Retail store management problems

Preface

HIS book is a collection of actual executive problems which

have been gathered from stores located in many parts of

the country. It attempts to present, in a coordinated

manner, problems which face executives of retail stores of various sizes and types.

While the search for these problems was undertaken primarily to strengthen the material available for teaching purposes in the course in Retail Store Management at the Harvard Graduate School of Business Administration, I hope that the book will be of value to those actively engaged in retailing, both in training executives within the store and in suggesting other ways and new methods of handling some of their retail management problems. It is gratifying to those of us who believe in the problem method of teaching, to know that executives are finding means of using these problems to advantage within their own organizations.

I believe that the collection of problems will furnish a sufficient background upon which courses in Retail Store Management can be built in other educational institutions. The probable reason why there have been so few courses of this kind given, is the fact that nowhere has there been an available collection of material sufficient to cover the subject in an adequate manner.

Executive problems are much the same in whatever types of business they may arise. The details of the problems, of course, differ, but the same methods of analysis and processes of sorting material are necessary whether the problem is confronting executives of a retail store or a large daily newspaper. The technical details are important, and it is our belief that they can best be presented by including them in the background of problems to be solved. For this reason some of the problems in this book may seem to be unnecessarily long, but an attempt has been made to give the whole setting of a particular situation.

I

II RETAIL STORE MANAGEMENT PROBLEMS

Since, in preparing men for executive positions in business, it is necessary to train them to think as an executive must think, the problems are presented as they came to the executives of stores. They are actual executive problems as we have been able to find them, with a few facts changed to cover up the identity of the particular store. Incidentally they are problems which the retailers are most interested in solving.

From the experience of the members of the staff of the Harvard Graduate School of Business Administration, the advantages of the case method of teaching are unquestionable. The course in Retail Store Management has been developed from a lecture system to a discussion basis and from there to a straight case system. ‘The necessary detailed background and the general principles of retailing are more thoroughly covered by presenting them in the body of the cases than by the lecture or text-book method. Class interest is more easily maintained when the members of the class visualize the problem as their problem and have the opportunity of discussing what should be done under particular circumstances, rather than when the instructor alone expresses his views. There is usually more than one way to solve a business problem and a proper discussion should determine a satisfactory conclusion.

The case method of instruction, as it is developed in the teaching of business subjects, is due in large part to the efforts of Dean Wallace B. Donham of the Harvard Graduate School of Business Administration, and the interested reader is referred to an article in the Harvard Graduates’ Magazine of March, 1921, in which Dean Donham sets forth the advantages of this method of teaching as he sees them. It was Dean Donham’s enthusiam for, and his whole-hearted belief in, the case method of teaching business that encouraged me to undertake this work. I have a deep feeling of appreciation for the advice, the suggestions and the aid he has given me.

Gifts from stores and store executives made it possible to develop an organization in the Harvard Bureau of Business Research, under Professor Melvin T. Copeland, for the collection of problems in this field. To Professor Copeland I owe a great debt. Without his help, advice, constructive criticism, and direction, it is doubtful whether the work necessary for the completion of this book would have been accomplished. This book

PREFACE III and the course in Retail Store Management at Harvard have been greatly improved because of his aid.

Mr. Malcolm P. McNair, Mr. C. E. Frazier, Mr. C. N. Schmalz and Mr. R. N. Winternitz, field agents for the Bureau of Business Research, have collected a majority of the problems which appear in this book. Their advice on disputed points, their interest in and analysis of the aim to be attained, and their cooperative attitude are much appreciated.

To Miss Mary E. Osgood, Secretary of the Bureau of Business Research, and to Miss Ethel M. Brainerd, my secretary, I wish to express my gratitude. They have gone over the outlines of the problems, the manuscript and the final proof, have made valuable suggestions and at all times have been most willing and helpful.

I am grateful to the executives in many stores from whom the problems were collected. Without their active assistance and complete willingness to disclose confidential information, the problems could not have been made practical or correct in detail. Were it not for the fact that a list of the names of the firms might disclose the identity of some of the problems, I should have included in this preface the names of the 126 stores to whom I am so indebted.

. : DUK. D.

Cambridge, October 24, 1921

AN APPRECIATION was made possible by the financial assistance, the interest, and the active cooperation of a number of retail stores and their executives.

I am deeply indebted to the following Boston merchants who underwrote a fund so that we might start an organization at the time when a collection of problems was first planned:

pve research upon which the problems in this book are based

Mr. A. Lincoln Filene, of Wm. Filene Sons Company

Mr. Robert W. Maynard, President, R. H. Stearns Company Mr. George W. Mitton, President, Jordan, Marsh Company Mr. Felix Vorenberg, Vice-President, Gilchrist & Company

I wish to thank Mr. Jesse Isadore Straus, of R. H. Macy & Company of New York, who actively interested himself in raising money for this fund and explained the purposes of the fund to a group of his friends in the retailing field, with the result that many of them contributed.

I also desire to express my appreciation to the following firms whose executives contributed to this research:

Jordan, Marsh Company Boston, Mass.

Wm. Filene Sons Company Boston, Mass.

R. H. White Company Boston, Mass.

Gilchrist & Company Boston, Mass.

R. H. Stearns & Company Boston, Mass.

Chandler & Company —. Boston, Mass.

E. T. Slattery Company Boston, Mass.

Conrad & Company : Boston, Mass.

R. H. Macy & Company New York City The Bailey Company Cleveland, Ohio L. Bamberger & Company Newark, N. J.

Boston Store Chicago, Ill.

V

VI

Crowley-Milner Company

L. 8. Donaldson Company The Emporium

The Fair

Forbes & Wallace

Gladding Dry Goods Company William H. Hager

Hale Bros.,. Inc.

Henderson-Hoyt Co.

Herzfeld-Phillipson Company Hochschild, Kohn & Company The Howland Dry Goods Company J. L. Hudson Company

-§. Kann Sons Company

Mandel Brothers

LaSalle & Koch Co.

Meier & Frank Company Rike-Kumler Company Rothschild & Co.

Scruggs-Vandervoot-Barney Co.

Weinstock, Lubin & Co.

Younker Bros.

Cambridge, October 24, 1921

Detroit, Mich.

Minneapolis, Minn.

San Francisco, Cal.

Chicago, Ill.

Springfield, Mass.

Providence, R. I.

Lancaster, Pa.

San Francisco, Cal.

Oshkosh, Wis.

Milwaukee, Wis.

Baltimore, Md.

Bridgeport, Conn.

Detroit, Mich.

Washington, D.C.

Chicago, Ill.

Toledo, Ohio Portland, Oregon Dayton, Ohio Chicago, IIl.

St. Louis, Mo.

Sacramento, Cal.

New York City

D. KD.

Table Of Contents

: Page

RE ee Geren are aay fe cers a RA ko PIP Tea BT I

PPE OCEN TIONG ate ee Foe a A ry ok. Vv

Part Ii—accounting Problems

A. INTRODUCTORY PROBLEMS Pevaming. V¥ early Provitesi0s i sas: 6s. Figuring Monthly Profits........

Cost of Doing Business.....

Income Sheet Form.....

Merchandise Statement. ..

Expense Statement...........

Net Gain Statement. .

Profit and Loss Form . ia Adjustment of nee, to Profit and Loss Statement. Form of Profit and Loss Statement .

Charging ae sara Rent and Interest, as 6 Operating Expense .... ; rye

Cash Discounts. .

Accounting for Depreciation . ..

Charging for Alterations.

Inclusion of Some Part of | Buying seeieiee in the Cost. of Merchandise . elaine Se Cm a a ee

Accounting Control for Small Chain......

Method of Handling Cash......

XIII

_ 42 .. 48 . 45

XVI RETAIL STORE MANAGEMENT PROBLEMS

IV. PERSONNEL STATISTICS

17.- Personnel Statistics: \ i s:icnck «censor «eee eevee 18. ‘Analysis of Labor Statistics> 772... oy eee 19. Labor Turnover Statistics:.) 2 170 20: ‘Calculatiomof Labor Turnover: 229-00.)

B. GENERAL OPERATING STATISTICS

21; - Statistics:-for Store;@omparison ey A test ea ee 22, Department Wordcast “230 es Ve ee ee 23. Forecast for moire Created by ieee a ee Department. . ee TALE ; 182 24. ‘Departmental Control ior) ae ee 25. Monthly ot Statement ES ae for ge ment Store . ae 187

26. Computing a Rate of Gross Profit and bv eTB ea Rate of Expense....... Mine 191

C. PRESENTATION OF STATISTICAL INFORMATION TO THE CHIEF EXECUTIVES OR TO SUBORDINATES

27. Statistical Comparison of Sales Volume................... 192 28. How Statistical Comparisons Should be Made............ 194 29. Monthly Statement of Chain Shoe Stores.................. 194 30. Form for Combining Reports from Chain Stores........... 198 31. Po ae Statistics eee Division ea in a oe ae Store... es: 199 32. aren ASEM eee PRED See en NN 33; Wall Charts in Executive Offices... 202 3 eee 200

D. ORGANIZATION OF A STATISTICAL DEPARTMENT 34. Merchandise Control Through Statistics or Accounting...... 207

35. Statistical System for Chain Grocery Stores. .............. 209 36. Weekly Operating Statistics for a Chain Store System ...... 211

See ee a lee

TABLE OF PROBLEMS XVII

Part Iv—organization Problems

A. BUSINESS ORGANIZATION

HNCOrpOMlION teenth |. coneiieigusid. te. uodkesineeet> 218 Organization and Its Relation to Management............. 219 Raising Capital fora onde: Chain. oot. ee ee 220 enedene Potnaweoantdlicn 2 yucca tt. eee ae 221 POO SU DAN ee loci ys) heck wine atapin dee LOS

Oreanization of 4 Clothing Chain .. -. nyo. sc jek eeveglee en dae 2O4

B. STORE ORGANIZATION PROBLEMS I. TYPE OF ORGANIZATION

MN AAO Ui tse tee ahinerincrs Farts aint afeweret aos iatadh. 220 Naini Divisions o1ystore Organization. vo. od. ose... ss se 228 POO OLCaAMIZAviON MOTThON! To ce ates ne seh es LOR Store Oreammationeaenepeawiial via duu tht. lay.qoleoe.k 236 Generar otere Organization -2 66020. IOS IGE BeOS 240 One-Man Management... 22.205. 2.208 OI Re 242 Cigali zation Oras@naln SONS. PS Ng Oy SOA 268 Separation’of Buying’and Selling ..06.) 0206.22 2. eee. 254 Coordination of Buying and Selling Departments........... 256

Relation of Inventory and Discount Policies to General OEP IM ZA IONE COMELON nse ens cree ee cate a Shs ena LOR

II. ORGANIZATION OF ADMINISTRATIVE DEPARTMENTS

Organization of a Small Drug Chain................00 000... 261 Organization for a Small Grocery Chain................... 263 MEOVEG RP CpartMent, 0... ceo ee ks et Fee ete s BOO Position of Statistical Department in Store Organization.... 267

Organization of the ae tS see ahh and Its Contact with the Rest of the Store .. ; . 269

XVIII RETAIL STORE MANAGEMENT PROBLEMS

22. Relation of Organization of Department to Merchandise

Classification ...::..castvaitac f picum wana egies ere 23. Organization of a Single Selling Department.............. 274 24. eae of Administrative Departments—Conflict of

Authority . PT Pr a ee Se 25. Location of Mail-Order and Correspondence Departments in

Organization;-Chart : /7a5).25, Senin freee ee ee 26. Organization of General Superintendent’s Office............ 282 27., Relation to Managemento es) es ek G4 ee ee 28. Executive in Charge of Public Relations................... 285 29.) Standard Problem vAnalysis 05 70 Wte e 2 ae tee er 30. Elimination of Adjustment Bureau....................... 289 al. Organization of Complaint Division. . =. 245 ge yee

C. PLANT LOCATION AND EQUIPMENT

I. LOCATION 32. Location and Layout of a Hardware Store................. 299 33:+ Shoe Store Location. ... 2022). vk Se 34;°" Expansion of Unit Store?. 2: 0.9.2 ve sieiee eee eee 35. When to Organize a New Branch in a Chain.............. 307 36. Location of Grocery and General Market.................. 308 37,, Location of Dry, GeodsiChainiine tyin wer ew te eee oe 38. Selecting Location with Reference to Kind of Trade Desired 316 39.) Sitetor Furniture Store. 5. eae 40. Location Policy for Chain Grocery Stores................. 820 41. Location Policy for Chain Hardware Stores................ 322 42, Unfair Competition » .,.ic5c4 4 cca 4 a Re ee

43. Ground Rent or Building Lease. 9p PROPS BIE SGP Cee 0) 0* wear ae

II. EQUIPMENT 44, Cash Register vs. Central Tube or Cable System........... 326 45° Bundle Conveyors. 02.00.0055 0 4 ee er ce

46. 47. 48.

Se ae se a

Equipment—Elevators .....

Arrangement of Elevators and Escalators......

Location and Operation of Elevators.........

Part V—merchandise Problems

A. MERCHANDISE CLASSIFICATION

Merchandise Classification . Raed

Combining Taxable Items into One Department. .

Departmentizing the Business in Jewelry Stores. .

Merchandise Classification in Retail Jewelry Store....

Merchandise Classification—Duplication.......

B. STOCK CONTROL

Control of Stock in Chain Grocery Store. . Open to Buy.... RES IN es 2 Determining Departmental Buying Power......

Departmentization .

Inspection System of a Department Store........

Want Slips. .

Stock Contal f for ae tios Sold. at t Different F Prices ....

C. LAYOUT OF MERCHANDISE

Layout of Departments. .

Layout of Department Store...

Bargain Basement. .

Bargain Counters. “ad 8 bea

Layout of TeeabArent Store 8 iy: Sie Standardized Layout in Retail etic Chain .

Organization, Location, and Layout of 5 and 10 Gent Stores .. 378

Pres ee O0D as cero laiesadiaes..). 3880

Use of Attractions in Layout. .

XIX

. 330 .. 333 .. 339

... 847 . 348 . 349 [852

. 309 .. 360 .. 362

. 363

. 364

.. 365 vee O08 Rea O ore

. 374

XX

SS gy

Changing the Chentele.. .

D. GENERAL MERCHANDISE POLICIES Exclusive Agency. . £2 Policy of Handling Nanaia Advertised Merchandise . Developing Own Trade-Mark.....

Guarantees “14 j.47¢)508. ERE Establishment of Temporary Branches. ..

Leased: Sections: <2.) nckeer ee Compensation for Leased Departments...... .. Use of Basement.

Advisability of Neaiwtaltunib’s a Grocery : Casa veina bee Self-Service Grocery Department.........

Furniture Department. .....

Silverware: .s. (Scented Ae

E. OTHER MERCHANDISE PROBLEMS Best Selling Prices. .

Lines to be Carried. . PE eo Concentration on One Line in Unit Hardware Store. . Selling Unreliable Merchandise... ..

Slow-Moving Lines......

Taking Goods on Memorandum..............

Additional Lines for Chain of Shoe Stores. . . Reduplication of Stock. . ts

Layout, Merchandise, and General ee

Part Vi—selling Problems

A. GENERAL PROBLEMS Selling Policy in a Shoe Shop. .

Change of Clientele and Location...

Curtailment of Service.......

.. 409 Use of High-Priced Merchandise in a a Medium-Priced Store. .

Sales Policy in a Department Store... .

Mid-Week Specials.......

Regular Sales ..

No Mark-Downs until End of Season.. ..

Loss Leaders. . .

Use of Trading Stamps.... .

Premium Merchandise. .. .

Use of P. M.’s in Introducing New Lines. . Use of Shopping Bureau... .

Demonstration Privileges... .

Order of Salespeople. .

Sales Contests. Taner eaes

Quotas for Chain Shoe Stores. .

Planning Board... .

B. ADVERTISING

General Advertising Policy ...0.. 668 00.0. 00.

Advertising Appropriation... .....

Connecting Advertising and Merchandising... .

Scope of Advertising Manager’s Duties... .. Organization of Advertising Department. . Who Should Write Copy?...

Advertising Contracts. tate Advertising Media in a Large City § Suburb .

Sales Promotion and Relation with Customers.....

Window Display. . lita Chain Grocery Store Dea rc

Educating Consumer on Cost of rae Business. . .

Legislation Against Misleading Advertising. .

XXI

XXIV

31. 32.

C. MARKING

Receiving and Pricing Methods in Chain Grocery Stores... . Need for Separately Enclosed Marking Room.............

Separately Partitioned Mark-Down Room.

Figuring Profits and Mark-Up on Perishable Commodities .. .

System of Pricing Merchandise...

Mark-Down Control ..........

D. RESERVE STOCK Reserve Stock Problems ..........

Stockroom for Order Filling.......

Yearly Sales Peak ....

kK. STOCK RECORDS Operating without Stock Records. .

Small Store without Stock Records. .

Stock Records in a Unit Drug Store.....

Stock Records in Unit Hardware Store. .

Harvard Stock Records for Shoe Retailers. .. Stock Records .

Model Stock Plan . xt Combining Price Ticket and Sales sya”.

Control Over Sizes and Colors.

Perpetual Inventory in Retail Meat Market.

Merchandise Classification, Sales Records, and Method of

Inventory. .

Method of SERRE the i ne of Stock-Turn .

F. INVENTORY

Warehouse Inventory Methods in Chain Grocery Stores. . .

Taking Inventory. . Le Cost vs. Retail Method of eee oR OO Ne

CY NS

10. 11. 12.

Retail Method of Inventory in a Unit Jewelry Store . Retail Method of Inventory in Unit Drug Store. ... Method of Taking Inventory in Unit Grocery Stores. . Piece Control......

Stock-Taking .

Instructions for Taking Inventory in Department Stores. .

G. STOCKS SHORTAGES Causes of Stock Shortage. ..

Inspection for Stock Shortage...

Shortage in the Glove Department... ..

Stock Shortages in Chain Grocery Stores. .

PART VIII—BUYING PROBLEMS x ORGANIZATION Controlling Buyers for a Grocery Chain... ... Limitation of Store Manager Buying... .

Methods of Buying in a Chain Grocery Store. ... Routing of Orders in Chain Grocery Buying. .

chandise Manager’.

Organization of Foreign Buying Department......... Purchase of Supplies... ace: Centralized Purchase of Supplies. ..

‘Centralized vs. Decentralized Buying.... .

| B. PLANS Merchandise Policy for Grocery Store............ Buying Goods Sold in More Than One Department... . Purchasing Policy for Hosiery Department... ..

XXV

708 . 710 . 7138 t. 72k6 How Much Power Should be Given the SEESIND and the Mer-

Ea

. 732 784 _ 735

XXVI RETAIL STORE MANAGEMENT PROBLEMS

13, “Alterations! + irs. ila BEE PR RNS eee) 14; .Computing Purchase‘Limite :¢ SAG ee ee C. SOURCES 15. Control of Purchase by Store Manager from Sources. ...... 739 16. Buying Sources for a Chain... . 2.27.22 2-32 ae 17. From How Many Sources Should a Store Purchase Goods?.. 741 18: Joint Buying to SecureiQuantity Prices: ...... 72. ee 19: Cooperative Buying Association. .222500C. 20's 0 eee 20. New York Purchasing Services: iii Baik Teh HOU SaeeR se 21. Resident: Buyer: +1... ; asd OE OS a ene fea 22. Reducing Stock Ae ee Association. . Ress. Tae D. METHODS 23. Cash Discounts. . oe EEE is ee 24. Buying Putures in CAMMed egaees me tn a 25. Use of Contracts for Futures in Canned Goods, Etc........ 754 26: Purchasing Store Sales Slips 2 07. 222. (= Se ae eee 27. Exclusive Agency in Bee Market. OE Td SU Peano 28. Form: of Order 220i). Leite Na ee Se a 29. -iuyingfS8 Recetas ore tae avec a 769

PART TX—GENERAL ADMINISTRATIVE PROBLEMS

A. PERSONNEL I. EXECUTIVE

A. ORGANIZATION

1. Organization of the Personnel Department................ 776 2. Relation Between Buyers and Floor Superintendents........ 779 8: Contract with Buyers {i's Cie see 2) eee 4, Buyers’ Contieta®), 0) Sant Joke, (let sina aaa 794 5. Women vs. Men as Store Managers....................... 801

Heaeatiomon Accictant Buyets...0.. 3.62 Sauce... Informing Store Managers of Price Changes. . Payment of Store Managers. .

Personnel Problems of a Small Drug Chain.......

2. NON-EXECUTIVE

A. ORGANIZATION

Personnel Inventory ....

Employee Records....

Job Analysis.......

Rating of Personnel. .

Elimination of Floor Men. Pe Aes: Check on Mistakes and ae of Cpe Sale of Merchandise to Employees.........

B. Promotion anp EmpLoyer SERVICE Educational Work.. Kens eee Educating oalereatiad in re ietacnies

Supervision of Records and Follow-up...

Relation of Store Policies to Training and Promotion. .

Selection, Training and Promotion of Employees. ..........

Promotion of Employees. .

Bumiovees: Welfare Work: ».. 0.2... SAP

House Organ...

C. MetHop or PAYMENT

. Payment of Salespeople. .

Compensation of Employees. .

Varying Methods of ee ereation in ee ome Store AN

Uniform Wage to Sales Force.

Reducing Salaries and icine Beh loveedk

XXVII

. 803 . 810

Ok

. 829 . 882

.. 834

. 837 . 838

.. 841

. 855 . 858 . 860

.. 885

. 887 ou

. 892 . 894

xxyut RETAIL STORE MANAGEMENT PROBLEMS

Payment of Salespeople in a Large Grocery Store..........

Payment of Sales Force in a Grocery Chain. .....

Methods of Paying Sales Force in a Retail Jewelry Store.. Method of Paying Salesmen in a Retail Shoe Store.........

Minimum Wage Legislation.......

B. FINANCIAL Financial Policy and Relations nth Banke ny Securing Capital for a Hardware Store............ Employment of Capital.......

Balance Sheet........

Pinaneial Statistics... 25.4 Voucher System for Accounts Payable. . .

Trade Acceptances..........

Leased Departments.... ..

Insurance...) 2) Sa Ae, ae eee eee

The: Sales fase, eee

C. PRICE POLICY Mark-Up. Pohey...3-...

Rules for Taking.Mark-Downs). .<:-<.5) 4355.56. Price Policys7 Mark-Up on Silverware. 2 ~. 2sian r e s Mark-Ups on Style’ Lines 3) ee Mark-Down Policy 2000) Pricing Valuable Merchandise... 77 4 jee ees Odd-Figure Prices.... .

Single-Price Polity: 3...) .2g3Gceieie ee ee ee Bee

Use of Price Tags for Customerse? aee> <7. .c ee eee:

Price Comparison Policy.........

57. 58. 59. 60.

72. 73.

Trading Stamps.. ere Variety of Stock and Price ee

Stamping Manufacturer’s Cost on Merchandise.......

Price Maintenance.......

D. RETAIL PROBLEMS IN RELATION TO GENERAL BUSINESS CONDITIONS

General Problem on Business Cycle. .

When to Stop Buying...........

Improving the Financial Condition of a Store..............

Reserve for Business Depression.......

Buying and Price Policy....

Cancelation of Orders . aii Credit Policy in a Business Cycle....

Reduction of Operating Expenses... .

Advertising Policy in a Falling Market .

Price Policy in a Rising Market.

Methods of EE Prices in a Falling Market...

E. OTHER ADMINISTRATIVE PROBLEMS

‘Contributions by Store Managers... .

Scientific Management in Department Stores..............

XXIX

.. 948 . 950 . 951 . 952

. 958 . 972

. 980 - 981 . 982 . 985

. 988

. 991 , 992 . 993

. 994

Part I Part I

A. Tue Position oF RETAILING IN THE _ Frevp oF MARKETING

ARKETING has been defined as a study of the principles

M that govern the policies of business management in the

distribution of commodities from purchasers to consum-

ers. This includes the activities of retail and wholesale mer-

chants, manufacturers’ sale organizations, the various agencies

engaged in the distribution of raw materials, and all other means of facilitating and promoting the sale of merchandise.*

This book takes up that part of marketing which has to do with the activities of retail merchants. Retail operations may be defined as those which aid in the transfer of goods between the producer and the consumer, whose main functions have to do with selling, by means of direct contact, to the final consumer. The personal contact which the retailer has with the final consumer can be used as a guide to classify retail activities.

From an economic point of view the retailer is in business to make a profit or a saving.** He is justified in this profit because he produces time and place utilities and undertakes a risk. His position is sound, for in most cases he is a necessary adjunct to the most convenient and most economical method of distribution of commodities. Despite the greater standardization of goods produced, no means has yet been devised to displace entirely the personal contact necessary for the distribution of the goods.

The public feels that there are wastes in the distributive processes, without knowing where or how they occur. But when one realizes that in many cases over 50% of the selling price to the consumer represents the cost of marketing particular products,

*M. T. Copeland, Marketing Problems, page 1. **Cooperative Retailing.

it is no wonder that the buying public questions the soundness of present-day marketing methods.

Exactly what percentage of waste is caused by the retailing process is difficult to determine. Various investigations of the Harvard Bureau of Business Research in particular retailing fields, and of other research bodies, stress the point that there are wastes in the operating expenses of these retail institutions. In fact, it is toward an elimination of these wastes that the best minds in the retailing field are turning, but in this respect, retailing is 15 to 20 years behind production As far back as 1900, Mr. Frederick W. Taylor, Mr. Carl Barth, Mr. Gantt, and their associates, were applying scientific methods to production, in order to eliminate waste.

One of the great opportunities at the present time in retailing, or in fact the field of marketing, lies in the systematic study of the expenses of distribution. Such organizations as the Controllers’ Congress of the National Retail Dry Goods Association, the various independent research groups, and the Harvard Bureau of Business Research, have done much and will do more to lead the way toward intelligent saving in the process of retailing.

B. PROBLEMS OF DIFFERENT TYPES OF RETAIL STORES*

Not many years ago, general stores and the smaller unit stores were the only types of retail institutions. As the population grew, the general stores expanded into department stores. The metropolitan specialty shop came as an outgrowth of the unit store idea, based upon an organization similar to that of department stores. Chain stores have developed in the last few years and form the most startling growth in retail distribution. Manufacturers’ retail branches, cooperative stores, mail order retailing, retail public markets, and itinerant retailers or wagon retailers, have been outgrowths from the other types.

Each of these types of stores has problems that are peculiar to itself. One may think of two sets of lines, one set running horizontally and the other vertically, the vertical lines representing problems of the different types of stores—for example, the | problems of the department store as contrasted with those of a

*For another summary of the problems of different types of stores, see Copeland,

Marketing Methods, pages 6-13. That book approaches these problems from the point of view of a distributor who uses retail stores as an outlet for his product.

chain system—and the horizontal lines representing those internal problems, such as accounting methods, organization, merchandise and other problems, with which every store, no matter what type, has to contend. It is with the horizontal lines that.the problems in this book deal, but a clear understanding of these so-called horizontal problems cannot be had unless the special problems of each type of store are made clear.

1. Unit STORES

Unit stores are those which are owned, organized and operated as an independent unit, without elaborate departmental organization, for the sale of commodities. The majority of general merchandise, grocery, shoe, drug, hardware, jewelry, and millinery stores are in this group. ‘The main problems of the unit stores are those dealing with intelligent competition, which problems can be subdivided, on a horizontal basis, into selling problems, accounting problems, and buying and stock-keeping problems.

A surprisingly small percentage of the unit stores in the country have an adequate cost or accounting system. They have no means of knowing, first, what their costs are, and, second, how to decrease the wastes shown by costs. The larger institutions with whom unit stores compete, because of the greater capital can purchase in larger lots and are able to secure quantity discounts from the manufacturers or wholesalers. |

It is a query in the mind of students in marketing whether or not the unit retailer can survive. Each unit store must solve the questions of how it can meet the selling methods of the larger institutions, how it can secure accurate costs, and how it can meet the lower prices of competitors through better buying methods. The chief advantage of the unit store is the personal contact which it is able to maintain with a small group of customers. This makes possible intelligent service applied to the particular needs of individual customers. However, those unit retailers who refuse to see the problems of better cost keeping, better selling, better buying and stockkeeping methods, will probably not be able to meet the competition of other types, and as a result be forced out of business. On the other hand, those unit retailers who recognize these problems, who are willing to learn methods from outside sources and are awake to other natural advantages accruing to them, will undoubtedly find a place in the process of distribution and will grow. The intelligent unit retailer probably cannot be displaced.

2. DEPARTMENT STORES ~

A department store is a retail institution organized on a departmental basis, in which one of the major departments is dry goods.* Department stores have grown and _ prospered because of the shopping convenience offered by a collection of many units under one roof, and because of their large buying power, their financial and credit standing, and the large and able organization of executives which they are able to afford. They are in a position to take every advantage accruing to large-scale operation and operate with a detailed commercial division of labor.

Until recently, department stores have had to think very little of how much it costs to operate their businesses. The discounts which they could demand in purchasing merchandise allowed them to sell at a lower price than their smaller competitors, even if their expenses were high. However, today, the active competition which has grown in the department store field is forcing these stores to consider wherein they can eliminate some of the unnecessary expenses. As it is, the extensive services and elaborate organization common to department stores have increased their expense ratio to a point beyond that of the smaller stores.

Again, because of their size, the department stores have found it very difficult, and in most cases impossible, to give individual service to customers. There is little chance in the department-store field for the competition of personalities. A smaller business is more flexible and less apt to become hardened.

In some districts the department stores will soon meet the point of saturation, for their needs have grown faster than the needs of the public. This fact has resulted already in a stage of specialization, as can be seen by the large development of metropolitan specialty stores throughout the country. It has been predicted by some that the department stores, as such, cannot meet this advantage of the specialty stores, that the specialty