"Give 'Em a Free Ride"

When he was running a fruit stand across from Kansas City's Union Depot 40 years ago, Isaac Katz sold oranges at three for a dime. "But Ike," his customers would say, "the other boys get a nickel apiece." "Yeah," Ike would answer, "but they sell one and I sell three. See what I mean?" Ike's kid brother Mike saw exactly what he meant, and soon was running another cut-rate fruit stand nearby.

Since then, Ike and Mike Katz have become the cut-rate kings of Kansas City, Mo., with 16 drugstores there and another 13 scattered through Kansas, Missouri, Oklahoma and Iowa. The Katz superstores carry more than 25,000 items, ranging from television sets to clothing, from mousetraps to lovebirds. Five of them carry monkeys, and managed to sell 15 last year at $82 apiece. (Last week the price was cut to $79.) One popular come-on: cut-rate streetcar and bus tickets. But the Katz specialty is selling nationally advertised merchandise "at the right price"--which in Missouri is usually lower than the established price.* In 1950, reported Ike and Mike last week, this policy paid off with record sales of $32 million, a net of $824,233 (v. $618,182 in 1949). It was, the brothers proudly claimed, "the greatest per store volume of any drugstore chain in the world."

Klondike Kid. The Katz family came to the U.S. from Austria when Ike was nine and Mike was one. After four years of school, Ike went to work at 13 on the Great Northern Railway, peddling Navajo blankets, straw mattresses (at $1.50 apiece), food & drink to prospectors going to the Klondike. Then Ike and Mike started their fruit stands. In four years of 19-hour workdays they made enough money (about $500) for Ike to buy a little down-at-heels hotel and make it pay.

With their hotel profits, they bought a tobacco shop and later a candy store. When a wartime edict ordered all stores but drugstores to close after 6 p.m. each day, Ike and Mike quickly added drugs to their line--and found to their surprise that they would sell. When the cigarette tax was boosted a penny a pack, they put out a sign: "Katz pays the tax."

The brothers plugged their cut-rate bargains in huge newspaper ads, set up their own jobber to buy as cheaply as possible from manufacturers. Said Ike to one competitor: "If you want to put us out of business, go ahead and try. Goodbye." By 1929 the two Katz stores were grossing $5,000,000 a year. By 1930 the Katzes were famous enough for Mike to be kidnaped by mobsters and held for $100,000 ransom (Ike paid).

Million-Dollar Bonanza. During the depression, the brothers started "million-dollar sales" to sell $1,000,000 worth of goods a month (they always did), handed out coupons according to purchases. Then "no money" auctions were held, where customers used the coupons to buy. As they opened stores, Ike and Mike added post offices (with free wrapping services), an optical department, shoeshine booths and lunch counters. They drive their sales help so ruthlessly that employee relations are bad. But to keep the customers happy, each year the Katzes underwrite a free concert of the Kansas City Philharmonic. Their new plan: free circuses.

The Katz brothers now leave much of the retailing details to Ike's son Earl, 43. Nevertheless, says Mike, now 64: "When I'm going out of a store, I can generally count on seeing Ike on his way in." Currently expanding into suburban areas, the Katz brothers have a slogan ready for their new stores: "Buyways off Highways." But Ike, now 72, will never drop his favorite motto for retailing success: "Give 'em a free ride."

* In Missouri, which has no fair trade laws, most merchandise can be priced as the retailer decides.

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