47th Street Photo: What's Wrong With This Picture?Bruce Hager
In the beginning, there was a camera store. As the name attests, cameras are still for sale at 47th Street Photo Inc., as are consumer electronics and even jewelry. And for 26 years, 47th Street has been a mecca for bargain-hungry New Yorkers and out-of-towners willing to put up with crowds, noise, and service that has always been, well, lacking. Counter staffers don't take time to chat up a particular product. They'll talk price and features and expect consumers to make up their minds quickly.
That curt style was all it took to sell during the 1980s, when 47th Street boomed (chart). Since 1988, however, a recession and a host of competitors have cut into business. Sales have dropped 21%, to an estimated $225 million this year, according to the company. And at the start of the all-important holiday shopping season, it is tangled in a snarl of charges and countercharges between its owner and a former business partner.
VERBAL CONTRACT? The real financial status at 47th Street is conjecture at best. The company has been privately held since the day its founder, Irving Goldstein, a Hungarian refugee, set up shop in Manhattan's diamond district. He now co-owns the business with his wife, Leah. But the facts surrounding a series of suits filed in New York State civil court offer a glimpse into the business' inner workings in recent years.
As revealed in court documents and discussions with lawyers from both sides, Goldstein during the mid-1980s invested in New York real estate managed by one Joseph Fischer. When Goldstein, now age 45, was incapacitated in a car accident in 1987, Fischer says he stepped in and helped handle some of 47th Street's legal problems, such as negotiating a settlement with a trade creditor. For his services, Fischer maintains in one court document, Goldstein promised him a one-third share in the equity of the company. And the type of agreement upon which this alleged promise was based? A verbal one. Goldstein, now fully recovered, denies making such an agreement.
Although neither party will comment on the issue, court documents make it clear that Fischer and the company are wrangling over other matters as well, including Goldstein's charge that Fischer misappropriated $1.3 million from 47th Street. Fischer denies it, and his lawyers have countersued for defamation. On Nov. 22, a New York State Supreme Court judge said she would consider whether to dismiss all of 47th Street's suit. A ruling is pending. Business, meanwhile, goes on, and 47th Street is coping with tough times. Money has been tighter since the company agreed to pay back about $10 million to Chicago-based Transamerica Commercial Finance Corp., which had canceled its line of credit with the retailer. And 47th Street also agreed last July to pay about $9 million in unpaid sales tax, interest, and penalties.
TOUGH ALL OVER. Joseph Greenfeld, 47th Street's 38-year-old chief operating officer, is candid about the cash crunch. "We are paying our bills within the context of the business environment," he says, meaning a little more slowly than in the booming 1980s. The company's sales almost tripled in that decade as people squeezed into its tiny flagship store. One store begat another, and by the end of the decade, 47th Street was operating in four Manhattan locations and a fifth on Long Island.
Those go-go days are over. Sales are down, plans for a New Jersey branch have been scrapped, and the company has been laying off staff. Greenfeld estimates that more than 20% of the company's 515 employees were let go since last year. 47th Street's problems largely reflect those of other consumer electronics retailers. Sales for consumer electronics and video equipment, which make up 50% of 47th Street's sales, are off by up to 20% since last year. Already, the recession has taken down one of the New York area's larger electronic retailers, Newmark & Lewis Inc., which filed for bankruptcy protection in September.
The disappearance of marginal players should eventually translate into higher prices and profit margins for the survivors. And 47th Street will probably pull through. Despite the rumors of financial problems, those big vendors that would comment say they're sticking by the company. "We will continue to support them," says Alan Czeizler, director of sales at Canon USA Inc., a longtime camera and photocopier supplier.
The company has its own ideas about how to weather the storm. Besides cutting staff and expenses, it recently expanded to the ground floor of its original location. It is even experimenting with a crazy little thing called service. The sales staff has been trained to politely discuss the merits of this or that new gadget with the customer. Maybe they can teach some of that newfound civility to Messrs. Goldstein and Fischer.