The talking machine world (Jan-June 1928)

Do You Know Your Costs Relation of store wares to sales doll a i Employes not engaged Employes engaged in in selling, 46% selling, 54% of Operation? Where the Retailer's Money GoesImportance of Cost Finding ACCURATE cost finding is one of the most important functions of management, whether in connection with a large manufacturing organization or a retail store. The retailer to-day, faced with keen competition as he is, price cutting, small down payments, long term contracts, service and other factors that endanger his profits, must know exactly where he stands financially. He must know the costs of his various departments. Certain knowledge of whether his sales methods are profitable is essential. He must know which departments of his business are profitable and which ones are failing to produce. Armed with this information the management can take the necessary steps to place every phase of the business on a basis that means a satisfactory return on the investment. Lack of this data often is the forerunner of failure. The importance of knowing costs cannot be overestimated. Where does the money go? That is a question every dealer should answer as accurately as possibbr How is the difference between the purchase price of syr article e iew per tnet pre s t ributed? W4^at~*~p«ax>tio n of g*osSJncome i s, deliv^sryTServg, rent, defcrecia> and carrying you know thf each dollar goes for salari ice, advertisin tion, financin trade-ins? If you have the basic knowledg your business to the end that tion can be attained and step obtain maximum profit on th The Science of Re ailing In the foreword to "Analyz Costs," by G. E. Bittner, of Department of Commerce, F assistant director in charge o merce, points out that: "Retailing is becoming mo ng Retail Selling the United States ank M. Surface, Domestic Com re and more a science. To conduct his busi less successfully, the retailer is required to k where to buy and when to exacting requirements of hi he overbuys, he will build up to absorb an undue proportio i capital, and to this large stoc t merchandise will accrue an ac< umulating burden of rent, insurance, interest, t obsolescence and other items If he buys stock that is not quirements of his customers 4e an inventory from which he c in not hope to re fer analysis of successful operacan be taken to investment. 1 ow how to buy, )uy, to meet the community. If large inventories of his operating of slow-moving xes, depreciation, f overhead costs, uitable to the rewill accumulate cover his entire investment hand, if he buys an insufncie it isfy the demand, he will los point customers. He may retard his stock turnover by carrying an excessive number of very similar items. "In his buying the successful retailer recog On the other quantity to satsales and disap nizes his function to be that of serving his community as a purchasing agent. He anticipates his customers' requirements as to kind, quantity and price range. Having intelligently purchased stock to meet the requirements of his customers, he then faces the necessity of displaying his merchandise in a manner that will attract the attention and arouse the interest of the patrons of his Financing and Carrying Charge 1% £3!) store. Thereafter, comes the test of his \ entire operation — that of selling his merchandise in a manner most acceptable to his customers w i t h^tft g up an unnecessary cost of^sefvice." he above paragraphs might harve been writ'ten especially for the talkm^fnachine and radio dealer. They containWood for thought. The analysis itself d^a+Swith the cost of selling commodities over the retail counter, treating the salafieS'and wages paid the sales person with e time of the sales person and the commodity sold. The study indicates certain deficiencies and pOSSibly nrmprpgeory yyflgjtpg Jj,0i LAJlllplc," "as brought to light that the sales person is idle about one-third of each day. Add to the idle time the time devoted to the care stock and one-half of the day is accounted for/j^isQit was discovered that certain items are costing rrre*e^to sell than others. These all important ctm&iderations and migfitvapply to any retail esfSWiaJiment. AV«rage Overhead Figures survey OTsgyerhead costs conducted e Talking^Machine World some time a£o brought tongbt some interesting facts regarding costsTR.stores handling talking saachines and raorst^sets and accessories. AhK>ng the smaller establishments, and even in sornV of the larger oneVJack of adequate cost-finding, systems was mades^ap parent from study of\he answers received f response to questionnaire The average overhead foS: talking machine and radio departments totaled 30 per cent, divided as follows: Salaries, 13 i*er cent; delivery, 2 per cent; service, 3 per cents: advertising, 6 per cent; rent, 4 per cent; depreciation, 1 per cent; financing and carrying charge, 1 per cent. It must be remembered that the^e figures are average. Individual concerns may run a considerably higher overhead or perhaps less, depending on efficiency of operation. It is interesting to note in Mr. Bittner's analysis of the relation of retail store wages to the sales dollar that salaries of retail store employes are 12.9 per cent (see illustration at top of page) as compared with the figure obtained by The Talking Machine World in its survey of 13 per cent. In a recent survey of the ratio of retail music store payrolls to gross sales a wide difference was found in salary overhead in different cities. In Syracuse this item of costs totaled only 11.5 per cent; Seattle, 13.21 per cent; Denver, 14.75 per cent; Oakland, 15 per cent; San Francisco, 15 per cent; Chicago, 17 per cent; Baltimore, 18.84 per cent, and in Kansas City 19 per cent. The average in 90,000 stores in fourteen cities, including all ^ is Delivery 2% lines, as mentioned before, was 12.9 per cent. Another interesting point developed in the survey of general retail stores is that only 54 per cent of employes are engaged in selling activities, 46 per cent being engaged in other work not directly concerned with producing profits. The 54 per cent of retail sales people do not spend their entire time selling, howe v e r. According to the survey only 42 per^ cent of t); t i mjr i s" 'pe n t in making sales; idleness takes up 33 per cent of the day; stock care, 17 per cent, and interviews 8 per cent. What does all this mean, especially to the talking machine dealer? It means that his business, being similar to other retail enterprises and included in these sur\ e improved. There is the idle time of sales people, for example. Cut down this form of^j«aste by reducing idle time and production increases and profits increase in direct ratio. Also there is no valid reason why the non-selling employes in the store should not contribute, no matter in how small a way, to the sale of merchandise. Some concerns recognize Advertising 6% ms fact and seyeral q{ the largest retail music establishments in the country have instilled in their non-selling employes the desire to sell by offering bonuses and commissions on sales made by or through se individuals^ i The volume of business d e rN^e d i n / this wayNjiay not be la ent, Etc., 4% Service 3% over a period of a month, but at the end of a year these sales may iiake all the difference between a profitable turnover and a loss. NThe bookkeeper, the delivery man and the service man all can and should be interested in trte sales end of the business. The service man/sespecially.^has been found an e x c ellent source of business. These are days of small net profits and the dealer must shave o v e r h ead wherever possible and increase turnover by more efficient methods of operation. Depreciation 1% 30