Radio broadcast .. (1922-30)

HOW ABOUT TIME PAYMENTS? Not many weeks ago RADIO BROADCAST sent out a question- naire to 500 radio dealers. These dealers were chosen at random but with sufficient care to insure thai they represented all types of outlets handling radio. It should be understood that no effort was made to secure answers from a majority of the 38,000 radio out- lets in the United States, and that the replies tabulated on these pages are not offered as conclusive or final. However, we con- sidered the results of interest and asked Howard W. Dickinson, a nationally known merchandising consultant, to analyze and comment on the survey. He says: rM!< » ME THE questionnaire recently sent out by RADIO BROAD- _H. CAST to 500 radio dealers has brought forth very interest- ing results. They are "Straws which show how the wind blows," if you will. These straws indicate quite a variable wind with reference to trade practices. The value of an investigation of this type lies not so much in the determination of facts as in the chance it gives each dealer to ask himself, "Should I do this, or that, and Why." So, Mr. Dealer, please do not look for the statement of positive laws of action and do not be surprised if this com- ment on the questionnaire resolves itself into some more questions which are for you to answer. How Sales Are Financed The first question in the letter sent out by RADIO BROAD- CAST asked: "How do you finance time payments? Carry them yourself, or through a finance corporation or banker?" Dealers answered this question in three different ways : (a) 32 per cent, finance their own sales; (b) 43 per cent, finance through a bank or finance corporation; and (c) 25 per cent, do it both ways. Shall we conclude from the above that the (a) and (c) groups are more heavily financed for each unit of turn-over than group (b)? Could it mean that the (b) group has es- tablished better credit for securing the help of outside capital than the (a) group? Or, does it mean that the (a) group adds somewhat to its book profit by saving the cost of securing out- side capital? This latter might easily be an expensive saving, if it ties up the capital which should go into advertising. It is interesting to see that more than two thirds of those who reported on this question get some outside capital to help in financing time payments—evidently this is the predominat- ing trade habit. Shouldn't almost everybody do it, particu- larly the great majority, who give themselves less promotion than their business needs? I got quite a shock from the answers to the next question— "Are you insured against defaults in time payments?" Only 8.5 per cent, of the dealers answered "Yes" and 91.5 per cent, answered "No"! Insurance is lelatively cheap. Chattel mortgages are not expensive, and I am inclined to believe that only a man with a lot of money can afford to carry his own insurance himself. Do the answers to this question indicate a deplorable lack of financial self-protection in the radio business? Is it not true that whenever general business conditions grow worse for a time, credit risks on installments show an even greater tend- ency to increase? Possibly different dealers interpreted the word "insurance" differently. Interest Charged Now comes the cmestion which intrigued me greatly as it was bound to show a variation of considerable range— "What interest do you add to price? " One dealer out of every fourteen—7 per cent.—does not charge interest to cover time-payment financing. I wonder why. It has become a pretty common practice and an'ob- viously reasonable one in all kinds of installment selling. Let us see what the rest of the dealers charge for financing : 2.8 per cent, ask 5 per cent, interest (This is generally less than cost); 14 per cent, charge 6 per cent, interest— obviously an attempt to split even on this item; 15.2 per cent, get 7 per cent, interest; 19.3 per cent, charge 8 per cent, interest; 5.4 per cent, ask for 9 per cent, interest; and 16.6 per cent.—one sixth of the dealers—charge 10 per cent, interest. In addition a few dealers—2.8 per cent.—charge 12 per cent, interest and 14 per cent, of the dealers charge 1 per cent, interest per month. Another plan which is followed by a few dealers — 2.8 per cent.—is to charge $1.00 per month, which might be a low rate or a high rate according to the volume of the sale. These answers show that there is ample precedent for mak- ing deferred payments return an interest charge, and it is perfectly proper that they should. Isn't 10 per cent, a very reasonable and proper charge to make for financing? 82 DEC EMBER 1929 •