The town's bourgeoisie watch with judging and disapproving eyes as Mads Skern opens his new clothing shop, in direct competition with Arnesen's. Oluf Larsen's daughter, Ingeborg, starts as a clerk in his store, much to Mads' pleasure.

Arnesen's store is losing money hand over fist, so when he learns that his manager, Mr. Schwann, has inherited a large sum, he persuades him to become his partner; the snobby Mr. Schwann gleefully throws his entire inheritance into Damernes Magasin, prolonging the inevitable for a few months.

Mads' business continues to thrive and he even begins issuing loans to the locals. His younger brother Kristen, a banker, arrives in Korsbæk to assist. Kristen is quickly smitten with Maude's sister Elisabeth, who otherwise lives in the shadow of her sister. They fall in love, but their liaison is impossible due to the rivalry of their respective families.

Arnesen is in the shambles, and even Varnæs cannot aid him financially any further.

Traveling clothier salesman Mads Andersen-Skjern arrives in Korsbæk with his little boy Daniel and sees opportunities when faced with the inept draper Albert Arnesen and this small sleepy town where the old families define the pace and virtue. Receiving only haughty condescension from the upper-class, Mads finds local allies in the family of pig trader Oluf Larsen and his wife Kathrine, who has more money than meets the eye.

To the horror of the bourgeoisie employees of Arnesen's clothing store, Vicki, now a young widow, sells the store to Mads Andersen-Skjern and moves to Copenhagen, against her father's will.