rrom le UBRARY Z^. E A R L READE OBERN LIBRARY THE UNIVERSITY OF CALIEORNIA SANTA BARBARA PRESENTED BY GEORGE OBERN BUSINESS ADMINISTRATION A Library of Business Principles, Practice, and Experience Editor-in-Chiej WALTER D. MOODY Former General Manager, Chicago Association of Commerce Managing Director, Chicago Plan Commission Author, "Men Who Sell Things" Managing Editor WILLIAM BETHKE, M.A. Department of Business Administration LaSalle Extension University LaSalle Extension University BUSINESS ADMINISTRATION Being an organized presentation of the prob- lems of business management prejiared by an unusual group of successful and authoritative Organizers, Educators, and Business Experts Irving R. Allen Sales Counselor, Chicago William Bethke, M.A. Edtualional Director LaSalU Extension University Ernest Ludlow Bogart, Ph.D. Professor of Economics University of Illinois Theodore E. Burton, LL.D. Former United States Senator Harry J. Carpenter National Bank of Commerce New Ycfrk J. W. COBEY Formerly Traffic Manager, National Cash Register Company E. F. Dahm, B.A. LaSalle Extension University Formerly Assistant Director Retail Research Association Hugo Diemer, M.E. LaSalle Extension University Formerly Personnel Superintendent Winchester Repeating Arms Company Coleman duPont Chairman, Equitable Office Building Corporation, New York B. C. Forbes Business and Financial Writer Louis Guenther Editor, "Financial World" Arthur B. Hall, A.B. Hall i' Ellis, Real Estate, Chicago Fred L. Ham, M.B.A. Director, Department of Business Administration, LaSalle Extension University F. C. Henderschott New York F.cison Company Samuel D. Hirschl, S.B., J.D. Harry Arthur Hopf, M.C.S. Organization Counsel Federal Reserve Bank, New York B. Olney Hough Editor, "American Exporter" E. H. Kastor H. W. Kastor b" Sons Advertising Company, Chicago Percy H. Johnston President, Chemical National Bank New York Edwin Herbert Lewis, Ph.D., LL.D. Lewis Institute, Chicago Walter D. Moody Late Managing Director, Chicago Plan Commission Hugo Munsterberg, Ph.D., LL.D. Paul H. Nystrom, Ph.D. Director, Retail Research Association New York C. C. Parsons Secretary-Treasurer, Collateral Mortgage Corporation of New York Joseph M. Regan Editor, "Bankers' Monthly" Alexander H. Revell President, Alexander 11. Revell is" Company, Chicago George E. Roberts Vice President, National City Bank New York Maurice H. Robinson, Ph.D. Professor of Industry, University of Illinois Stanley H. Rose Foreign Sales Manager, Barber Asphalt Company Charles M. Schwab Bethlehem Steel Corporation I. Leo Sharfman Professor of Political Economy Univecsity of Michigan Edward M. Skinner General Manager, Wilson Brothers, Chicago J. F. Strombeck President, Strombeck-Becker Manufacturing Company, Moline, Illinois Theodore N. Vail Late President, American Telephone and Telegraph Company F. E. Weakly General Office Manager, Ilalsey, Stuart (y Company R. S. White Collection Manager, American Steel and Wire Company, Chicago H. Parker Willis, Ph.D. Professor of Banking Columbia University John North Willys President, Willys-Overland Company Richard P. Wilson Batavia Rubber Company RETAIL STORE MANAGEMENT PAUL H. NYSTROM, Ph. D. United States Rubber Company Formerly Assistant Professor of Political Economy, University of Wisconsin, and Associate Professor of Economics, University of Minnesota La Salle Extension University C h i c a g^ o 1922 Copyright, 1917 LaSallp; Extension University CONTENTS I, The Development of Retailing Science Number of Retailers 1 Capital Invested 2 Prevailing Training 2 Importance to Society 3 Requirements for Success 3 Beginnings in Education 4 Future Prospects 5 Purpose of this Book 6 II. Retail Store Location Essentials of Good Location 8 Analysis of Location 8 Buying Power of People Customs of the People 10 Character of the Local Industries 11 Conditions Affecting Location 12 Best Retailers Tend to Get Best Locations, ... 19 III. Buying a Business Fitness for Retailing 21 Choosing tlie Location 22 Analysis of the Business to Be Bought 23 Purchasing Real Estate v. Retail Business 24 I'urchasiiig Fixtures and Inventories 25 Buying Credits 26 Ownership Tests 27 Buying Goodwill 29 Di.scounting Iliwill 35 • • • lU iv Contents IV. Store Organization Fitting Organization to Functions 38 Purposes of Organization 39 Charting Organization 40 Actual Store Organization 44 Practical Considerations in Organization 46 The General Manager 47 The ^Merchandise i\Ianager 48 The Advertising Manager 50 The Store Superintendent 51 The Office Manager 52 Miscellaneous Officials 53 Group and Committee Organizations 54 V. Buying Characteristics of a Good Retail Buyer 56 Education of the Buyer 58 Factors Affecting What to Buy 60 Studies in Local Demands 61 Policy with Reference to Novelties 62 How People Spread Their Purchasing Power. . 64 How to Buy 68 Speculative Buying 68 Buying Lines 70 Buying Job Lots 71 System in Buying 72 VI. The Store Accounting System The Pm-pose 74 Kinds of Accounts to Be Kept 75 Departmentalization and Its Limits 76 Departmental Distribution of Expense 77 Classification of Expenses 78 The Balance Sheet 83 VIL The Inventory Methods of Taking Inventory 86 Contents v Information to Be Gathered 87 How to Figure Cost of INIerchandise 91 Perpetual Inventory 92 The Individual Stock Record 93 Perpetual Inventory by Statistics 97 Merchandise Control by Statistics 100 VIII. Buying System Buyer 's Reports 102 Handling Purchase Orders 105 Purchase Records 106 IX. Sales System The Sales Slip 109 The Various Kinds of Transactions 113 .Inspection 113 The Cashier System 114 Auditing System 114 Credit Sales System 116 X. Efficiency in the Receiving Department How to Open Cases 120 How to Check Merchandise 121 Inspe<;tion and Testing 121 XI. Priclng the Goods The General Rule to Be Followed 127 Factors Affecting Pricing 128 XII. Retail Store Policies Value of Store Policies 11^ Kinds of Policies 130 Pricing Policies 140 Pricing at Different ijevcis 141 Policies as to Store Services 142 Approval Sales 142 Cash or Credit Policies 143 Handling of Complaints 144 vi Contents XIII, Art op Finding Good Employees The Science of Employment 147 The Superintendent of Employees 148 Analysis of Positions to Be Filled 148 Analysis of Qualifications Required 149 Sources of Applicants 153 The Employment System 156 The Application Blank 157 Physical Examination 160 XIV. The Remuneration of Salespeople The Percentage of Sales Paid to Salespeople . . 164 Working Out a Just System 164 Time Rate 167 Commissions 167 Combination of Time Rates and Commission . . 168 Quota and Bonus System 169 How to Use the Quota and Bonus Plan 169 Helping Salespeople to Understand the Quota and Bonus System 171 Miscellaneous Forms of Remuneration 172 Profit-Sharing Plans 173 Purposes of Profit Sharing 175 XV. Education for Salespeople Apprenticeships in the Past 178 Personal Instruction 180 Technical Class Instruction in Retailing 182 Subjects to Be Taught Salespeople 183 Knowledge of the Goods 184 Knowledge of Human Nature and Salesman- ship 185 Steps in the Sale 186 Cooperation between Stores and Public Schools 189 Education the Schools Can Best Give 190 Education the Stores Can Best Handle 191 Store Studies 192 Contents vii Educational Trips 194 The Use of Bulletin Boards 195 The Use of House Organs 196 Blunder Slips 198 Efficiency Records 199 Departmental Conferences 200 Rating Salespeople 201 XVI. Welfare Work Purpose of Welfare Work 204 Suitable Working Conditions 206 Store Lighting 207 Store Ventilation 208 Store Heating 210 Store Cleanliness 212 Drinking Water 212 Dressing Rooms, Toilets, etc 214 Lunch Rooms 215 Rest Rooms 216 Seats for Salespeople 216 Padded Floors 217 Prevention of Injuries 217 Fire Prevention 218 Miscellaneous Welfare Activities 220 Economic Welfare Work 220 Personal Relationship to Employees 222 Health or Hygienic Work 223 The Physical Examination 223 iModical Services 225 Hospital and Nurses 225 Welfare Work and tlm Happiness of Em- ployees 225 By-Iiaws of the Mutual Benefit Association 227 XVTT. De^iocbacy in the Store Employees' Share in Gove rumen t of Store. . . .232 Suggestions from Emp1oye<^s 232 viii Contents The Employee's Right of Appeal 233 Security of Employ mcnt 234 Right to Help Determine Working Conditions. 285 Right to Help Determine Wage 235 The Need for Boards of Ai-hitration or of Reference 235 Final Objects of Store Democracy 236 RETAIL STORE MANAGEMENT CHAPTER I the development of retailing science Number of Retailers According to the census of 1910, there were in the United States 1,195,029 retail dealers. In addition to this great number of people engaged in conducting stores of one kind or another, there were enumerated 921,130 sales- people and 387,183 clerks in stores. But to get an idea of the total number of people employed in the retail business in this country there should be added to the above the number of deliverymon, laborers, stockroom workers, porters, janitors, cleaners, engineers, carpen- ters, display men, advertising men, floor managers, book- keepers, and so on. It is safe to say that there are now more than 3,000,000 people employed in the retail trade. Not an insignificant number! In a comparison of the retail group wilii other industrial groups of workers, it will be found that farmers and farm laborers are the only classes that exceed retailers and retail employees. No single line of manufacture approaches this total. Tlie number of people employed in tlie transportation of goods also falls sliort of this number. Yet these facts seem hardly to have been realized by anyone. 1 2 Retail Store Management Capital Invested There are no figures available wliicli show the capital invested in the retail business — buildings, land, and merchandise. It seems safe to say that the total sales average $10,000 per store for these million dealers, or more than $10,000,000,000 annuallj^ Estimating a turn- over of two and one-half tunes, one would arrive at an average stock value of $4,000,000,000, It is believed that this amount is a conservative estimate of the value of the goods constantly on dealers' shelves. But whatever the amount may be, it must be clear that retailing is of tremendous importance in our business life. It is work that must be done. A great number of people and a great deal of capital are required to do it. Prevailing Training Like every other important occupation, retailing re- quires both skill and knowledge for its success. But unlike many other occupations nothing has as yet been done on a large scale to provide those who enter this work with a suitable training. Agricultural schools train for farming; trade schools for the various mechanical trades; the professional schools for the practice of laXv, medicine, and the ministry; and the engineering schools lay the foundation for the technical mastery of manu- facturing production. The distributor of goods, the retailer as well as the wholesaler, can scarcely turn to any educational institution of any grade for specific scientific and constructive help. Not since the Civil War has there been even an appren- ticeship system in this country, although one did exist before and does now exist in the great European coun- tries. The retailers of this country as a class, in so far Development of Retailing Science 3 as tliey are American born, are truly self-made. Out of the unorganized stniggle for self-existence that has char- acterized the retail business during the last fifty years, a few great men have emerged and have attained the highest public eminences. Among these are Marshall Field, John Wanamaker, and Benjamin Altman, men who have developed retailing institutions without par- allel and who have earned the respect of the commercial world. Importance to Society But the cost of conducting the retail business, both to the individuals who enter it untrained and to society, which must always pay the bill in the long run, is enor- mous. The wreckage of human energy ineffectively and unscientifically applied is appalling. For over half a century it has been repeatedl)^ stated that ''Over 90 per cent of those who enter the retail business fail." It is doubtful whether the failure rate is as high in any other important vocation. This is the price that is being paid by the mass of retailers who enter the business poorly prepared by training for, and in knowledge of, their work. Requirements for Success The management of a modern retail store is a full-sized job for a well-trained man. It demands a knowledge of finance which, in its elements, at least, corresponds with that demanded of a banker. It demands a knowledge of merchandise that epitomizes the entire processes of production. It requires a knowledge of public demand spocifically applicable to a given com- munity, greater than any other person need have. It involves the ability to employ, train, and manage em- ployees together with all that implies, for the problems 4 Retail Store Management of labor are as keen in the retail stores as in any other field. It demands a knowledge of salesmanship and of the means of publicity. It demands knowledge and ability to select and to make the best use of a retail store location, involving such matters as store archi- tecture, window construction, interior arrangement, and many other details. In so far as the manager of a retail business is able to decide and act upon exact knowledge along all these lines, he staiids a favorable chance of succeeding. Beginnings in Education It would be wrong, however, to give the impression that nothing has as yet been done to relieve the need for scientific study of retailing problems. In fact, what appears to be a very widespread and important move- ment in this direction is beginning to take form. Schools are everywhere considering the possible methods of per- forming the educational w^ork in this connection. Several have already made experiments along the lines of con- ducting courses for various classes of retail workers. Trade papers are pushing the propaganda of specific training for retailing, and the contents of these papers have become more and more valuable from an educa- tional standpoint. To anyone who has read the material printed in trade papers for the last twelve or fifteen years, it is surprising how much more constructive the articles presented now are compared with what they were in the past. The trade paper has made for itself a solid place in the program for more efficient retailing. The work carried on by local and national grocers* associations h^s been productive of good results, espe- cially in the way of stimulating thought and creating a solidarity of feeling. Wholesale and jobbers' associa- Development of Retailing Science 5 tions likewise have not been unmindful of the retailer. The service books and literature of many wholesalers and jobbers contain valuable suggestions, as do many of the pamphlets of store equipment companies. A number of good books have appeared during the last few years dealing with various phases of retailing, all of which are contributing to the general demand for more and more educational help. The function of busi- ness literature in the past has been to create a desire for itself and then to supply the demand. Most writers have felt themselves called upon to tell why their articles should be read; in other words, they have had to sell as well as produce their ideas for the good of the readers. It must be admitted that eome writers have been m-ore skillful in the former than in the latter. In the future, it seems likely that less effort will be called for in the selling end, and more on producing the ideas and sug- gestions that are worth while, for the demand has alreadv overtaken the supply at many points. Future Prospects While there has been a beginning in education for retail store work, it can hardly be said to be more than a mere beginning. Tlio main field of work both as to the subject matter that could be taught and as to the number of people who should have the opportunity to study is almost untouched. The progress to come during the next ten years will quite certainly demonstrate this. The time is ripe, and the demand from retail workers of all grades is steadily growing in favor of special retail trade schools. Tlie pressure for trained people has never been so great as at present in retail store work. Despite tlie fact that the rank and file of average store workers get comparatively low wages, the remu- 6 Retail Store Management noratioii for sioecial ability or special knowledge is as great as in any other occupation that could be named, or even greater. It seems that no other occupation offers the opportunity to the practical student who will but learn and apply himself as that found at present in the retail business. Purpose of this Book In response to the demand among retail store workers, managers, and employees who wish to rise in their work, this textbook on store management has been prepared. Here are brought together the essential principles and facts concerning the location, equipment, organization, and management of a store. As a text, this book must deal with retailing in general. It is not an expo- sition either of big or of small store practice. The principles advanced apply equally well in both classes of stores. Illustrations are taken from both classes of institutions, and the reader is urged to draw upon his own experience and observation for others at every stop. Every practical thinker will readily see how to make the principles apply to his own store or business. One of the main objects of this textbook is to help the reader to gain a view of the whole business, in other words, to counteract the narrowing tendencies of routine w^ork within any department. This wider contact with retailing problems will help to fit the reader for prog- ress and advancement. It will assist the store proprie- tor to manage more wisely on the basis of the best retailing experience. It will assist all business men, bankers, manufacturers, salesmen, credit men, etc., to a better understanding and appreciation of the problems of this great class of fellow business men. The presentation which follows is not theoretical. Development of Retailing Science 7 There are theories regarding retailing practice under development at the present time with which every wise retail store worker will want to be familiar. In so far as it has been necessary for purposes of clear explana- tion, parts of these theories have been included, but the purpose here has been to describe retailing as it is and to show by direction and suggestions how the problems of managing a retail store may be met. TEST QUESTIONS 1. About how many people are employed in the retail business in tiie United States? How are these distributed into classes? 2. How much capital is invested in American retail business? 3. What are the opportunities for special training in the retail field? 4. What is the failure rate in retail businesses? How do you account for its high percentage? 5. What are the chief business requirements for successful management of retail stores? 6. What is the general plan of this text? CHAPTER II retail store location Essentials of Good Location The most essential element of a good store location is the opportunity it offers to sell goods where people naturally come to trade, either because of convenience or because of habit. The main street of any town is the natural retail trading district of the town because it is the main artery of travel. The distance from the main street to the side streets is so much resistance that must be overcome in order to secure trade on the side streets. The corner is usually better than the middle of a block for the reason that it marks the convergence of two arteries of travel. It is convenient for two streams of people. A good principle to follow is to take the store to the people and not to expect the people to come out of their usual ways to the store. Analysis of Location passers-by Other things being equal, the location passed by the greatest number of people is the most vahiable for retail store purposes. But other things are not equal. For example, large crowds of working people hurrying to and from factories at times of opening and closing are not likely customers for any class of retail goods, except, 8 Retail Store Location 9 perhaps, cheap lunches, tobacco, and saloon goods. People bent on leisure passing a place are not good customers except for certain classes of goods, such as refreshments that can be consumed on the premises, lunches, fruits, etc. A count of the number of people passing a place, if including many of such classes of people, will not serve in comparing locations. The number of people who come out to shop and to buy is the real factor of importance in the total that pass a location. In the main parts of the town during most hours of the day it may be taken for granted that many of the passers-by are prospective customers for some classes of retail goods. Thus a count of the number of people who pass a given location, if judiciously made, will offer a guide as to the relative quality of the location. Buying Power of People Even when it is known how many passers-by are pro- spective buyers, it is also of importance to determine what their buying power is. This is determined by their incomes. A family with an income of $600 per year must spend practically all of it for the barest necessities of life. The family witli an income of $1,200 per year will buy not only a fuller line of necessities but also some of the merchandise that might be classed as com- forts and luxuries. The higher the family incomes, as a inile, the greater the proportion of the total amount expended for pleasure, for refinement, and for mer- chandise that ministers to the artistic impulses. The amount of money expended for food increases as the family income increasos, but not so fast; thus the rolative amount expended for food diminishes as the income increases. A family with an income of only $000 por 10 Ectoil Store Management year spends nearly $400 for food, or two-thirds of tlie total amount. But the family with an income of $1,200 per year spends less than $600, or less than half for food. The percentage expended for clothing seems to be about the same for families of all sizes of incomes below $2,500 down to $300 per year. From 12 to 15 per cent goes to wearing apparel. A family with an income of $600 per year would expend about $75 per year for clothing and shoes, while the family with an income of $1,200 would spend $150 or more for such goods. It will be seen, therefore, that it makes a good deal of difference to the man who proposes to start a store in a given community whether the people of that com- munity receive high or low incomes. This fact alone will determine the amount of business to be had in the community and the character of the goods that will be demanded. It is obvious that a careful compilation of statistical information on population, occupations, earn- ing power, and consumption might prove exceedingly valuable in determining upon a store location. Customs of the People The customs of the people in the community make some important differences in the character of trade. Eeligious principles cause some people to eat no meat on Fridays, others to eat no meat at all, others to eat no meat of certain kinds, as for example, pork. In some communities, dominated by the older ideals of puritan- ism, but little "finery" is consumed. Communities differ greatly in the kinds and qualities of foods used, even after all these years of high-pressure national advertising of food manufacturers. In some communities fashionable goods are much more in demand Retail Store Location 11 than in others, and the rate of change of style varies greatly even between communities only a few miles apart. All such factors have to be considered by the one who proposes to establish a store at a certain location. Character of the Local Industries It is obvious that the character of the industries that keep the people in the community employed is another factor to be considered. If the industries are of a per- manent kind with the prospect of growth in the future, it may be advisable to select a location and open a store even if immediate trade prospects are not particularly strong. But if the industries are of a temporary nature, then that fact needs to be considered in locating the business. One might ask how long the industries may continue, what is likely to happen when they shut down, what industries, if any, are likely to take their place, how long it will take to make the transition, and so forth. The location that may be ever so good today and this year may be worthless a year hence after the productive enter- prises upon which the community now exists are shut down. Some industries are intermittent, run full blast at some times, on part time or part force at others, and not at all at still other times. The community where such industries exist is a hard one for the retail distributor under almost any circumstances. Many unthinking peo- ple rush into the retail business during the more rushing times, compete keenly for trade, and find themselves stranded when the lean seasons approach. The rush sea- sons are likely to find the dealer with depleted stocks, while the dull seasons are quite sure to find the dealer with large quantities of unsold goods. 12 Retail Store Management Conditions Affecting Location location of retail street The retailer who wishes to study his business will not merely inquire how many and what classes of people pass a certain location. He will want to know why they pass it. This introduces a very interesting bit of practical psychology. Habit rules very largely in making some streets and certain locations most popular. But definite reasons can usually be found for the popularity if one goes back to the time when the habit was only in the process of forming. A great variety of conditions tend to help make a location popular, and only a few of them can be enumerated at this place. These will suggest the line of thought to the reader so that he can study his own location or the location under consideration. The main retail street in almost every town is the street that most shoppers find it easiest to get to, or at least, at one time found it easiest to trade on. This principle prevails everywhere. Even tlie little country general merchandise store was built at the crossroads where peo- ple could come from four or more directions. In the village and city the retail trade street is the one on which the most people in the community can trade with the least discomfort or inconvenience. It may be the level street, the paved street, the street that is dry, or the street that is most easily traveled. It is the street that is traversed by street cars in all but the very largest and most crowded cities. It is usually down town rather than up town if the city is built on a slope. It is not necessarily the lowest point in the city, although in the earliest days of nearly every city the lowest point that was dry was also the trading point. In nearly all our American inland towns built on river Retail Store Location 13 banks, the earliest business street was the street facing the river. But as the size of the towns increased, and as the first buildings became less and less adapted to carrying on the trade, the main business section moved up block after block from the river. This movement up and away from the river may be noted in nearly every old river town. SIDE OF STREET One side of the street is usually more popular than the other. There may be several causes for this. If the street is not level, the upper side is usually better traveled than the lower. In all parts of this country, except, perhaps, the most northern tier of states, the shady sides of the street during the afternoon are most popular. The largest part of the trade is done during the afternoon, and the shoppers coming and going to the stores seek the shady sides of the street; conse- quently the stores located on the shady sides draw trade with less effort on their part than the stores on the sunny side. In the most northern part of the country, during the winter months of the year at least, the sunshine is so much welcomed by walkers that they take the sunny sides. In winter and during wet weather the sunny sides usually dry off more quickly than the shady sides, and this helps to make the sunny sides more desirable. SUNLIGHT AND WINDS The sunlight is a very important factor to be con- sidored in locating a retail store. Not only do the people seek the protection of the shady side from its direct rays or seek its warmth ami brightness according to the lati- tude, but it afYects the displays that the store makes in its windows. It is much more difficult to make a satis- 14 Retail Store Management factory display of most lines of merchandise in sunny windows than in windows in which the light is controlled or shaded. A bright glare from the outside makes a mirror of the window glass if the merchandise and back- ground are dark colored, thus preventing the goods from being seen at all. Very few goods can be displayed for any length of time in the direct light of the sun without damage to color or finish. Shades or awnings are re- quired on the sunny side to protect the merchandise in the ^\indows, but this protection interferes with the ready sight of the goods within. Thus on the shady side of the street the most attractive displays can be made, and these help to draw the crowd to this side of the street. Awnings are a nuisance at the best, interfering not only with the efficiency of the show windows but also with passers-by with parasols and umbrellas. The prevailing mnds affect a location. People natu- rally avoid corners or sides of streets that are wind swept much of the time, particularly if the wind is cold and raw, or if dust-laden. The side sheltered from the wind is obviously the popular side. ENVIRONMENT A street with a sidewalk on one side in good condition, clean, level, pleasant to walk upon, and with an ugly sidewalk on the other side, uneven, unclean, on which pools of water stand after showers, etc., will find most of its traffic on the side having the best walk regardless of other conditions. Sunlight, wind, and the slope of the land operate most fully only when both sides of the street are otherwise quite alike. People naturally take the side of the street that is most pleasant. If one side has a number of old, empty, tumble-dowTi structures, Imiklings, billboards, or other Retail Store Location 15 features that are not attractive in themselves, people will take the other side of the street if that appears more attractive. Most people, especially women, avoid smoke, noise, bad odors, etc., and if one side of the street is more pleasant in any of these particulars than the other, it will receive the preference of the passing crowds. Beautiful, clean, new architecture attracts people, and a location near structures of this kind is generally considered good. People go where the crowds go. The stores that have already located in good places draw ever larger and larger crowds. Consequently places near old, successful stores are to be preferred. The syndicate five and ten cent stores try to get a location when opening up in a new town close to the best department store whenever possible. A large wholesale house that supplies goods for variety stores advises its customers through its service bureau to locate next door if possible to a well- established five and ten cent store or near a good depart- ment store. Some stores go well together in groups Their compe- tition is not so strong as their assistance to each other. For example, shoe stores, specialty ready-to-wear goods, jewelry, and diy goods complement each other in getting the trade of women. Hardware, house furnishings, and furniture stores go well together. Confectioneries, flo- rists, and ice cream parlors go well together. A location near a successful moving picture theatre is splendid for stores dealing in women's and children's goods and is not bad for stores or shops dealing in men's goods. The moving picture show brings out the people, and when they come out to see the movies, they usually have time to stop and see the dispbiys in nenrby wiinlows and to shop in the stores. Saloons, blacksmith shops, factories, and boarding l(i Retail /Store Management houses when near to the stores generally hurt the trade in women's goods. Hospitals and schools as well as jails also are considered bad, and large empty buildings are bad competitors for any kind of store. INFLUENCE OF HABIT People get into the habit of going in certain directions, taking certain streets and certain sides of the streets because of repeating an act that at first seems reasonable to them. These habits help certain locations to be sure, but they also hurt all other locations out of the beaten path. The man who would locate his store out of the district where people would habitually come to trade not only must contend with the extra exertion demanded of customers to come to his out-of-the-way place, but also must contend with habit in human nature. Of the two, among most people, habit is perhaps the stronger. RETAIL RENTALS A location for a retail store is valuable in proportion as it offers an opportunity to sell goods and to make a profit from the sales. Since profits may be made either by adding large margins to the costs or by turning the stock often on narrower margins, it is the possibility of making large profit sales or many sales that gives a store place a high value. High rent does not necessarily add to the cost of sales, provided the volume of sales increases proportionately. In a small village whtere the population is small and the trade possibilities meager, -even the best location may not be worth much more for store purposes than for residence or other uses. From this lower limit of, say, $20 to $30 per front foot, the values of the best retail locations increase more than a thousand times Retail Store Lpcation 17 this amount in the largest cities. The larger the city and the larger the possibilities of making profits in either of the ways indicated above, the higher the values of the location. In small towns the improvements, that is the building, are usually worth as much or more than the lot. In the largest cities, on the best sites, the lots are worth more than the buildings. It would not be profitable to expend as much money upon the building as must be expended for the land. On the average, however, the improve- ments on a site suited for retailing are about equal to the value of the lot. Not only is this an average, but it also makes a fairly safe rule of investment for those wanting to build a retail store on a lot suited for the purpose. Since it is the possibility of making sales and profits that gives value to a retail location, the value and the income in the form of rent that the location commands bear a close relationship to the earnings of the business conducted thereon. While sales totals do not give any accurate idea of the amount of net profits, still the sales total is generally used as the measure of the rent. The amount of the rent that must be paid for location and building varies for different places and for different busi- nesses ]>ut ranges from y^ per cent up to 15 per cent of the sales in successful businesses. The average rental in small towns or villages seems to range from 1 per cent to 2 per cent of the sales. In cities of 25,000 up to 100,000 the averago goes up at least 1 per cent; while in cities above 100,000 the average rental for good locations runs from 3 per cent to 5 per cent or even 6 per cent of sales. Specialty stores located in exceptionally good locations, and thus enabled to make large profits per sale, must in most cases pay rentals far above the averages just given. One of the elements of success in such high-priced loca- 18 Retail Store Management Passers-by Factors in Retail Store Location Buying power of people Customs of people Character of local industries Street location Side of street Store environment v Rentals Back and forth to work — specialized stores Shopping hours — general and department stores Amusement crowds — specialized stores Occupations — skilled or unskilled labor Family incomes Percentages expended for various classes of goods Will the community support such a store? Religious customs Racial characteristics Cultural distinctions Conservatism of people Permanent Temporary Transitional Intermittent School and tourist towns Retail street Accessibility Street car streets Level street Paved street Down-town or up-town Direction of growth of city { Upper side or lower side Shady or sunny side — winter and summer Prevailing winds i Sidewalks Types of buildings Empty buildings Kinds of business establishments Existing stores Cotnpiementary groups of stores Hab'its f Amount < Terms \Best merchants Fic. 1. — Factors in Retail Store Location Retail Store Location 19 tions consists in the ability to drive a good real estate or rental bargain for the site. Best Retailers Tend To Get Best Locations A retail store location is simply an opportunity to go to work. A good location is one that can be worked more intensively than a poor one. The better the location the more intensive the means of merchandising that should be employed, in fact, must be employed. Only the shrewdest and brainiest retail store managers can suc- cessfully conduct stores in the best locations. In the long run the best locations tend to get into the hands of, and be managed by, the strongest type oi retail man- agers. The competition among managers for such locations is nearly always keen. The ratio of rentals to sales is therefore higher than in poorer locations, and only the most skillful can pay the rents and other expenses incident to such locations and still make a net profit. A summary of the factors to be considered in retail store location is given in Figure 1. The tests called for are only suggestive, but they may well be used by a merchant or anyone contemplating the buying of a store for determining the efficiency of the location. A given store site will seldom combine the highest advantages in all the points outlined; consequently a sort of average or composite value must be assigned to the place. The sum of these values can never, however, give a correct result unless the parts are first accurately weighed and deter- mined. The number of failures which result from poor location and too high rents is large. Such a location may permit satisfactory business for a time, but it offers a constant invitation for new competition at the better location, and 20 Retail Store Management when such competition has once begun under able man- agement, it places the store at the poor location at an unequal disadvantage, and, if the difference is great enough, failure is the only outcome. TEST QUESTIONS 1. Compared with the other factors in successful retail store management, what is the relative importance of location ? 2. What facts should be ascertained in regard to passers-by? 3. How can the buying power of the people in a community be analyzed as a guide to store location and management? 4. AYhat are some of the customs of people which must be reck- oned with in deciding upon the store and its location ? 5. What analysis of the local industries should be made pre- vious to locating in a commimity ? 6. What factors determine the location and shifting of retail streets ? 7. What factors often give one side of a street a preference over another ? 8. What general principles should be observed in retail store location with regard to rentals? CHAPTER in buying a business Fitness for Retailing It has been a current opinion that ' ' anybody can keep store." That experience, education, and natural fitness are necessary requirements is coming to be seen slowly but surely. Because many, if not most, people still believe in the old maxim, the failure rate among retailers is still far too high. The time may come, even in this country, when the public, in the interest of conservation and in the interest of the general welfare, will place restrictions upon entering into the retail business as is now done for the professions, banking, insurance, trans- portation, and some other callings. Space cannot be taken here to go into a discussion of tliis idea, but it must be said that the time has come for calling attention to the social waste of having a great number of inexperienced, unfit persons enter retailing each year, only to exhaust their own small capital and upset the conditions of trade for their fellow merchants who may have much greater fitness for their work but who must boar the cost of competition with concerns destined to fail. It is the loss to the community of wasted effort and capital as well as the loss to tlie indi- viduals who try and fail that needs to be understood by every thinking citizen as well as by retailors themselves. Let us assume that an individual seeking to start a 21 22 Retail Store Management retail store has the necessary qualifications of experience, education, willingness to work as only managers have to work in the early days of getting their businesses on their feet, and the personal qualities that fit a man for the management of a retail store. Let us also assume that the individual has the necessary amount of capital, an amount that cannot be defined because it must neces- sarily differ with the kind of business, the size of the community, the class of trade sought, the location selected, and, most of all, with the man, himself. What, then, are some of the considerations that he should bear in mind in acquiring a store? Choosing the Location The first thing needed is an analysis of the location as indicated in the last chapter. It is necessary to know whether the store to be bought is in a location frequented by many or most of the people in the community, what brings the people there, and what are the possibilities of gaining their patronage. One must ask the question whether the community will support a store such as that under consideration. In small communities this question may call for an enumeration of the possible customers. In larger communities it may refer to the amount and kind of competition. Many a failure of a retail business can be traced to the fact that there was no need, either active or potential, for the kind of store started; that there was not sufficient demand for the class of goods handled ; or that the demand was adequately supplied in a satisfactory way by other stores already in existence. Presence of competition should, of course, not be con- sidered in itself alone as a sufficient reason for not starting a store. The fundamental questions to be answered in every case are these: Is this store now Buying a Business 23 under consideration needed by tlie public? Will it be wanted by the people? If the answers to these questions are given in the affirmative, then the amount of competi- tion need not be considered. If the new store can supply wants not supplied by others, if the new store can supply wants more adequately, more satisfactorily, and more economically than the old stores, then there is excellent reason for its being started, and the chances for its success are good. When buying a store in any location attention needs to be given to the development of the city, its directions of growth, and its probable future, so far as possible. It may be difficult to judge the probable future of a city, but one can at least note the progress during the imme- diate past and any possible influences affecting this progress. Analysis of the Business To Be Bought Coming more particularly to the concern itself, the investigation needs to include not only the business as it is but also its past history. A location with a bad past, such as failure after failure, is generally considered a bad purchase at any price. The public seems to be shy of the place with a history of failures. To be sure, a failure may be due to any one of three classes of causes, the wrong management, untoward circumstances nuiking the time unpropitious for starting a business, or unsuit- ability of location. But if there have been repeated failures, one may presume a strong likelihood that the location is not all that it might be for the kind of store that was attempted. There are even objections to going into business in a location whore there has been but one failure if the failure be recent. There is an old maxim that runs somewhat as follows: **It is easier to start a 24 Retail Store Management new business than it is to raise a dead one." Certainly if the failure has been one of long development, there will be considerable work to do before the habits of customers will be changed from staying away to coming to the store. It is easier to cause a new habit where none have existed before than to seek to build by first breaking down old habits. Much valuable information can usually be gained by making specific inquiry as to why the present owner wants to sell out, what the conditions were that he found difficult to contend with, and so on. For answers to these questions the buyer of the business should consult, not only the person or persons selling, but also other people in the community, such as competitors, bankers, and cus- tomers. Such inquiries should also seek to determine what the character of the merchant was as a merchant. The replies will generally reveal the elements of success and of failure in the past business. It is just these things that the new manager needs to know in order to profit by past experience. The sale of a retail business usually includes not only the real estate, buildings, and so on, or the leasehold for the unexpired term of years, but also the fixtures, a cer- tain amount of merchandise in stock, and in some cases goodwill is figured as an item in the sale. Purchasing Real Estate v. Retail Business In an outright purchase of the real estate the ordinary precautions of buying land need to be observed, as to clear titles, bona fide transfer, accurate descriptions, etc. In the purchase of a lease for its unexpired term, care needs to be exercised to make sure that the terms of the lease are fully understood, the conditions, if any, the provisions for revaluation, and the chances of obtaining Buying a Business 25 a pew lease at the expiration of the one under considera- tion. In handling either real estate or leases the best plan is to secure the help of a competent attorney to make sure that all documents are properly made out and recorded. In passing it should be added that buying and owning real estate, even if it be only of store property, is a busi- ness entirely apart from retailing and should be kept separate from the store business in the owTier's accounts. The retail business should be required to jjay a rental of fair market rate for the use of the store building and location ; and the upkeep of the building, the taxes, insur- ance, and other items of expense on the building should be met from the building's income. By keeping the accounts separate the owner may be able to determine after a period of time which part of his double venture is the more profitable; whereas if both were lumped together, he would have to guess at the actual state of affairs. Purchasing Fixtures and Inventories The purchaser of a store and its stock should always insist on having a complete inventory of both fixtures and merchandise. In valuing these, the kind, the amount, and the condition should be carefully noted. Valuations should bo made upon the basis of present worth rather than original costs. The value of fixtures will depend upon their fitness for the new business. On inventorying the merchandise stock of an old store, one commonly finds considerable stock that is of little value, goods fliaf are out of fashion, incomplete lines that cannot bo completed, because their manufacture has ceased, odd and rarely wanted sizes, tarnished, soiled, and shopworn goods, etc. Some of these goods may, per- 26 Retail Store Management haps, not be sold at any price. Some may be sold only at much less than cost. Other items may have but small value in themselves but may be necessary for the store to have in stock to complete certain lines and, conse- quently, be worth nearly full value as new. Many conditions affect the values of goods in stock in stores in addition to the usual depreciation with time, and all these need to be understood in making a valuation for purposes of purchase. A novice's ideas of value are not likely to be worth much in this work. The experienced judgment of an expert merchandiser is necessary, and not only those who have had but little experience in merchandis- ing, but also those who have made life studies of retailing, should employ experts to assist in making valuations, if for no other purpose than to check the judgment of the purchaser. This is a case where two or more heads are better than one. Buying Credits If the concern to be bought out has been doing a credit business, the purchase may involve taking over the accounts due or receivable. Much care needs to be exer- cised in estimating the value of this item. At no place is the method of lumping all together without classifica- tion more fatal than in valuing the outstanding sums due the concern. In a normal, going business, some of the accounts will be found good in every way, the debtors standing ready to pay their debts at the usual times, or whenever they are due. Others are equally good but need collection service in the form of statements and, in some cases, dunning letters and follow-up. Others will need to be seen personally by a collector before the amounts can be collected. Still others will not pay until forced to do so by legal action. Still others will never pay, and Buying a Business 27 some cannot pay, no matter what pressure is brought to bear upon them. Long standing accounts are, as a rule, more troublesome to collect than recently incurred debts. The purchaser of accounts receivable should examine, and upon the best information available, classify them into at least two classes, ''good" and "doubtful." Some- times a third classification into "bad" accounts is necessary. The "good accounts" may be accepted at practically their face value, less interest for the time until they fall due, possible expenses, and a certain amount thought to represent the probable loss by unfore- seen accidents among the debtors, and to cover mistaken judgment as to whether the debtors are "good" or not. No rule can be made for discounting the value of "doubt- ful accounts." "Bad" accounts have no purchase value. The judgment of someone knowing the local conditions intimately should be sought. Credit men of wholesale houses doing much business in the vicinity are, perhaps, better fitted to make safe estimates than anyone else. Ownership Tests "Wlion stock has been taken and its value placed, the next step in the investigation is to determine its owner- ship, whether fully paid for or not, if bought on the installment plan, or if owned by other parties and merely consigned to the dealer who is selling out. Care should be taken to determine whether there are any outstanding indebtednesses secured by chattel mortgages on the fix- tures or stock. Finally, the purchase should be closed by getting a bill of sale in writing, drawn up by an attorney. A formal bill of sale is given in Figure 2. Any other wording wliich clearly embodies the terras of sale will answer the same purpose. The schedule may be raade out oTi scparato sheets and attaclied to the bill of sale. BILL OF SALE KNOW ALL MEN BY THESE PRESENTS, that William Stonp, of the city of Chicago, in the county of Cook and state of Illinois, party of the first part, for anil in consideration of the sum of One Tliousand Dollars, lawful money of tlie United States of America, to him in hand paid, at or before the ensealing and delivery of these Presents (or specify any other manner of payment), by Richard Lake, party of the second part, the receipt whereof is hereby acknowledged, has granted, bargained, sold, and delivered, and, by these Presents, does grant, bargain, sell, and deliver, unto the said party of the sec- ond part, all the following GOODS, CHATTELS, and PROPERTY, to wit: All and singularly the goods and stocks of goods and mer- chandise now in the store of the party of the first part, at No Street, in the city of , and all the furniture and movable fixtures in said store belonging to the party of the first part, a schedule of which is annexed hereto. TO HAVE AND TO HOLD the said goods, chattels, and property unto the said party of the second part, his heirs, executors, admin- istrators, and assigns, to and for his own proper use and behoof, forever. And the said party of the first part does vouch himself to be the true and lawful owner of the said goods, chattels, and property, and to have in himself full power, good right, and lawful authority, to dispose of the said goods, chattels, and property, in manner, as aforesaid: And he does, for himself, his heirs, executors, and ad- ministrators, covenant and agree to and with the said party of the second part, to Warrant and Defend the said goods, chattels, and property to the said party of the second part, his heirs, executors, administrators, and assigns against the lawful claims and demands of all and every person and persons whomsoever. IN WITNESS WHEREOF, I have hereunto set my hand and seal the fifteenth day of October in the year one thousand nine hundred and sixteen. Signed, Sealed, and Delivered in the Presence of (Signed) William Stone [seal] (Signed) Sarah Camp Schedule of the goods and stocks of goods and merchandise and the furniture and movable fixtures mentioned in and conveyed by the annexed Bill of Sale: 1 , 2 , etc. Annexed and signed this day of , 19. .. , Witness Fio. 2.— Bill of Sale with Form for Schedule Buying a Business 29 Buying Goodwill the nature of goodwill Goodwill is frequently offered as a valuable consid- eration in the sale of a retail business. In so far as it really exists it is one of the best assets of a store. The preliminary investigation of a business needs to include a thorough study to determine what goodwill the business possesses. Goodwill, though intangible, is a very real factor in everv successful business, and while this fact is generally understood, it does not seem that many under- stand just how goodwill arises, of what it consists, and how to evaluate it. ** Goodwill" may be defined as a tendency of a number of people of a community to come to the particular store under consideration rather than go elsewhere. It origi- nates with the satisfaction of the customer with the store's service, merchandise, or the values it offers. Good treatment, courtesy, and attention accorded to cus- tomers by salespeople are powerful builders of goodwill. Public spiritedness of the management contributes largoly to the tendency. Continued and repeated satis- faction with the store leads finally to a habit of thought, a belief, or a faith in the store. It is this faith or confi- dence in the store built on the recollections of satisfactory past experiences with it that constitutes the cause of the tendency. The satisfactory service contributing to the building-up of goodwill in the customers' minds may be the result of carefully planned systematic organization and team work within the store; but, as a rule, customers select some particular, tangible factor about the store to which their minds attach their goodwill. In some cases the goodwill inheres in the location ; in others it is attached to the 30 Retail Store Management manager or proprietor personally, to the firm name, to the salespeople, or to some particular salesperson, to the brands of goods sold, to any particular type of display or method of selling, and so on. Goodwill that inheres in the location remains after the business changes hands. Goodwill when associated in the minds of the customers with the proprietor or manager goes with the person. If he leaves the business, it is lost to the business. If a manager of a store who has attracted considerable goodwill to himself should open up another store within trading distance of the old loca- tion relinquished or sold, his old customers would carry their trade to him. For this reason, in buying out a store, provisions are usually made in the contract of purchase that the seller shall not again engage in a similar business within a certain number of miles, for a certain period of years. This gives the buyer a chance to gain the goodwill of the same group of customers. Goodwill attached to the firm name continues with the firm as long as the name is kept; hence the name of a concern or store is frequently kept even after the prop- erty has changed hands. Who can say how great the loss would have been in trade and prestige if the store of Marshall Field had been changed in name after the death of its founder? In the same manner, if but in lesser degree, other stores lose trade drawing power when their names are changed, because the name is to many people the tangible thing to which they attach their goodwill. Goodwill associated in the minds of the customers with some salesperson or with the salespeople of a store is dependent upon the salespeople. If they go, the good- will goes. Many salespeople are able to build up a large clientele of satisfied customers who look habitually to them for their goods. Such salespeople are worth more Buying a Business 31 and can command more salary than salespople who do not have the knack of gaining goodwill. That salespeople can attract a large part of the good- will of the customers of the store to themselves is recog- nized by some stores as an evil, and the attempt is made to get the salespople to try to attract the goodwill of the customers to the firm or the location rather than to themselves. Salespeople are taught to speak as for the firm instead of for themselves in dealing with their cus- tomers; to say, "We can recommend this," instead of ''I can recommend this," and so on. The danger in con- nection with goodwill associated with the salespeople is that the salespeople may leave and become employed by competitors or that they may go into business for them- selves, and the courts have held that they have the right to the custom of their former customers. On the other hand, there is a distinct loss in personal salesmanship when the salesman effaces himself in favor of his firm before his customers. Many customers naturally prefer to do their trading with an individual rather than with a firm, and this is evidenced by the fact that small stores can prosper under the shadow of the largest institutions. In the small institution, the personal touch is most impor- tant ; while in the large place it is the name of the concern, the location, and other factors that absorb most of the goodwill. Goodwill, in a few cases, extends far beyond the normal trading territory of a store. The name, John Wana- maker, suggests confidence far beyond the limits reached by the store's delivery system. In ;act, it is known all over the continent, but the value of the goodwill l)eyond the trading zone is largely potential. The people who feel confidence In tliis name would trade at the Joim Wana- makcr store it' it were nearer. Hence this goodwill 32 Retail Store Management becomes of cash productive value only when these people move into the trade radius of the store, when they visit Philadelphia or New York, or when they make use of the mail-order department. Another characteristic of goodwill is that after a period of time and after it has assumed certain proportions, it grows in amount and intensity almost of its own accord. Satisfied customers begin to tell about the store to their friends, to take sides in favor of it in arguments, and to bring friends and acquaintances to see the store that they like. Naturally this develops goodwill in others and still others. It therefore supplements advertising in bringing in new trade to the store, and it is noteworthy that a large well-known store in a middle western city that possesses much goodwill has been able to keep its expense for adver- tising down to a lower percentage of its sales than any of its competitors having less of this prestige among its customers. In other stores with large amounts of goodwill, the advertising appropriation is made more effective by the confidence that the customers place in it as a result of their goodwill. Larger amounts may be expended for advertising before the point is reached wiiere additional expenditures do not bring in proportionally greater amounts of business; that is to say, before the point of diminishing returns is reached. It will be seen that the goodwill of a retail business is measured by the number of people who feel that the given store is a more desirable place to trade for anyone or more of several reasons than any other place. If there is a single person wl -^ is well satisfied with the store and who expresses his tavor by doing his trading there because he wants to come, the store may be said to possess 80 much goodwill. The goodwill of only one person would Buying a Business 33 in most cases be of no marketable value however. But the goodwill of a hundred people possessing considerable purchasing power would be a highly valuable item for any store. Some of the largest stores possess the good- will of literally thousands of customers, and this is per- haps the greatest asset they have. Not all customers who trade with a store are goodwill customers. Some may come because they cannot go else- where, others because there may be too much incon- venience to procure their merchandise elsewhere. The trade of a customer who must come to the store may be worth while having but does not add anything to the goodwill of the store. Just as soon as the opportunity presents itself to trade elsewhere such customers transfer their entire trade. Illustrations of this fact might be drawn from almost every community where there was at first only one store followed by the addition of another and the consequent loss of many customers at the old store. Instances have been known where people who have been forced to trade at a store have risen in a body and rebelled against buying from it. Many company stores have had difficulties of this kind to contend with. Good- will can be the result only of free will. In so far as cus- tomers would still continue to trade at the store after competition sets in, goodwill can be said to exist. One must carefully discriminate between the value of a loca- tion as a convenient point of trade and the goodwill of a location. Customers who come to the store only when some spe- cial sale or bargains are offered but who do not give their trade regularly to the store can hardly be said to con- tributo to the store's goodwill. On the other hand, cus- tomers who cannot regularly come to the store for all their supplies of tlie kind offered by the store, })ut who 34 Retail Store Management come as often as they can and whenever they can, are, definitely, goodwill customers. Nearly every large, suc- cessful store and many small stores have considerable goodwill of this kind. Many, if not most, of the retail concerns offered for sale, with a few exceptions, have but little real goodwill among their assets. The business that has been under- going a long period of decay has no goodwill of value. The mismanaged business is likely to be without goodwill. The dishonest business is likewise devoid of it. Goodwill is like a delicate plant. It is hard to get it started and requires great care to make it grow. It is easy to harm it or destroy it altogether. VALUATION OF GOODWILL The actual valuation of goodwill is an exceedingly com- plex problem as the foregoing discussion indicates. In the last analysis the amount to be allowed is determined by the bargaining power of buyer and seller. The only practical mathematical formula for the valuation of good- will is that which capitalizes the net income of the busi- ness above the normal rate of interest on the capital invested. Let us assume that the average net capital invested in a store is $10,000 and that the normal return should be 8 per cent. Let us furthermore assume that the net profits for the year on this business, after allowing for all expenses, including wages, are $1,000. The normal rate of return at 8 per cent on $10,000 would be $800. $1,000 minus $800 leaves $200, which may be considered the income return of the goodwill. This capitalized at 8 per cent makes the goodwill worth $2,500. The foregoing calculation determines the valuation of the goodwill of the store on the basis of current earnings. If we introduce the element of expected increase in profits, Buying a Business 35 tlie goodwill may be worth even more. A good margin should always be allowed, however, when goodwill is val- uated on such a mathematical basis. In the last analysis, good judgment based on a thorough understanding of all the merchandising factors involved will prove a safer guide. Discounting Illwill There exists also the negative of good^^ill. We may, perhaps, term it "illwill." If customers have been mis- led by the store's advertising, if the merchandise has been unsatisfactory, if there has been short weight or measure, if the service has been unsatisfactory, if the salespeople have been rude, inattentive, or overanxious to sell, then customers are likely to entertain nothing but illwill for the store. Under such circumstances customers will delib- erately shun a store and seek, so far as possible, to give their trade to other stores. Illwill is just as real as good- will, and its effect is to subtract from the value of the business just as goodwill adds to it. The buyer of a store must beware that he is not acquiring illwill along with the location, firm name, and other effects of the concern. From what has been said it is evident that goodwill embraces the established popularity of a business house which tends to maintain its custom. It represents the value of a business over and above the stock in trade. This plus value has been secured by the expenditure of money for advertising, high-class clerks and good service ; by a somewhat continual policy of square dealing, honesty and satisfaction ; or by special advantages accruing from such a factor as location. A summary of the factors to bo considorod in buWng a business is shown in the chart, Figure 3. 36 Retail Store Management Fitness, for retailing Choosing locations Buying real estate Buying a < Business Buying a lease Buying fixtures Buying stock Buying credits Buying goodwill ^^ Ownership tests Experience Education Willingness to work Personal qualities t Necessary capital See Chapter II, Fig. 1 I Clear title Bona fide transfer Accurate description Suitableness Proper valuation Cost of upkeep Separate accounts with real estate Terms fully understood Conditions Revaluation Provisions for renewal Complete inventory Fitness for new business Value Present worth v. original cost Kind Amount Fashions Incomplete lines Odd sizes Tarnished, soiled, and shopworn g^ods Experienced judgment > Lumping together v. classifying Valuation of each group Discounts and interest Expert local advice Location Personal with proprietor Personal with sales persons Good service Firm name Advertised value Valuation of goodwill Illwill Fully paid Installment purchases Consignments Chattel mortgages Bill of sale Pig. 3. — Buying a Business Buying a Bn,siness 37 TEST QUESTIONS 1. TVhat three primary qualifications should one possess for the retail business? 2. What factors will justify the establishment of a new store in a community ? 3. "What preliminary^ investigations should one make before buying an existing store ? 4. How should the real estate be treated in connection with the management of a store ? 5. What precautions should be observed in buying invento- ried stock? 6. Into what groups should accounts receivable be classified? 7. How may legal ownership of the stock be determined ? 8. What are the essential provisions of a bill of sale ? 9. What facts enter into goodwill ? How is it valued ? 10. In what ways may allowances be made for illwill ? CHAPTER IV stori: organization Fitting Okganization to Functions The functions of a retail store are to buy, to store, to display, and to sell merchandise to ultimate consumers in such lots or amounts as desired and at such times as desired. In consequence of these functions the work of the retail store naturally divides itself into the following lines: 1. Buying, receiving, and stockroom work. 2. Advertising and display. 3. Salesmanship. 4. Care of the building and equipment. 5. Employment, supervision, education, and welfare of employees. 6. Record keeping. These large divisions are in turn subdivided according to the character of the service per- formed by the store. Within these main lines of work there occur a multi- tude of sublines. For example, under care of the build- ing, there is generally found such work as heating the building, ventilating, providing air of the right humidity, repair work, construction of fixtures, running the ele- vators, caring for the lighting, cleaning, painting, var- nishing, decorating, providing and caring for employees' lockers, check rooms, toilets, drinking water, lunch room, etc., and providing protection from fire. If the store 38 store Organization 39 delivers its goods to the homes of the purchasers, a delivery department mil, of course, be needed. If the store sells goods on credit, a credits and collections department must be added. If business is obtained through the mails, a mail-order department may be installed, and so on. In addition to its regular merchandising work, some of the larger stores sometimes add other service depart- ments for the convenience of shoppers, such as parcel checking stations, postal, express, and telephone stations, reading and writing rooms, offices where electric light and gas bills may be paid, theatre tickets bought, taxi cabs ordered, and so on. Banking facilities are in some cases provided for customers, but in view of recent disasters in connection wdth certain large stores having banking departments, these departments are not so popular as they were two or three years ago. Purposes of Organization The objects of organization are obvious. Organization is effected in order to get things done, to place definite responsibility, to secure proper performance, to make it possible to place employees at the kinds of work that each is best fitted for, to train employees in specific kinds of work so that expertnoss may be developed in a minimum of time and at a minimum of expense. It is impossible for anyone to know all that should be known about all departments of work in even a small store. By organiza- tion and departmentalization the indivichials are given certain fields in which each may reasonably be expected to become both skilh'd and well versed. Some organization is absolutely necessary. All stores are organized, although most stores could probably be better organized. While many stores need more organ- 40 Retail Store Management ization, there is also the danger of the other extreme, over-organization. Whenever the organization is of such character as to discourage initiative, the doing of the best work, or of the right spirit, it defeats its own pur- poses. This can come readily through a too fine division of labor, a too minute definition of responsibilities that do not exactly fit each case as it comes up, and thus leaves the worker with an imperfect guide without the oppor- tunitv to make a new definition to suit the needs of the case. Organization of retail store work and of employees must always encourage initiative and independence of thought or it will fail. Customers cannot be handled in all cases by rule. General policies can be outlined, but the application must be made in a thoughtful way by each individual worker whether he be salesman, floor manager, credit manager, or delivery man. Organization permits of definition of work to a certain extent, of the fixing of standards of performance, the results that may reasonably be expected from each worker, and of the presenting of definite lines of respon- sibility so that credit can be given for work properly done and blame placed where it should be. It makes it possible to train employees for their work in the most direct way. Organization outlines the steps to be taken in order to secure promotion; hence, tends to encourage employees to do their best. Charting Organization The reader can gain a better idea of the character of retail store organization by a study of the accompanying chart, Figure 4, than in any other way. Note the gen- eral divisions of work and the subdivisions under each general div-ision. The chart does not nearly exhaust the store Organization 41 wo Ok Ho Ou c y- z -iui **5 ui*J . z2 S o z O _ 1 t3 1 ■»— 9- w o z tn - -''. "^ kJ 3 > o 4 ^' i f 'J 'f h ? ii 1! 3! l/. o O oo rn — ^ jt f zl '■ jf • Cu i ^ 44 Retail Store Management Next, let us see a retail organization chart, Figure 5, worked out for positions along the lines shown in the preceding chart. Actual Store Organization The following outline shows the actual store organi- zation and the division of labor among executives in a store employing about one thousand people : General Manager Promotion of business Store censorship Censorship of correspondence Advertising and publicity- Newspaper contracts Show windows Interior decorating Fixtures and store layout Demonstration of merchandise Adjustment of claims Mail-order supervision Stock keeping Store signs Assistant Manager Merchandise Stock and buying Statistics Superintendent Employment bureau General and special delivery- Employees' permits and passes Employees' personal packages Employees', delivery packages Exchanges Transfers Systems Store Organization 45 Pay roll per cent (selling and non-selling) Ifltegrity of employees Economy in fixing salaries Economy in number employed in each department (selling and non -selling) Character, efficiency, and references of employees engaged Detective work School of instruction Employees' coat, lunch, and rest rooms Head Floor Manager Supervision of floor men Discipline of first floor Service on floor Display of merchandise on first floor Checking umbrellas Orderly appearance of main aisle and of first floor Assistant Superintendent Safety of store and protection of customers Protection and care of fixtures Elevators Machinery Sidewalks Warehouse and bam General economy Porters Night-work people and management of same Outsiders working in store day or night Suppression of expense and waste Fire safeguards Sprinkler and tank equipment Fire buckets and chemicals Telephones Mr. Fire drill Fire buckets Shoplifting Receiving and raring for the wants of institution buyers 46 Retail Store Management Mr. Lights Mr. Receiving department throughout the house and warehouses Stockrooms Purchasing supplies Chief Cashier Cashiers Insurance of all kinds Deposit purchase department Auditor General auditor Customhouse Post-Office Gas Timekeepers' records Credit Manager Credits C. 0. D.'s Hold tickets Will calls Dressmakers ' discounts Wedding trousseau discounts Signing charges Office claims Efficiency and economy of office help Correspondence Chief Mail correspondence Donations and charities Practical Considerations in Organization The organization of most stores is the result of growth following lines of least resistance rather than the result of logical analysis of the needs of the business. Subdi- visions are made to suit immediate convenience rather tban ultimate good to the business. Employees in some store Organization 47 cases are required to specialize too closely with but little or no hope of promotion ; while in others, executives try to do the work of so many departments that no speciali- zation is possible. The better plan would be to distribute the responsible work so far as possible among those doing only routine work, setting the executives free to that extent, and permitting them to use their thought in constructive work. For example, in moderate-sized stores, each of the salespeople after a year or two of experience should have something to think about besides the work of selling. One way of getting employees to grow is by giving them responsible things to do, and store employees will respond as quickly as any class of people to this sort of stimulation. The manager of the store who keeps all executive work and planning to him- self is making a big mistake. He not only wears himself out, but he stunts the development of his employees and shuts off the opportunity to profit from what they might contribute to the concern. The General Manager The general manager of the store is the individual directly responsible for its success. In his efforts to increase the profits and place the store upon an ever stronger foundation of goodwill in his community, he must be the organizer of the business. He must bo able to imagine the consequences of various courses of action with accuracy; in other words, he must have foresight. He must be a judge of men and must make selections for subordinate executive positions. He must be able to inspire liis employees with enthusiasm, to draw out the best efforts of every man. He must be an educator in the fullest sense of the word. In all but the smallest stores he nnist delogate responsibility ;md duties. In 48 Retail Store Management doing this, be needs to show his helpers how best to do tlieir work and make way for their development into experts in their respective fields. Finally he must know how to let others do what they can do as well as he can. The shrewdest managers follow the maxim, '*to do nothing themselves that they can get others in the store to do." The Merchandise Manager The merchandise manager is the chief or head of the buyers of the store. It is his work to prepare the buying budgets for each department, to apportion the finances so as to bring the best returns. Certain limits are there- fore set for the buyers beyond which they may not go without special consideration. To assist him in fixing the department appropriations, the merchandise manager makes use of the business statistics of the concern. These records of past achievements include purchases, sales, advertising, expenses, weather conditions, competitive attractions, not only for each of the years in which the business has been in existence, but also by seasons and months, and often by shorter periods. Thus with tables of figures or charts before him, showing just what has been accomplished in the past, what has been successful, what has been a failure, what has proved profitable and w^hat not, and with a knowledge of the conditions of the present, he draws his conclusions as to what each depart- ment may do for the following year, season, and month. In conferences with the buyers these figures are consid- ered and revised if thought best. Each buyer is then notified of his buying quota and how it is to be distributed as to time. As a rule no attempt is made to regulate or advise the buyer as to what to buy previous to the buying. Purchases must be approved bv the merchandise man- Store Organization 49 ager, however, and if tlie buyer is not successful in get- ting his goods at satisfactory prices, terms, conditions of delivery, and discounts, the merchandise manager halts the transactions for a consultation. Special appropriations are sometimes made to depart- ments even after the regular budgets have been fixed. Abrupt changes in style sometimes demand instant pur- chases even if the buyer has exhausted his department allowance. In other cases the buyer may have made mis- takes in his buying and may find himself unable to sell without adding other goods, qualities, sizes, or varieties. Whatever the reason, it may in some cases be profitable to let a department have more money than it was origi- nally planned to give it. The merchandise manager is or should be the sales manager of the store. He should see that selling condi- tions in the store are right, that the marking of goods is done properly, that advertising and display are properly attended to, and that the buyers keep in touch with the latest sales ideas as well as with merchandise. Through his position he is able to gather up a great deal of valu- able information about merchandise, markets, demand, style tendencies, and other matters of like importance. This information he can convey to the buyers and through them to the saleHpoo[)le and others who should know it. Every merchandise department needs the help of a competent city shopper or comparison head. The duties of this official are usually to spend considerable time in competing stores, note qualities and prices of goods offered there, and compare with prices of similar goods in her own store. Complaints that the store's prices are too high arc investigated by this official. Buyers' state- ments made to the advertising man are similarly checked. Disguised as a shopper, often not known even to the sales- 50 Retail Store Management people of her own store, the comparison head does vahi- able service for her store in its competition with other stores. The Advektising Manager The publicity or advertising manager is responsible for the duty of letting the people know about the store and its merchandise. Logically, perhaps, the publicity manager should work under the merchandise manager instead of directly under the general manager of the store. This would be the best arrangement if the mer- chandise manager were broadly enough trained in all cases to supervise the work of the advertising depart- ment. But most stores consider publicity of such im- portance that they make a special department of it, and the general manager makes it his duty to keep in close touch with it directly. In fact, in some stores of national reputation the general manager is the real head of the advertising department, not only dictating its policies, but also planning its work. In such stores the so-called ''advertising manager" is little more than a copy writer. The publicity department, in planning its work, oper- ates in closest cooperation with the merchandise depart- ment. The buyers, as a rule, supply the facts used in the advertising of goods, and suggestions for the devel- opment of advertising campaigns come from buyers and the merchandise manager. The display manager is indicated in the charts shown in this chapter as occupying a position in the publicity department. As a matter of fact, the writer knows of but few important stores where this form of organiza- tion exists. Like the advertising manager, he sometimes works directly under the general manager, in others, under the merchandise manager, and in still others under Store Organization 51 the store superintendent. The charted form is presented as the logical way. Window and store displays must be correlated with the advertising and are, in fact, impor- tant parts of it. Under the same department head there can be no question that the work will be carried on in closest connection. Practically, however, but few adver- tising managers now found in retail stores have had the training or experience fitting them as supervisors of the work of the display men ; consequently the organization of display under a separate department is best under such circumstances. The Store Superintendent The store superintendent is responsible for the phys- ical plant and its operation. Under his direction the store is cleaned, heated, lighted, and properly ventilated. Re- pairs, renewals, and additions to fixtures are provided by him. Usually store supplies not intended for sale but for use in the store are bought by him or by some official working under him. Elevators, engines, electrical appa- ratus, safety devices, and fire protection equipment are under his charge. The superintendent also organizes and conducts the delivery, exchange, and complaint or adjustment depart- ments. The inspecting and wrapping force is usually under his direction. In some cases the stenographers work under his direction. In most stores the superintendent is also charged with the duty of hiring, training, disciplining, and, when neces- sary, dismissing employees. Through him the promotions are made, increases in salary granted, and changes from one department to another approved. The firm places upon the superintendent the responsibility for the labor expense, percentage, both selling and nonselling. He must strive for efficiency and economy. 62 Retail Store Management In modern stores bis employment department is sup- plemented by an educational department tbat trains tbe new employees for tbeir respective positions and offers courses of instruction to tbe older employees to supple- ment tbeir experience and tbus make tbem more valuable to tbemselves as well as to tbe store. Education bas come to occupy a permanent place in tbe system of every store. Salespeople, casbiers, inspectors, wrappers, ste- nograpbers, and delivery men are all sent to scbool, at least for a time, in tbe modern store. How tbis form of organization may be improved will be taken up in a later cbapter. All pbases of welfare work for employees are also a part of tbe superintendent's spbere in most stores at present. Tbe welfare director, wben one is employed, is one of bis aids. Pbysicians, nurses, and otber belpers are sometimes added. We sball see sometbing more of tbe possibilities of tbis work later on. The Office Manager Tbe office manager keeps tbe records of tbe concern. Tbese records comprise tbe purcbases, sales, tbe casb, credits, goods on band, pay roll, expenses, insurance, and so on. Tbe auditing of tbe store's transactions is in cbarge of tbis department. Commonly, tbe store's ste- nograpbers work under tbe direction of tbe office man- ager, but in otber cases, as we bave indicated, under tbe superintendent. Tbe costs of doing business are com- puted in tbis department for all parts and departments of tbe store. Statements are made out daily, weekly, montbly, and at tbe end of eacb season and year, sbowing tbe condition of tbe business in various details for tbe use of tbe executives. In addition to tbe bookkeeping records already referred Store Organization 53 to, the office manager 's department is responsible for the mailing list of all possible customers in the community, kept in live condition by continual checking, additions, and eliminations. This department is in some stores, though not in all, the repository for the records of the advertising, window displays, sales campaigns, buyers' files of prices, terms, discounts, and lists of concerns from whom the store may buy. In many cases such records are kept in the departments to which they relate. The office manager must, obviously, be a man of ability as an accountant, one able to handle and interpret sta- tistics of all kinds pertaining to merchandising. He should be a detail man, but not one who lets detail absorb his power to see general tendencies. Knowledge of the whole business is most essential; hence a person can hardly hope to fill this position as outlined without con- siderable retail experience. If, as is often the case, the office manager is also the credit manager, he must have all the qualifications of a credit manager in addition to those required of a store accountant. Miscellaneous Officl\ls As has already been suggested, the organization of a store may not only din'or in considerable detail from the above but may also have other departments, lines of work, and institutional features than those indicated in the chart. For example, nearly every manager of a large store has the help of a legal adviser who may or may not have his entire time taken up by store duties. Some stores employ an official known as an "expense man- ager," whose oije equipment. 1. Fire. 2. Burglary. 3. Fidelity. 4. Plate glass. 5. Employers' liability. 6. Merchandise en route. 80 Retail Store Mcmagement 7. Water sprinkler damage. 8. Life insurance in partnerships. (d) Taxes on stock and store equipment. (e) Repairs and renewals of store equipment. (f) Depreciation of store equipment. * VI. ^Miscellaneous expenses. (a) Telephone. (b) Water and ice. (c) Cold storage. (d) Janitor. (e) Miscellaneous sundries. (f) Interest on capital borrowed. (g) Losses from bad debts. (h) Expense of collecting slow accounts. The tables which follow, Figures 8, 9, and 10, illustrate the cost of doing retail business. Figure 8, showing the tabulated result of the grocery investigation ^ carried on by the Bureau of Business Research, of Harvard Uni- versity, is of considerable importance to those engaged in that line of retailing business and lends, as well, con- creteness to the meaning of the foregoing expense figures. The percentages in this table are percentages of net sales, and all figures have been adjusted to a uniform basis. For each item listed the figure shows (1) the low- est figure found, (2) the highest figure, and (3) the com- mon figure. A fourth group is given on some items .showing the standards attained by the more efficient stores. Any grocer who keeps his 'ccounts so that he can deter- mine the exact expenditure for salaries, advertising, deliveries, rent, etc., may make valuable comparisons with the items here listed. Whenever his expense ex- 2 This summary includes stores which sell groceries only, and also stores which sell both groceries and meats and provisions. Item [For percentages, net sales =100%] Low High Coiniiion Standards attained by a group of more elficient stores Gros.s nrofit on merchandise 7o 14.6 0.1 0.0 0.1 3.5 0.01 0.03 4.5 0.6 0.3 1.1 0.3 0.01 0.4 0.3 0.1 0.03 0.01 .01 .03 0.8 0.04 0.0] O.o:; 0.01 0.1 0.01 10.4 3.3 • 0.2 % 27.9 2.4 0.5 2.4 1 10.6 1.8 1.4 10.8 3.5 3.4 5.9 2.8 0.4 4.0 4.1 0.8 0.5 0.5 1.4 0.9 5.6 0.6 0.6 0.7 1.2 1.4 2 2 ''.5 " 11.0 1.7 % 21.0 0.5 0.02 0.5 6.0 0.1 0.4 7.0 1.5 1.5 3.0 1.5 0.1 1.7 1.3 0.2 0.1 0.1 0.1 0.2 2.0 0.2 0,1 o.a 0.1 0.5 0.5 i(;.5 2.5-5.5 0.8 % Salaries and wages of bupng force. . . Other buvinff exDeuse Total buying expense Salaries and wages of sales force Advertising Wrappings and miscellaneous scUin;^ exuense 5.0 0.3 Total selline expense 5.5 Wages of delivery force Other delivery expense Total delivery expense 1.0 1.0 2.5 Management and office salaries Office supplies and expense Total manaffcment expense Rent Heat, lieht and power 0.8 0.15 Insurance on slock and store eciuip- Taxes Repairs and renewals of store equip- ment Total fixed charges and upkeep ex- pen. se 1.5 Telephone Tee and cold storage: Groceries only Oroceries and iiie.its and provision.s. Other niiscellaneou.s expense Total miscellaneous exj»en.sc 0.1 0.2 0.3 IjO.s.ses from bad debts 0.2 Total of expense statoincnt 13.0 Net profits from merciinndiHe opera- tions Interest Number nf stock-turns a year: Groceries only 3.5 7.0 $5,000 23.8 26.4 $20,000 7.0 9.0 $10,000 12.0 Groceries and moats and provisions. Average annual sales per salesperson. 14.0 •Low. Fio. 8. — Grocery (Compiled by the Uurcnu of Dusinci Invest ig 19 Itcoearrh at ion , Harvard UniverHity. ) Percentage Item Lowest Percent- age IIlKhost Percent- afro PercontaKP a))out Which Data Centre (not an average) alwnit Wliich a ("oncentra- tioii is Suf- ficient to In- dicate a Kealizable Standard Low grade Gross profit, including dis- 23-25 counts 20 42 High grade 30-33 i Total operating expense, not Low grade Low grade including freight and cart- 23 20 age and interest 18 35 High grado 27 ■ High grade 25 Buying expense 0.8 1.8 1.1 1.0 Sales force 5.0 10.3 8.0 7.0 Advertising 0.0 8.8 2.0 1.5 Deliveries 0.0 1.4 0.6 0.4 Rent 1.8 14.6 5.0 3.0 \ Interest 1.0 7.9 2.5 2.0 Stock-turns 1.0 3.6 1.8 2.5 Annual sales of average sales- 1 person $5,000 $16,500 $10,000 i Fig. 9. — Summary Table of Percentages of Costs of Doing Business in Shoe Stores (Compiled by the Bureau of Business Research, Harvard University.) Kind of Business Number of Stores Range Model Group Num))pr Falling within Mode Grocery Dry goods Furniture Shoes Hardware Men 's clothing Drugs Jewelry Department stores Five and ten cent stores. 17 11 8 8 8 7 O •f 4 11 2 12-22% 16-25 22-28 16-27 17-26 20-30 24-30 25-32 22-30 25-27 141/2-17% 11-22 22-24 21-23 19-22 27-30 28 26-27 11 6 6 4 4 3 2 5 Fig. 10. — Some Figures on the Costs of Retailing Business in Wisconsin (Collected by the author. From Economics of Retailing, Ronald Press Co.) Store Accounting System 83 ceeds the common figure, it might be considered a danger signal. In expressing expense in percentage form, custom varies as to what should be taken as the base. Some use the cost of the merchandise while others the sales. Either may be used in getting accurate results if adhered to strictly. The great error heard of so frequently nowa- days in figuring the percentage of profits is using the cost as the base in figuring mark-on and sales as the base in computing expenses. The result is, of course, not only inaccurate but disastrous. Certain advantages favor using the sales as the base for all percentage computations. Expense naturally comes out of sales, and but little difficulty is found in computing mark-ons on the basis of sales value. Nearly every large retail organization as well as many noted accountants have gone on record as in favor of computing- percentage on sales. It is assumed here that either method, if followed cor- rectly, will yield accurate results. Because most of the literature on the subject favors conjputing the percent- ages on the sales value, this method is followed by the author in this work. The Balance Sheet Tlic most fundamental work of the accounting depart- ment, and the last to be prepared, is tlie financial state- ment, or bahmcc sheet. Tliis report is referred to at this point because all accounting nmst aim at it in the end. The balance sheet must show wlu\t the manager of the business wants to know; hence the accounting system must be built up to provid<^ the information wanted here. There is as yet no uniform standard method of making out a retail store financial statement, but the following is a very acceptable presentation. 84 Retail Store Management Assets Cash on hand. Cash in bank. Due from customers. Notes receivable. Merchandise on hand. Furniture and fixtures. Real estate and buildings. Office supplies on hand. Advertising supplies on hand. Unexpired insurance premiums. Miscellaneous other assets. Total Assets. Li abilities Due to creditors for mercliandise. Due for expense bills. Notes payable. Miscellaneous liabilities. Total Liabilities. Value of business, excess of assets over liabilities. Capital at beginning of period (Date ). Profit or loss during period ( months). The form of balance sTieet presented above is, of course, merely suggestive. For the larger stores more formal statements are presented, embodying the best technique and practices in accounting. A knowledge of the general principles of accounting is highly desirable in this connection. The management value of a simple, well-adapted, fact- telling, accounting system cannot be gainsaid. The statistical investigations which have been made as to costs in various lines of merchandising give certain approximate standards for purposes of comparison. More intelligent competition on the basis of facts in the retail field is a pressing necessity and can be secured only through accounting methods that do really account. store Accounting System 85 TEST QUESTIONS 1. "What are some of the practical advantages of a good store accounting system ? 2. Show how functions determine the classes of accounts to be kept. 3. List the five primary classifications of retail accounts. 4. What principles should govern the departmentalization of accounts ? 5. Describe some ways for departmental distribution of expense. 6. Outline an acceptable form for a financial statement of a retail store. CHAPTER VII THE INVENTORY The foundation of good accounting in a store is the inventory. A correct list of all merchandise on hand, properly classified according to kind and length of time in department, with valuations, is one of the absolutely necessary essentials to forming a correct judgment of the condition of the business and the best possible future course of action. In tlie past the inventory had no other use than to supply the bookkeeper with the necessary figures on the value of merchandise on hand to enable him to close his books at the end of the fiscal year. Consequently this inventory was taken but once a year, generally about December 31, or in January or even February. February being a quiet month so far as business is concerned has been found a favorable time by many dealers. The need for more careful accounting has brought in the custom of taking a semi-annual inventory in many of the best conducted stores, although the single, annual inventory is all that is taken by most stores. The traditional inventory has been changed in many ways so as to make it yield the maximum of information. The following will make clear some of its aims and the methods of taking it. Methods of Taking Inventory In the best stores inventory taking is now planned in advance so well that it actually takes only a couple of 86 The Inventory 87 days to complete the process. It is, of course, taken by departments, but goods within departments are carefully arranged according to lines, sizes, and qualities. In some cases, as in hardware stores or hardware departments, even the counting of items is done in advance, and a tag is attached to each compartment, drawer, or box to show the number of articles within, with spaces following for salespeople to indicate the number taken out and sold between the time of counting and of actual inventory. Inventory sheets are prepared in advance. The loose- leaf system has been found more effective than a bound inventory book. Each sheet is consecutively numbered in advance so that if any sheets are missed later on, that fact will become apparent by mere checking of the pages. Blank spaces are provided at the top of each sheet for the department number or letter, the date of the inven- tory, and the names of those who used it. When all is ready, the employees of the store should be divided into teams or pairs. Each buyer should assume cliarge of his department or in case the buyer is in charge of several departments, the head salesperson should lead in the work and call off the stock on passing from item to item, and an assistant should enter the item on the sheet, repoating the item and its quantity and other information to the one who calls it. Repeating serves to show that the figures are understood correctly. Information To Be Gathered In a \ ■ K o 'w.0 y ' / > \ C d 2 z ■r. C / > m b X / / u I o > T 1-3 > \ z u OQ 7- / X. UJ '"-' / Ui O: _ X < CD Uj \ o \ " _3 r3 > r- 5 C / 1- « >* / z u ' < L-J \ > CD 3 < O ! )^ bJ / Q. CC 1 bJ IJ a Z u 2 'J ■A ■J / > '— ' / OQ O I UJ \ O .- 1; \ — • > V o 5 oc : -«= - « Ui > Q. / < CD O O UI < >. *-• c rj •3 1 CC ^-. O a o <1 P I— « C c 3 <2 S CDC/) ^3 n o 3 o o o X 03 S.O- 3 T3 PO c^5 6) n fO 3 S.o ~ 3 o ■X O n o CD -< n n 2 H n X n o 00 < D n > H n 2 H O n o m -< m X H n z D n o 00 •< I n n H Z o The Inventory 91 increase his business and what he can do in competition. If the per cent of mark-up is too high, this ^^ill be re- vealed at inventory. If the retailer knows what his costs of doing business are, as he should, he can tell from his inventory how low he can safely cut his prices and still be safe. If a certain line is found to have moved slowly, he can tell whether the price may be cut, or whether the goods should receive some other special attention, such as change of location, more urgent salesmanship, or special advertising. These are some of the valuable features of this sort of inventory. How To Figure Cost of Merchandise Practice varies on what is to be taken as the cost of merchandise in inventorying. A few merchants take the net cost price of the goods less all discounts whether taken or not. Others take the net price paid, in this case subtracting only such discounts as are taken. Still others take the billed prices and disregard the discounts. Some take any one of these losses and add all expenses incident to laying the goods on the shelves, such as freight, cart- age, storage, and so on. Nearly all reduce, or should reduce, the valuations by the amounts suffered in depreci- ation. One cannot say that any one of these methods is scientifically correct and the rest all wrong. For certain purposes, the lulled prices of the goods plus the expenses of bringing to the store seems the best, though any other might be utilized if followed consistently. Many mer- chants til ink it best to list all goods at billed prices, deduct the average cash discount received, and then add a per- centage representing the average cost of 'Maying down" the goods in the store. Certainly transportation on goods inward bound should 92 Betail Store Management be considered as a cost of the goods and so treated when the goods reach the store; then is the time to connt expenses of doing business in addition to costs. This fine line is the boundary between costs and expenses in a retail store. Perpetual Inventory The common inventory reveals the exact amount of merchandise on hand at the time it is taken, but as it is taken but once or twice a year in most stores, for months the average merchant has to guess at just what he has on hand and how the various parts of it are moving. Six months is a long time in the retail business. This is enough time for a business to plunge from success to dis- aster. Many complex situations may arise concerning which the merchant has no definite knowledge. To remedy the evils of guessing, the perpetual inven- tory was invented. Its purpose is to show the amount of goods on hand at any time. It has a long and inter- esting history in the manufacturing industries. Here it has been used with great benefit for many years. It is only recently that retailers have learned about it and how to apply it to their conditions. The perpetual inventory is tlie basis of merchandise control. It shows what goods are moving fast and what slowly. It therefore indicates what goods must be pushed, what goods should be reordered, and how much may be reordered. The turnover can be definitely deter- mined while business is going on instead of waiting until the end of the season. By its use the manager can guide his business profitwards while there yet is time. The per- petual inventory is the best possible sort of record to have and to use in insurance adjustments in case of fire, flood, tornado, or burglary. TJie Inventory 93 The Ixdividual, Stock Record The principle of the perpetual inventory is simple. Goods on hand plus goods bought less goods sold, brought up to date every day or week, shows goods on hand. The application is, however, unfortunately not quite so sim- ple, due to the fact that the average store handles a great variety of goods and the records required to show the above for each item would require too much time. Then there are to be considered returns and exchanges of mer- chandise, C. 0. D.'s, sales on approval, goods to be returned to the manufacturers, etc. In some lines, such as men's and women's suits, rugs, furniture, and other lines in which each item runs up into considerable money value, it is not only possible but also practicable to keep a record of the stock in such detail as to show just Avhat prices are on hand every day or week. The record for ladies' suits maybe cited as an example. Information such as indicated in the form. Figure 13, would be recorded in the perpetual inventory. All the items shown on the left-hand side of the stock record card are filled in for each garment as it is added to stock. The information on the right-hand side is writ- ten in as the sales are made. Price tags are made out so as to show the registry number as well as the size and price. AVhen a sale is made the price tag is turned in with the sales slip. From the former the proper record is located by tlie jcgistry number. From the latter the information as to the character of tiie sale is transcribed to the stock record. At tiie close of eacii day's Ijiisiiiess a report, Figure 14, is drawn off from the stock record, siiowing the items enumerated in tlie report. At the end of each montli a moiitiily report .similar in 94 Retail Store Management t-H Q M CO o CO O a W O ( / -I ■< O > \ Wcio \ S' CLttI 1 1^^ 1 O 1 o \ o ] '-i / n o 3 \ 3- > y O) \ o •< j ^2 ocra 1 S" 9 m ) n o 1 [ ( i > / s ( o 1 « O -o <» o \ o bJ 75 j 3- 30 / [ 7Q m o 1 O J CJ o 3) / m ( 1^ O / -o o =i\ \ \ 1 o / u» 1 -o \ s ^ o ^ a t/ / . f y 5C \ 1 £( V ( The Inventory 95 items to the daily report is drawn up but showing the profit in percentage of sales as well as in dollars and cents. Many specialty shops check their * ' stock on hand at end of month " by an actual inventory, at least of some departments or lines. DAILY REPORT DATE At Cost At Retail Stock on hand at beginning of day Purchases added to stock during day Returns to stock, exchanges, and approvals Sales Goods sent out on approval Stock on hand at end of day Profit or loss on day's business Remarks (Weather, sales conditions, etc.) Fig. 11. — Daily Report Keeap Stock Record By sample tests, selecting line at random, or those of which there may be some doubt as to accuracy of the stock figures, the wliole report is checked. A comi)lote inven- tory once every tliree months or at least at the end of each six montlis is customary among tlie best stores. In lines that run uniformly for considerable periods of time, where fashion changes are not .'i])rnpt, the manu- 96 Retail Store, Manacjement factiirers' stock numbers are used instead of the com- plete descriptions written out as in the stock record given above. A rug or stove stock record need have only a few columns. A good form is illustrated in Figure 15. Each rug of a make and size is entered as one (1) and then simply checked (X) when sold. By a glance at the record sheet, the dealer or buyer can tell just how many RUG STOCK RECORD Size ^x/^ Season t'.*^. /f/^ MFG. NO. STOCK XXX\ 1 1 1 1 Fig. 15. — Eug Stock Record of each there are in stock and how many have been sold. Various other stock systems are in use, all effective and more or less economical in the time required to keep them up to the minute. The principle is the same in all of them. Stock on hand, plus purchases, less sales reduced to cost price of goods sold yields the value of the goods still on hand. In many departments the linos of merchandise handled are so numerous that individual stock records for each The Inventory 97 line are probably out of the question. This statement is made with the qualification "probablj^" for systems are being introduced showing exact status of stock in nearly all classes of stores. The great chain store systems sell- ing cigars, groceries, and drugs have already introduced stock records showing in detail the stock on hand in every line, but outside of such concerns this type of record keep- ing is not common. '& Perpetual Ixventory by Statistics Department stores have another way of determining the amount of stock on hand. Their method is sometimes called the "Statistical Method." In using this method no attempt is made to check the sales back to costs for each item sold. The total sales are simply reduced to approximate cost value by subtracting a certain percentage computed to be equivalent to the net markup or markon of the goods. Let us suppose that the average net markup is 30 per cent. If the sales for the day are $500, the cost value of those goods will equal 100 per cent — 30 per cent, or 70 per cent of the sales. $500X.70i=$350, cost value of goods sold. By proceeding according to the general principle of the perpetual inventory, goods on hand plus goods added to stock less sales expressed in cost values as above, equals goods on hand at end of day, week, or month, whichever time pciiod is used in marking the computation. The average net markup is found as follows: At the time of taking the rcguhir inventory the goods are listed at both cost and selling values. The difference is a figure that represents the markup at that particular time. For example, if the cost value of the mercliaiidise in a depart- 98 Retail Store Management mont is found to be $7,000 and the sales value $10,000, the markup is $3,000, or 30 per cent of the sales. As goods are added to stock, the selling prices are added to the invoices, so that for every invoice the accounting department may compute tlie markup and use it in averaging the markup of the whole. But goods cannot always be sold at the marked prices ; hence there must be markdowns. Occasionally goods appreciate in value while in stock; hence they may be marked up. These deviations from the original marked price when made are fully reported to the merchandise manager, and as a rule, may be made only with his approval. The accounting department notes the changes and the volume of goods affected and subtracts from or adds to, as the case may demand, his merchandise on hand values. To illustrate the method let us express it in formula. Inventory at sales value as originally found ■j- goods purchased at sales value + total markup for period on goods in stock — total markdowns = stock on hand at sales. From the original inventory and from invoices marked at both costs and selling, the average per cent of markup can be obtained, also the amount of subse- quent markup can be obtained. The amount of sub- sequent markup will form a certain percentage of the whole that may be added and the amount of markdowns likewise a certain percentage that may be subtracted. To illustrate: The original markup may be 33i/} per cent of sales value. Later markups raise this amount to 34 per cent, but markdowns may follow which total 3 per The Inventory 99 cent of the sales value ; lience the net markup will be 31 per cent. To find the cost value of the stock on hand the net sales value is reduced by 31 per cent, taking the percentages given above. The net stock on hand as shown by the statistical method just described is only approximate. The reason for this is that the percentages used are merely average percentages. The sales for any day or week may be only or largely in goods ^\'ith low markup or profit margins, or the sales might in other cases be in goods with higher than average margins. In either case using the average percentage in reducing from sales values to cost, values would result in an inaccuracy. In most stores the tend- ency away from the average is toward business with lower profit margins. In other words, the goods with the low profit margins move more rapidly than those with high margins. The actual markup in such instances is of course less than the average, and to reduce the sales by the average markup results in getting a lower than actual total of costs of goods sold. It will appear from the resultant cost figures that the goods cost less than they actually did. At the end of the season the actual inventory taken then will vary from the perpetual inven- tor)^ figures obtained as above no matter how carefully coraputod. To make allowances for such discrepancies some stores regularly subtract a certain percentage, not usually more tlian i/> per cent, from the average percent- age of markup, to make the final result agree with the season inventories. Care must be exercised at all places in tliese computa- tions to use the same base in getting at percentages. Either the cost or the first marked price sliould be used. Of the two the writer suggests the first marked price, the lUU Jh'lail Shjic Mauagenwnl selliiin' price as first marked, as the best base. But after having selected the base, no changes should be made, or the results will be entirely wrong. Merchandise Control by Statistics Proper merchandise control by means of statistics requires not only a stockkoeping system that will show inventory values at frequent intervals, but also accurate expense statistics, and the past experience of the store, if any, in both of these details. From his knowledge of past sales and expenses of selling for each department the merchandise manager is in a position to budget his sales and expense for each department for the coming season with reasonable accuracy under normal conditions. Knowing something about what the customers of his store will want in volume of merchandise and knowing the past expense of selling similar volumes, the merchan- dise manager can determine in advance what percentage of markup is required to cover the costs of doing business plus the desired profit. In this percentage possible mark- dow^us must, of course, be considered. A quota can thus be established for a department for a coming season showing sales required, average percentage of markup, per cent of markdown to be allowed, and net profit de- sired. These conditions can be placed before the buyer as his goal to work for or to exceed if possible. The merchandise manager can go still farther in out- lining his merchandising plan by showing maximum and minimum limits of stock to be carried to insure the proper turnover, the number of days in which the stock should be sold, and the amount of stock to be on hand at the end of the period. The merchandise plan is then put on paper for each The Inventory 101 department and a copy given to tlie buyer of each depart- ment resx>ectively. Possible contingencies as well as details of carrying out the plan may be arranged largely in conferences with the buyers, either singly or in groups, but after the details are settled, the buyer may be held, within reasonable limits, to the plan as outlined. It is his business to carry on his buying and selling in such a w^ay as to fit in with the plan. TEST QUESTIONS 1. What has been the prevailing practice and attitude with regard to the inventor}- ? 2. Indicate the preliminar}' preparations that siiould be made for taking inventory. 3. What information should be gathered through an inven- tory? How may such information be used for determining mer- chandising policies in the store ? 4. How should the cost of merchandise be figured in an inventory ? 5. Under what circumstances is a perpetual inventory prac- ticable ? 6. Explain a system required to secure a perpetual inventory through individual stock records. 7. Explain the statistical perpetual inventory plan. What are its uses and limitations? CHAPTER VIII buying system Buyer's Reports The buyer who is to do his work properly needs to have certain facts about his business. Some of these facts should be provided for him by the management. Others, as we have seen in another chapter, he should dig up for himself. "We have just noted in the preceding chapter that the buyer should be provided with a copy of the merchandis- ing plan for the coming season by the merchandise man- ager, at least that part of it applying to his department. In the small store where the buyer is also the manager of the store, he can work out his own plan and prepare his own statistics, but in the large store, most of the figures will be provided for the buyer. His own record keeping will be mainly in keeping track of stock, the department perpetual inventory, making notes and records of popu- lar wants, recording names of sources of supply, prices, discounts, terms, etc. The buyer should have prepared, or shoukl have placed before him, every morning a summary of the business of the day before in his department, the total sales, and the sales of each salesperson classified into cash, credit, C. 0. D.'s, approvals, and exchanges. Figure 16. The returns and allowances claimed should likewise be noted. 102 Buying System 103 DAILY SALES REPORT; DATE 1Q1 DEPARTMENT 'WEATHER 1 Clerk No. Cash C. O. D. Charge Exchange Refunds ^^ ^ --^^ , — ,^__ ___J r ^ 1 r^ ^ Totals Less Exch Final Previous Ye* ir's 5^Alf•<; Wp;ithpr I'lG. IC— J)ally Sales Keport to liu^'cr 104 Retail Store Management 1 D a> x> lu 3 'J WEEKLY REPOR DATE i ■■ • 0.) fl> if) at V o 3 t-t p M o r- s? Is? 1 o o ►1 -» (/y H H m CD o n — 1> 0) '• Charged to Slock for Season at Retail re 5 a Buying System 105 111 parallel columns, tlie iigures for the same day of the preceding year should also be given, if possible, so that the buyer maj^ note not only his progress from day to day but also from year to year. The information outlined above will guide the buyer in directing his sales force and sales plans, and indirectly, his buying. More directly the buying will be guided by the records showing the department sales in past years, sales of the present season to date, how much of the season remains, the amount of stock on hand, the amount of stock ordered, yet to come, but not received, Figure 17. The buyer must, of course, be guided constantly hj the limits placed upon him by the merchandise plan. Handling Purchase Orders There should be a definite system of handling the pur- chase orders to avoid duplications and overbuying, and to save time in looking up, at any time, the amount of goods ordered but not yet arrived. There should be a written order for all goods ])ur- chased. No verbal orders should be permitted in the retail business. Orders by telephone and telegram should be confirmed in writing at once and marked. ''Duplicate confirming wire order." Orders should be made out on the store's stationery. No matter how small the store this may be carried oat with profit. A departmentalize(l store siiouhl iiave a separate oi'der l)()ok for every department. Goods for two or more departments shouhl be ordered on blanks from those departments iii\ jiiiably. Tlie order blanks sliould bo made out, at least in dupli- cate, better still in tii plicate, by means of carbon sheets. The originjd shouM he given to Hie sliipf)er, one copy should be kept l)y the buyer in llie departmenl, and the 106 Retail Store Management third copy should go to the merchandise manager and thence to the office. Every order should be consecutively numbered and should come to the office in the order numbered. In large stores it is a rule, and a good one, that pur- chases above a certain amount must be confirmed by the sig-nature of the merchandise manager. It can readily be seen that the purpose of these confirmations might be nullified if orders were not promptly sent in to the office in the order received. In most cases a purchase order out of its consecutive order will not be received at all without explanation. Purchase Records A record is made of the order in the bookkeeping department showing date placed, number of order and amount, department classification according to time goods are to be delivered, total, and general remarks. After this record is made, the order is filed to await the time when the invoice appears. Cancellations made in the meantime are recorded both on the order duplicate and in the office record described above, generally in red ink. When the invoice arrives, it is first checked against the duplicate order in the office to catch shortages, partial shipments, or unauthorized shipments. Prices and terms are compared and then the order is permanently filed in the office. The invoice is sent to the shipping room to be used in checking the incoming goods. Some concerns have the part of the invoice containing the column that shows the quantity of goods ordered clipped off and require that the receiving department must count and list the quan- tities of all goods received. This prevents the receiving clerks from being careless in checking the quantity as Buying System, 107 THE BUYER Buyer Fixes Prices Invoice Recorded,, Filed, INFORMATION £ Merchandise Plan from Merchandise Mgr BUYING SYSTEM Popular Wants Quality Slyles Price Quantity Order Blanks No. Consecutively Triplicate Stock Records and Inventories Daily Classified Sales Reports Comparisons with Past Years /< Buyers Files Sourcesof SunplyCatalogs Quality Obioinablo Prlcet Supply Available Discounts Trnniportalion Term* Market TendcnclM I 3 o c 3 c n D. 1^ I' en n> S'r ^c- Merchandise Manager A Shipper 1 J General Office Bookkeeping Records CooHd J ^ Shipping and bhippi-d' Receiving Konn ccciving Konm Invoice Checked L J Fig. 18. — nmrt Showiiif,' SystcMii in ri I'.iivcr's OHico 108 Retail Store Management given on the invoice as correct. After the invoice is returned to the office the clipped column is checked ^dth the receiving clerk's figures and again attached. Before returning the invoices to the office from the receiving room, the buyer notes after each item the sell- ing price to be marked on the merchandise. The selling prices thus marked become the base for all computations following, such as percentages of expense, markdown, profits, etc., in all stores that have adopted the selling price as the base system. It is from these invoice prices, costs, and selling that the merchandise manager gets his foundation for his perpetual inventory already described. A record is usually made of each invoice received show- ing date order was entered, date invoice was received, its number, the name and address of the firm, the amount, terms, discounts, net amount to be paid, when paid, department selling price, and markup percentage. The invoices themselves are generally filed in a pur- chase journal and the amounts posted to the merchandise account in the general ledger. The chart on the preced- ing page. Figure 18, shows the general procedure in a buyer's office. TEST QUESTIONS 1. What are the buyer's chief sources of merchandising infor- mation? 2. How and in what form does he get his merchandising statistics? 3. Outline a policy for handling purchase orders. 4. Explain the records required for the buyer's work. 5. Trace the complete history of a purchase of goods. CHAPTER IX sales system The Sales Slip The sales slip is the fundamental record of the sales sys- tem. Accuracy in amounts and proper classification are the factors most desired. Economy of time and labor in preparing them follows closely. The sales slip in most general use measures 7 by 3% inches. It is generally made out in duplicate by means of a carbon sheet, and a triplicate form is gaining favor with many concerns. The third copy is a tissue paper sheet that is attached to the sales book and not removed. It serves in case of loss of the original, and it is also claimed that its use makes dislioncsty more difficult. The usual information on the sales slip includes blanks for tlie customer's name and address to be used in case of delivery or in case of charged goods, date, number of salesperson and of inspector if inspection forms a part of tlie store system, sliowing the kind of sale, whether cash, fliarge, C. O. D., approval, etc., descrii)tion of the merchandise, amount of sale, amount of money received from customer, and the number of the sales slip. A typi- cal form of such a sales slip is shown in Figure 19. In an ordinary transaction, the original is usually kept by the cashier as the store's record; the duplicate is sent with the goods; ;ind the triplicate, when used, is kept by 100 COLUMBIA CLOTHING CO. DULUTH and SUPERIOR SPELL NAME CORRECTLY AND GIVE FIRST NAME IN FULL. UNLESS REGULAR ACCOUNT, FILL IN ALL THESE LINES. FOR CASH SALE USE LOWER PART OF SLIP ONLY. 2828, ^Superior, Wis _: ..^191.. NAME ADDRESS BUSINESS. AGREES TO PAY ON GOODS PURCHASED BV . SALESMAN O. O. D CHARGE CASH SALE SALE SALE, AM'T REC'D LOT NO. ARTICLES AMOUNT ^ „ — -.^ Q^ Si CHECKER NO _ .- NO exOHANOE OR REFUND WITHOUT THIS SLIP CHARGE OK'D BV 1 ffOI lO ....... -, r Fig. 19. — Simjile Sales Slip Sales System 111 tlie salesperson in the sales book and turned into the auditing department ^Yhen the book is used up. The duplicate is usually wrapped with the merchandise. In case that the customer pays cash and wants the goods delivered, a receipt is usually given in the form of a slip printed and attached to the base of the regular sales slip. This slip gives amount of sale, salesperson's number, inspector's number, number of sales slip, date, and cash- ier's stamp showing that payment has been received. One of the best forms of sales slips for large store use is one that has three parts on its face, each part perfor- ated so that it may be separated from the rest, Figure 20. The address label to be used in case the goods are to be delivered is placed at the top and filled out only when needed. In the center is the regular sales slip with places for names and address in case of a charge sale, descrip- tion of goods, kind of sale, etc. At the bottom there fol- lows the part kept by the cashier as a voucher and the carbon of which is used as a receipt in case of goods to be delivered and paid for in advance. Each part has the number of the sales slip printed on it and the number of the salesperson. Cash on clolivery sales are usually handled as follows : The sales slip is made showing merchandise, amount, and address of the customer, togetlier with the identifying numljers mentioned for other sales slips. The propct bhnik showing tl)(? kind of sale is marked C. 0. D. The original is kept by the cashier as in other cases, and the duplicate is sent with the merchandise to tlie C. O. D. desk. Here tlie slip is pasted on a C. 0. D. label and this tied to tlie package. Next a record is made on the delivery sheet, and when tlie driver takes the package out, he must bring back eitlier the package or the money, and the fact in either case is noted on the delivery sheet. 112 Retail iSture Management 36022 E B7 anooKUTN-Krw voak Alwaxs R«p»a4 Nicm< FW Send to 86022 ^ouTc rouio CHCCI »0. 37 (;tj>MTrry Customers 3hoi!l( dum. Its presentat ing goods for exchan and delay. 36022 E 37 <3-; m lllU>OKUm,-NBW YORK (Nam*) (Aildreaa) Customers buying in jnor* 4han tonc dcparimcn* will s&ve iime ,X>y u^ifi]} a TrBnsfvr and tf>surr Alwa^a Bapaat Name and Addrcaa to Coatomar. Writ* l^lalnlr .Bought by FW Send to. 36022 E CHEtl HO. 1 SALCS NO. 37 IIOff$OlDOICJUir«EC10 QUANTITY WRITB ITBM8 PLAINLY OO MOT WaiTC ITSM* aCLOW THIB LINC Total 37 lOOI 10. CASH RCC'D AM'T or SALC Never Dcilroy a Check. Have ii voided by proper Authority 36022 FW Fig. 20.— Multiple Sales Slip Sales System 113 The Various Kinds of Transactions Tliere are a great variety of transactions to be recorded on sales slips about which we need not go into detail here. For example : Transactions may not only be pure cash, charge, or C. 0. D., but also part cash and part credit, part cash and part C. 0. D. ; delivery at a certain date may be bought by one party and delivered to another, bought by one party and charged to another, etc. The store system will have a definite plan of handling every such case, the principle of which involves nothing differ- ent from what has already been given. At the end of the day each salesperson turns in to the head of the department a summary of sales classified as cash, charge, and C. 0. D., made up from a record of every transaction on a card at the back of the sales book. The head of the department reports the total for each salesperson and for the department. From these the manager of the store can tell shortly after the closing hour just what the business has been during the day. Salespeople frequently make errors in their additions, lience errors creep into these totals; but it gives a line on the results that may be used until the auditing depart- ment has completed its work the next day. Inspf-ction Rome stores have all Sides inspected; others do not think it worth wliile. Tlie tendency is toward inspection. Usually the cashier, where one is em])loyed, is also the inspector and \vra])f)er, but not always. A cashier-inspec- tor can care for the merchandise and cash of about eight to ten salespeople. Wlieii rashiers are helpe