Founded: 1937
NAIC: 442110 Furniture Stores; 443111 Household Appliance Stores; 443112 Radio, Television, and Other Electronics Stores
SIC: 5712 Furniture Stores; 5722 Household Appliance Stores; 5731 Radio, Television & Electronics Stores
A subsidiary of Berkshire Hathaway Inc., Nebraska Furniture Mart, Inc., is an Omaha, Nebraska-based operator of three mega-stores, offering a wide selection of furniture, flooring products, electronics, computers, and appliances. Nebraska Furniture also offers building solutions for built-in kitchen appliances, whirlpool baths, and custom electronics, including home security systems, multiroom audio systems, home theater systems, central vacuum systems, telephone outlets, digital satellite systems, and prewiring for new homes.
A major Nebraska tourist attraction, the flagship store, located in Omaha, is 450,000 square feet in size and includes a Burger King restaurant. Nearby on the massive campus is a 500,000-square-foot warehouse and distribution center and Mrs. B's Clearance Center and Factory Outlet Store. Almost as large is the Kansas City, Missouri, campus and its store, which features a 450,000-square-foot showroom and a Quiznos Sub outlet. On a much smaller scale is the Des Moines, Iowa, store, which sells only flooring, appliances, and electronics. Furniture sales in central Iowa are handled by Homemakers Furniture, a two-store operation in Des Moines acquired in 2000. In addition, Nebraska Furniture sells through its web site.
Founder, Russian Born: 1893
The origins of Nebraska Furniture is a quintessential immigrant success story. The company's founder, Rose Blumkin, known to her employees and customers as Mrs. B, was born Rose Gorelick in a Jewish settlement near Minsk, Russia, in 1893. She was one of eight children born to a rabbi and his wife, who ran a grocery store while her husband devoted his days to study. Rose received little formal education, yet decades later famed financier Warren E. Buffett maintained, "Put her up against the top graduates of the top business schools or chief executives of the Fortune 500 and, assuming an even start with the same resources, she'd run rings around them."
Starting at an early age, Rose did receive a practical business education working in her mother's store, helping out when she was just six years old. At the age of 13 she walked 18 miles to the nearest train station in order to seek work outside the settlement and then after two-dozen rejections used her powers of persuasion, which would serve her well throughout her life, to get a job as a clerk at a dry goods store. Just three years later she was manager of the store, supervising half-a-dozen men.
At the age of 20 she married Isadore Blumkin, a shoe salesman, and would have likely lived her life in obscurity as little more than a peasant had world events not intervened. With the outbreak of World War I in 1914, Isadore fled to the United States to avoid being drafted into the Russian army. The war would also hasten the end of czarist rule in Russia and ushered in the Soviet Union. In 1917, with tensions mounting in the country, Rose left to join her husband. Stopped at the Siberian-Chinese border by a Russian guard, she concocted a story that she was on a trip to purchase leather for the army. She then closed the deal by promising to bring back a bottle of vodka for the guard.
Rose Blumkin and Husband Move to Omaha: 1919
Rose booked what she thought was first-class passage on a ship that turned out to be a peanut boat that made stops in China and Japan. After six weeks in transit she finally arrived in Seattle and despite an inability to speak English made her way to Fort Dodge, Iowa (with the help of the American Red Cross and the Hebrew Immigrant Aid Society) to rejoin her husband. In 1919 she and Isadore moved to Omaha, where a community of Russian Jews had formed. There her husband ran a secondhand clothing store. Rose gave birth to four children during the 1920s and learned English. She also brought over to America her parents and seven siblings.
With the advent of the Great Depression of the 1930s Rose began exercising her gifts as a shopkeeper to help her husband. According to the Wall Street Journal, "She rented shotguns and peddled used clothing, jewelry, fur coats, and anything else she could lay her hands on." She also displayed a gift for marketing. In one well-documented example, she offered to clothe a man from head to toe for just $5. She printed up 10,000 fliers to that effect, and a day later the secondhand clothing store did $800 in business.
In 1937 Rose decided to open her own furniture store and with $500 borrowed from her brother she rented a store in the basement of a pawn shop located across the street from her husband's clothing store. She then took the train to Chicago, the center of the wholesale furniture business at the time, and began visiting manufacturers to ask for merchandise on credit. Her perseverance and eagerness won them over and she returned home with $12,000 worth of furniture for inventory. The trip also provided her with a name for her new venture, taken from the American Furniture Mart she saw in Chicago.
Furniture Store Opens: 1937
Nebraska Furniture Mart opened in February 1937. Rose's business model was simple and effective: buy at 5 percent over wholesale and mark up the merchandise by 10 percent. She tried to meet the needs of her customers while giving them the best deal possible. It became encapsulated in a phrase that in effect became the motto for Nebraska Furniture: "Sell cheap and tell the truth."
While this was a winning formula in the long run, the business had to endure some difficult times for the first dozen years. Early on Rose sold all of the furniture and appliances in her own house in order to pay $800 to her creditors. The competition also did not look kindly on Nebraska Furniture underselling them and pressured manufacturers not to supply to her. Nor would banks lend her money. Undeterred she bought furniture as far away as New York, had it shipped to Omaha, and was still able to beat the price of her competition. In one often-repeated instance she was taken to court for unfair trade in 1950 because she was selling carpet that usually fetched $7.95 a yard for just $3.95 a yard. She pleaded with the judge, maintaining, "I sell everything 10 percent above cost, what's wrong? I don't rob my customers." Not only did the judge throw out the case, the next day he stopped by the store to buy $1,400 worth of carpeting.
Nebraska Furniture reached a major turning point in 1950 when the outbreak of the Korean War led to a sudden drop in business, leaving Rose with a lot of excessive inventory but not enough cash to meet her loan payments and other bills. A local banker offered her a $50,000 loan for 90 days, relying on the merchandise as collateral. Rose took the loan and used it to rent an auditorium and to place an ad in the local newspaper announcing a major sale. In a matter of three days she sold $250,000 worth of merchandise, allowing her to pay off all of her debts including the short-term loan. From that day forward she would never have to borrow money again, and as a result of minimal overhead Nebraska Furniture was able to keep charging lower prices and maintain a competitive advantage.
It was also in 1950 that Isadore died. Their son, Louis, had gone to work for Nebraska Furniture after serving in the military in World War II and took over management of the company as president, while as chairman Rose spent her time on the sales floor, especially devoted to the carpeting department. Louis learned the business well from his mother and soon made a name for himself as an astute buyer as well as an innovative retailer in his own right. In addition to furniture and carpeting Nebraska Furniture began selling appliances and electronics.
As the business grew during the 1950s it spread to several Omaha locations until they were consolidated into a flagship store at 2205 Farnum. A new flagship store opened on South 72nd Street in 1970, but five years later it was completely destroyed by a tornado. Undeterred, Rose and her son built a new and even larger store on the site. In 1980 the other Omaha stores was shut down and all business was thereafter conducted at this new 200,000-square-foot store.
Nebraska furniture posted sales of more than $100 million from one location in 1983. It was a remarkable total for several reasons. After the new store opened in the mid-1970s, annual sales were less than $50 million, an amount that represented about all the greater Omaha market could support. Given that the city's population was growing at only a modest rate, Nebraska Furniture, in order to enjoy such strong sales growth, simply increased its market reach farther and farther from Omaha, as customers were more than willing to make the trek to shop there. The amount of business the Omaha store generated was reportedly staggering, more than any other home furnishings store in the country. In fact, it sold more furniture, carpets, and appliances than all of its Omaha competitors combined.
Warren Buffett Acquires Company: 1983
Nebraska's Furniture's success and the legacy of Mrs B. was not lost on another Omaha native, Warren Buffett. In the late 1960s he had offered $7 million for the business, an amount that Rose turned down while calling him cheap. In 1983 he came calling again, but Rose was 89 and more receptive, eager to raise cash for her children and grandchildren and ensure the company's future with Buffett's deep pockets. Moreover, Buffett had a reputation for keeping successful management in place and indicated no desire to replace the Blumkin family members who were involved in running the business.
Without taking inventory or an audit a deal was quickly reached and sealed with a handshake, calling for Buffett's company, Berkshire Hathaway, to purchase 90 percent of the business for $60 million. The written agreement would comprise only two pages, and legal fees related to the deal amounted to just $1,400. An option to buy back 10 percent of the company was subsequently exercised by members of the Blumkin family, so that in the end Berkshire Hathaway had in effect paid $55 million for 80 percent of Nebraska Furniture.
Although there was a change in ownership, little changed at Nebraska Furniture. Mrs. B continued to roam the carpet sales floor, albeit on a motorized cart, and sales continued to grow at a steady rate, topping $150 million in 1988. By this time her son Louis had retired as CEO and assumed the chairmanship. Louis's son Irvin had taken over as CEO and son Ronald served as chief operating officer.
The new leadership would soon, however, run into trouble with their headstrong grandmother, who believed they were meddling with her beloved carpeting department, which in the previous three years had seen a 17 percent decline in sales while the other department improved sales by 24 percent. In May 1989 she walked out and a few months later, at the age of 95, invested $2 million to open Mrs. B's Warehouse, a new business across the street that sold furniture and carpet. She leased out the home-furnishings department and ran the carpeting business herself. Although Mrs. B's Warehouse was not going to drive her grandsons out of business, within two years it was Omaha's third largest carpet retailer. In late 1991, two days before her 98th birthday, Buffett made peace with Rose, who had become angry with him after he had sided with the grandsons, bringing her roses and chocolates and a $5 million offer for the Warehouse business. She accepted and this time Buffett made sure to have Rose sign a noncompete agreement.
Rose Blumkin, 104, Dies: 1998
Rose continued to work at Mrs. B's Warehouse, and a year later celebrated her 100th birthday at the store, joined by Nebraska Governor Ben Nelson, Senator Bob Kerrey, and other dignitaries. She continued to work seven days a week as long as the store was opened for business until she was 103, sometimes relying on an oxygen mask and tank connected to her cart. Even after she retired and her health began to deteriorate she continued to be driven to the store each day to be given daily briefings on how business was going on top of several phone calls she placed each day to the grandchildren she put in charge of Mrs. B's Warehouse. In time this operation would be subsumed by Nebraska Furniture, becoming Mrs. B's Clearance Center and Factory Outlet Center. On August 1998 Rose Blumkin died four months shy of her 105th birthday.
In the final years of Rose's life, Nebraska Furniture expanded on several fronts. In 1993 the company opened NFM Builder Sales in Des Moines, Iowa, selling appliances and flooring to home builders and contractors. By the end of the decade the business outgrew its space and as part of the expansion plans Nebraska Furniture decided to add a retail operation, Nebraska Furniture Mart Appliances & Flooring, which would refrain from selling furniture or general electronics equipment.
The main reason that the company did not sell furniture in Des Moines was due to an entrenched competitor, Homemakers Furniture, established a quarter-century earlier and modeled after Nebraska Furniture. Homemakers's main store was about 300,000 square feet in size, and it maintained a newer 65,000-square-foot outlet as well. The enterprise frustrated Nebraska Furniture's attempts to gain a significant share of the market in central Iowa for a time. In September 2000, however, Nebraska Furniture acquired Homemakers. Because the brand was well established in the market, Nebraska Furniture elected to allow the stores to operate under the Homemakers name.
Other changes followed in the new century. The Omaha operation was modernized in 2000 and a Mega-Mart was added to sell electronics and appliances. In 2002 Mrs. B's Clearance Center and Factory Outlet Center was renovated and a new warehouse and distribution center added to the 77-acre Omaha campus. The extra warehousing capabilities would be needed to support the opening of a third Nebraska Furniture store in 2003 in Kansas City. This 450,000-square-foot store performed so well that it soon required its own distribution operation, and in 2006 a new warehouse and distribution center was added in Kansas City. A year later the Omaha operation grew even larger with the addition of 25,000 square feet to the electronics and appliance store, originally intended to accommodate the new fixtures required by the increasingly popular flat-screen television.
In addition to increasing stock by 20 percent, the renovated store included in-store departments dedicated to Apple, Sony, Harman@Home, and Bose products. These investments were made to keep Nebraska Furniture ahead of the competition, which by then included Costco, a major seller of electronics and appliances that opened its first Nebraska store in Omaha in 2007. While not about to rest on its laurels, the company was confident that it could fend off any new competitors. "We set the standard in Omaha, and in Des Moines and Kansas City," Executive Vice-President Bob Batt told Omaha World-Herald in October 2007, adding, "We set the bar, not the other way around. They're chasing us. Never caught us."
Principal Operating Units
Nebraska Furniture Mart; Homemakers Furniture; Mrs. B's Clearance Center and Factory Outlet Store.
Principal Competitors
Best Buy Co., Inc.; Circuit City Stores, Inc.; Ethan Allen Interiors Inc.
Further Reading
"Cheap No More; Berkshire Buys Blumkin," Fortune, October 17, 1983, p. 8.
Feder, Barnaby J., "A Retailer's Home-Grown Success," New York Times, June 17, 1994, p. D1.
------, "Rose Blumkin, Retail Queen, Dies at 104," New York Times, August 13, 1998, p. D19.
Hayes, John R., "The Oversight Was Understandable," Forbes, April 26, 1993, p. 196.
James, Frank E., "Furniture Czarina: Still a Live Wire at 90, a Retail Phenomenon Oversees Her Empire," Wall Street Journal, May 23, 1984, p. 1.
Johnson, Patt, "Nebraska Furniture Buys Homemakers," Des Moines Register, September 15, 2000, p. 1A.
Miles, Robert P., The Warren Buffett CEO: Secrets from the Berkshire Hathaway Managers, New York: John Wiley & Sons, Inc., 2002, 412 p.
Pinkerton, Janet, "Dealerscope Hall of Fame: The Blumkin Family," Dealerscope, January 2002, p. 62.
— Ed Dinger
