name-brand furniture, word travels fast. It can move several hundred pieces in two or three days. That happened recently after a small fire in a large distribution warehouse sent Building 19 several thousand pieces of ”a nationally known brand of top- quality replicas of colonial-style furniture.” Generally when Ellis gets that sort of merchandise, he can`t use the manufacturer`s name in his advertising, but his customers know from experience that it`s the real thing.
”In this case,” Ellis says, ”the fire wasn`t serious. A manufacturer of this stature, though, can`t take any chances with its reputation. They don`t want any question about them delivering slightly damaged goods to their normal retailers, so they buy high-end insurance coverage for just such a contingency. So they collect their insurance, I give the insurance company some return, and my customers get a good deal.”
In this case, he was selling things like $1,800 cherrywood armoires for $950, $1,400 cherrywood entertainment-center cabinetry for $700, and $600 cherrywood corner curio cabinets for $299. They didn`t last long.