Harvard University.

Bureau of
Business Research
Management problems in retail
grocery stores

HF
t2,o

MIN1STKAT1
310

HI II

MANAGEMENT

l'K<>!

RETAI1

1910

IN

BULLETINS OF THE BUREAU OF BUSINESS RESEARCH

1.

Object and History of the Bureau, with Some Preliminary Figures

Out of Punt
on the Retailing of Shoes

2.

Harvard System

of

Accounts for Shoe Retailers

Price 50 cents

3.

Harvard System

of

Accounts for Retail Grocers

Price 60 cents

4.

Depreciation In the Retail Shoe Business

6.

Expenses in Operating Retail Grocery Stores

6.

Harvard System

of

7.

Harvard System

of Stock-keeping for

Price 60 cents

Out

of Print

Accounts for Shoe Wholesalers Price 60 cents

Shoe Retailers
Price 60 cents

8.

System of Operating Accounts

for

Wholesale Grocers
Price 50 cents

9.

Operating Expenses In the Wholesale Grocery Business

Price 50 cents

10.

Management Problems

11.

System

of Operating

in Retail

Shoe Stores

Price 60 cents

Accounts for Hardware Retailers

Price 50 cents

12.

Operating Expenses In Retail Hardware Stores

13.

Management Problems

In Retail

Grocery Stores

Price 50 cents

Price $1.00

BULLETIN NO
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MANAGEMENT PROBLEMS
HI

Ml i.KOCERY

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\MBRIDGE

\KD UNIVERSITY

mi

II

IN

STORES

COPYRIGHT,

1919

HARVARD UNIVERSITY

1093081

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Curtoown

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Buying

SoumsB of Supply
Bulk and Packap Goodi

36
37
II

..

ArranfMnent of Merrhandiw

Conduakm

n \<; EXPENSES IN GENERAL MERCHANDISE STORES

Selling

42
44

44

Expense

44
Buying, M:m:ip -IIM -nt and Offirr
1

STOCK-TURN

I.",

Charges and Upkcvp I\|M MM

IN

'
i

Mi

M \M>I>I.

45

Brom

\N\CJEMENT PROBLEMS IN GENEKM. MIH<H\\

45

KKH

Average Sales per Customer

\<>

46

Sales

Purchases of Produce

46

46

Sales of DifTi -n-nt Kiodi of Merohandise

Cash and Credit

-,

.17

47

MANAGEMENT

IS

HI-TAIL GROCI

\i\

IN

STORES

IN

OPERATING expenses and management methods in the retail

grocery trade have been studied by the Bureau of Business
Reeearch during the

last five

yean.

The topics that are discussed

The

result* of thin in-

in this bull* -tin include operat-

\penses, accountuu m,thods, selling problems, r

such as buying, and
l>r. .i.lems, and merchandise problems

he merchandise in the store. In the

the arrangem
last part of the bulletin, some data on operating expenses and
in general merchandise stores, *
also briefly presented.
are
groceries,
usually
The report* that had been obtained by the Bureau through

management problems
tiell

its field

bered

agents and by mail pn<

l.U'i. fniiu

in7<

mail

to

Krooers.

January

um-

Tin- bulk of these were

ation up
To briiiK tl.
between
be
made
to
enable
and
to
to date
prescomparisons
-nt r.mditiuiM and pre-war conditions, the Bureau has sefor tin- years

cured

l>y

l'l

mail i!:

:md

i,

I'M.'.

-p. .rt-

for the business

year 19!

The annual volume

of business in the stores reporting

fn>m $5,665 to $513,900. The stores from which

1918nuiK'
information was received were located in forty-one states
and Canada. Some reports were also received incidentally
i

ami
inrliidfd in this

Kngland, but they are not

summary.

<h the utorai reporting for 1918 were identic*! only in part
hoi* rrportu.g in 1914-15, tcvtft hmvr ban made which indicate
that the fifura are at fan
&

Thr

retail

grocery business

is

carried on elm -fly through

chain stores, department

stores, mail order houses, stores selling fancy groceries and
tin*

following

ty|X58 of stores:

ordinary grocery stores that are owned and operated as mdividual units.
The chain store company generally maintains a central office

and warehouse but sells at retail only

through small branches scattered over a considerable area.
This provides central i/.ed purchasing and cent rali/ed man-

agement but a dispersion

habits and needs of cu-

of selling in order to cater to the

who wish

to

buy

their supplies

of groceries near their homes.

Few department
and,

among

profitable.

stores maintain a grocery department

those that do, this department is sometimes not

The grocery business does not seem to l>e well

adapted, under ordinary conditions, to department stores.

Department stores have heavy expenses for management,

delivery, and rent, and in many stores these heavy expenses
are only partially offset in the grocery department
sociation with other departments in the store and

by the

by

as-

the ad-

vantage in wholesale purchasing. Groceries are not generally

bought by shoppers but purchased regularly from that are conveniently situated, in inexpensive locations, near
the residences of customers.

expenses for delivery

and

In percentage of net -ale-

rent

stores as in the grocery departments of

and ordinarily management expense*

ment

tin-

are as low in these grocery

is

department

lower than

in

stores,

depart-

stores.

In each of the larger cities of the United States there are

at least one or two stores, generally with a fairly large volume of business, which specialize in fancy groceries. Al-

though they sell staple goods, they feature imported products

and other specialties which are not found in wide selection in
the average retail grocery store. The stores that sell fancy
groceries generally give extensive service to their customers,

with the consequence that their operating expenses are above

those of the

avenge grocery

store.

Their poet

correspondingly higher.
The hulk of the rt'Uul grocery business
stores that are owned and operated a*

profit

u*

handled by the
idl-

ing medium-price merchandise. Some of theee aell only for

them give credit and maintain decash, but the maj
v service.
These are the typical retail grocery stores,
:til

this

type of store that the Bureau haa received

<*ports.

OIM i:\ir

lowt-

KN8EB IN BKTAII.

rarh item of expense, the table on page 9 gives the

tie stores that
i;hest, and the common nV

reported to the Bureau for the business year 1918. The comr r.-u-h item is the one that is shown by the
largcM nuintter of stores. It is the one around which all nports tnul to mil.-!-; the most representative, the most

Owing

to the changes brought about

by war conditions and

Turing reports for consecu\ rare from a

large number of identical stores, it is not
M< lude report* for different years in a single
prart
make exact
comj
expenses, or

also because

<

.*

>

oompamons,
h comparisons as the Bureau has been able to make,
operating eipenses in retail grocery stores for
h< last five years indicate that the ratio of total expense to
sales has tended to decline. This means that the outgo for
expense, while it ha.- inrreased, has not increased as fast as
In this connection
th< receipts from sales have risen.
also to be pointed out that the ratio of gross profit to net sales
has declined at about the same rate that percentage of total
t

The items

shon tin- must contrast

HUN. in percentage of sales, are selling, deKxpenlivery, and buying and management expense.
supplies and also fur most of the fixed charges, such as hrat
insurance, and taxes, on tlie other hand, appear to have in
between

1!M

of expense that seem to

Mild

Teased

:ts

iiiueh

:is

the retail prices of groceries, for the per-

centages of expense for these items do not seem to have

undergone much change.

These changes in percentages of expense have probably
been due in part to economies introduced to meet war conditions. They have also been due, it appears, to the fact that
wages and salaries seem not to have increased as rapidly as
selling prices.

If salaries

and wages had advanced

at

same

the

rate that prices increased, the percentages of expense for the

wages and salaries items would have remained constant,

whereas those percentages have tended to decline.

The
economies introduced to meet war conditions were of two

Some meant the adoption of new methods for saving

labor and are likely to be permanent.
Others involved a
curtailment of service to customers.
In many stores such

sorts.

curtailment

probably not be permanent.

used in the table on the following page have
U'cn adjusted to the standard system of accounts for
.)!7.
grocers, according to the revised edition published in
has
been
examined
Statement
to
make
Hire
Every
carefully
will

All the figures

that it tallies with the others. Reports that were incomplete

or of doubtful accuracy have been omitted in compiling the
summary. All the percentages for both profit and expense

are based on net sales.

In every case net sales equals 100%.

Ml'l lt\|i

10
I'.'l

\I.

Tho items in the expense statcim

<lmjz t<> the standard system of accounting for retail ^m
hide not only
expenditures such as those for wages, wrapping paper, advertising, postage, and telephone, but also a fair salary for tin
proprietor or partners, rent whether the store is leased or
owned, and interest both <m borrowed money and on the proprietor's net investment, and, of course, depreciation of

ment. The inclusion of

be used for comparison.

all

|uip-

these items gives figures that can

In 1918, the figures for total expense in the stores from

which the Bureau received reports showed a range from 9.0%,
the lowest, to 22.8%, the highest. The common figure for
total expense in the business year 1918 was 14 % of net sales.

SELLING EXPENSE
;ul vert isTotal selling expense includes wages of salesfon
and other selling expense. The lowest figure
-.

ing, wrappings,

was 3.41 %, the highest 9.94 %,

%.
The largest item in selling expense, and in fact the largest
This
individual item of all expenses, was wages of salesfon
includes the wages paid to salespersons, and also a portion of
for total selling expense in 1918

and the common

figure

was

5.8

<

the salary of the proprietor according to the time, that he

to
spends in selling. Wages of salesforce ranged from

3%

8.7

% in

1918, and the common

figure

was 4.7 %.

A full explanation of the individual accounts for merchandise and

expense is given in Bulletin No. 3, System of Accounts for Retail Grocers.
This also explains how net worth is determine^ and gives suggestions for
1

keeping the records. Since Bulletin No. 5, Expenses in Operating Retail

Grocery Stores, was published in 1915, the Bureau has revised the accounting system for retail grocers. The reasons for this change are
explained in the revised edition of the accounting system published in
May, 1917. By this revision interest on both borrowed capital and on
the proprietor's net investment is included in fixed charges, whereas
previously it was not included in expense.

II

hay and

penditurea for

feed, gaaolinc

all ..tii.

tenance of

ilr!

common figure waa 1.4%

the wages of l-h

-

the mini

i.

The

ra!l\

uerou* report* were received

iil

',

.1.

co

these storea wa*

\jn-iuie

waa

cut

or

appmxm

the uae of a codporn'

t>\

and

% in

grocers wboee

were made by a coO|>

total

half

aU.jt

xpcnse wan 2.4

Thi* imi
in

wasgri"

M.-M

li\.

and borae ahoaing,

'ipkeep and main-

that

m.lix- jointly fur -vvrral nirr

7', of

ill

uhirh

:n

tin- if

tin-

Itiirr.-iu

.h\.n.
a

\nltiiii

l.iLsincsfl

i.f

n--.

tlystores,

below the average,

selling low-

mdiae.

These stores that

<i-hv<Tv

<lnl

not

make

deliveries ftiminatiHl the

expense.

There was, however,

They

not

.ii.l

Intl.-

a<l<litional

other laeana of seeunng

m expense. In fad. in many such stores the sales

per salesperson were nightly lowrr than in .-tores that made
.|.-li\.-n.-v :tnl
he saleaforoe expense was fully as high. The

eeonoiny

turn was pi
lrlivrrir>

inadi-

-.

gn.

ery storea

in fa-

oommon
wn

Th.-

of thrir sales

as.

The

on th- other hand,

mm

\pense was genera II \

d.

retail

n stores that

in ilio^,. that .inl n.t.

sthat>

In

the

ami

he average

iose storea deli vered

than was deliver^

roe, and they generally employed shipping

greater delivery service rendered by such stores

LI

one of the reasons for

tin-

higher tm

use in

tin-

fancy grocery trade.

Hi

VINO AND

MANAGEMENT EXPENSE

from the report.- th;il have lieen

was found advisable to combine buying and manworth
agement expense. While some stores have found
while to keep their buying expense - parate from their management expense, as was suggested in the standard accounting
system, this was not the general practiee.
Total buying and management expense includes buying,
and also office supplies.
management and office
A
postage, and other buying and management expense-.
In compiling the figures
VIM I,

it

it

large item in this expense ordinarily

is

of the pro-

a part

prietor's salary apportioned according to the time he

in

buying and

in

managing the business.

large

spends

number of

retail grocers reported that they devoted little time to managing their business. Some of their other expenses and their
losses might be less if they did give more attention to manage-

The common figure for buying, managewas 1.6% in 1918. The common
buying and management expense was 1.7%

ment problems.
ment and office
figure for total

salaries

in 1918.
1'ixKi)

CHARGES AND UPKEEP EXPENSE

This includes interest, rent, heat, light and power, taxes

(except on income and buildings), insurance (except on buildings), repairs of store equipment, and depreciation of store
equipment. The total fixed charges and upkeep expense
ranged from 1.35% to 6.82% of net sales in I'.HV The common figure in 1918 was 3 %.
Total interest, which is included in expense, is the sum of

he interest
is paid on borrowed capital, and
on the proprietor's net investment in the business, exdunve
of real estate which is covered by the charge for rent. The

the interest that

IS

intm* it charged

average net invent

the average net w.u

Mho assets

M he bunn

(not in

linn

for

lh*prn.

here, it
It.

rraliUU)lthcuiiio(thc

to outriders (not mrlutlmg capital ttoek or surplus

imlividcd profit*). The aweta indudc

h.-ii-ilities

on hand, equipment at depreciated value,

notes and account* receivable, and prepayments such as prepaid insurance. The liabilities include notes and account*

cash, merchanciim*

payable and accrued items such as unpaid taxes (not mortgage* on real estate). The net investment for a corporation
is determined in the same way as for a proprietorship or a
partnership, irrespective of the
issued.

The common figure for

Owing to the

nrluded in expense whether the store is

is owned, the amount included

Acharv
-r

lowest
,

If

the store

\\lu.-h
t

nt

fig*

was 0.9% of

less than in retail hardwhere the common figure was 3

stores, for example,

of the sales in 1918.

expense whi.-h the

stock

faster stock-turn in retail grocery

ware

capital

was substantially

stores, total interest

here

<f

total interest in 1018

net sales.

leased or owned.

amount

the store could be leased.

u sinew fairly should bear.

;;
u;^
of not sal

ami the comn

was

1.1

This

is

an

In 1918 the

^hestwas

%.

around 1.1';. neverthewere a substantial number of stores which showed a

een0.5%and 1 '; Another group centered

the figures for rent centered

less there

aroun.l

however.

IiI

nt

*fiii to

bear any relation to th- volume of business, the site of the

n of the country in uhu-h the store was
located. Similar variations were foun-i in In.th large and
small businesses in large cities and in small towns throughout
the eouritry.

14

LOSSES FROM BAD DEBTS

The expense for losses from bad <l-l>i> in

0.04% to 3.31 % of net sales. The -omnion

It appears that

numerous

customers' accounts on
Otljy

DO hope Of

books

About

collection.

which then-

for
1

(ill

was

from

continue to

retail grooere -till

their

'.Ms varied

figure

ifl

of the retail

pi

gn

who reported

to the Bureau stated that they churned off then

once
a year. Sixteen per cent charged oil had deht>
b:icl
"
stated that they never d,
occasionally," and 21
delii-

a bad debt while a customer was

alive.

Only

3%

of the

grocers charged off bad debts more frequently than once

year.

001008

AND NTT PROMT

In 1918, the highest figure fir gross profit was 26.04%; tinlowest figure was 10.5%; and the common figure lii. .)% of
(

net -ales.
ii'n.-s profit is the difference between the cost of the
merchandise sold and the amount of the net sales. Out of this
gross profit expenses are met and what remains is net profit.
(

The common

figure for net profit in P.MS

was 2.3%

of

This net profit is the amount which remains for the

proprietor after charging all expenses including hi- own
sales.

salary, interest, and rent. The net profit is compensation for

the ri-k that i- incurred in the business and also reward for

good management. It bears no relation to the amount of

capital invested, but varies according to the skill and u i-dom
and foresight with which the nisi ness as a whole is conducted.
The stores that showed a net loss or only a small net profit
generally had a figure for irm-- profit somewhat below the
average, and their expenses for such items as wages of s
Their total expense was
force, rent, and delivery were \\ix\\.
in
than
the
stores
that
showed a normal net
generally greater
As
a
a
small
rule
a
or
loss
profit.
profit could not be attributed solely to a single cause, but was rather due to condr
1

manifested throughout the management of

tin

l>u-im

15

STOCK-Tl
The rap

Merchandise in a

retail

Imarily agood index of the management

In 1918, Block-turn rang*! fn.m IS time* a
r

<>f

th- I>ii*ines8.

year to 27.07 times a year

iL'ure

was

stores.

7.9 times.

1018

Over one-fourth

km than six

The com-

of the storei

times a year, and a

a year.
the reports the Bureau has received from
n the stores
retail grocers during the last five years,
uith an annual rate of stock-turn higher than 10 was about
I

iniiiilM

-r

..f

these less than four times

MI

two and one-half times as great

the stores with a stock-turn

The total expense,

stock-turn was substantially loss
ftn

in percentage of net sales

of less than 6 times

a year.

stores with a high rate of

than tin t..tal expense in

a low rate of stock

a the
total expense between
groups of stores was generally
h thr lowest total exi B, The
"f
is.!
tiinrs
a
pense had a Stork-turn
J
stores with

iMl. 01
In P.MS.

tii,-

\ESS

ivpiral n tail grocery store, according to the

t'v the Bureau, had an annual volume of

a year. From January 1 1918, to Junu:
handise on hand in1910, the average in
creased 11 %. This increase in 1018 corresponded app
mately to the increase in
ndex numbers published t>\ tl..- \\ar Industries Board.
The large stores showed about the same figure for gross
profit and for total expense as was shown by medium-site
stores. Stores with an annual volume of sales of over $100,000,
for example, showed a common figure for gross profit of
16.0% in 1018, and 14% for total expense. The wages of
salesforce and total selling expense were practically the

*1

sales of $55,000

16
as in smaller stores.

Delivery e\pen>e was somewhat

the larger businesses; the

figureforrent was somewhat

in

little larger,

9.3 times a year.

common
less,
-

figure

0.8%.

was 3.2%. The

Stork-turn wMsl.ut

the stores with lowest

086 and highest stock-turn, furthermore, had

Mow

the average.

volume

appears, therehe manages his business intelligently, can compete successfully with the large ston
.-ales

considerably
fore, that the small grocer,
.f

It

if

ACCOUNTING METHODS
Under present conditions competition is so strong in the
grocery trade, and there are so many opportunities for
unseen leaks and losses from waste, spoilage, and theft, that
the grocer who does not keep good records of his income and
outgo is fortunate indeed if he avoids bankruptcy. Yet a
retail

surprisingly large proportion of the retail grocers of the

country, judging from the Bureau's observations, do not

keep accounts that are even approximately accurate. The
result

is

unstable business, danger of frequent failures, and a

and manufacturers. Thi> is

credit risk to wholesalers

heavy
unsound from the business standpoint, and a heavy burden to
the public, which eventually pays the price of lax method-.
A majority of the retail grocers in the United States at he
present time undoubtedly have records that are inadequate
for their needs or none at all.
The Bureau has found many
cases of retailers who had no accurate information as to their
profits or expenses and who did not know even approximately
where they Stood financially. There are many who never take
an inventory of their merchandise OB hand. Profits cannot l>e
determined, of course, unless an actual inventory of stock
on hand is taken at least once a year. Numerous other merchants who do take an inventory fail to include in tin
t

of the important items. One retail grocer

to the Bureau that his total expense was
stated
example,
of his sales. He had omitted numerous charges which

penses some

5%

b frequently omitted
one-half
of the retail
Fully
do
account
an
of
not
the
merchangrocers, moreover,
keep
dise taken out .f the store for their family use. Thkboot
his busiiiess should bear.

An item

thai

salary of the proprietor

"I husinesB management.

grocer, with a well-equipped store to a western city, has
uniixhcd an example of the danger of slip-hod account-

ing method*. I., 'Mii, his sales were 121,000 a year. He did
not take any inventory of his stock on hand. He
his cost of merchandise sold by deducting a certain
age from his sales. This figure was subtracted from the sum
I

vted inventory

ane>

and

his purchases to give

He had an itemised record

the ntock on hand.

-'
f 'le
expenses of his business, and he included a
record of the
salary for himself. Imt lit* did not k
from
IMC.
the
for
He charged
takrn
store
goods
family

his twine,
rh;i>,->

,,f

wrapping paper, ice,

mrivh:in.h--. :m.| -1M

He

felt

that this

made

and telephone to
i...f

in-'lu-i.-

lli.-in

his pur-

i!i

hi-

'

easier.

bookkeeping
he could have had a complete stateIn March, 1919, the
ment of his account* in full <1< tail
fnun him. This report
.in received another n-p-Tt
pense.

hiii

IK tic :i<l<htiniml HTurt

showed that he was continuing

his inaccurate

methods.

ing the period of five years his business had been going
oonstjtMtlv <ln\vn-hill fr<>m the profit stantl;
-ales,
clur to competition, \\rn- -Imhtly less.
He had just discovered, perhaps too late, that he had lost a substantial sum
of money in the business, and he did not know where it had

had borrowed money by means of notes, and on

it had all
disappeared, and his net worth
statemn
hi* own assertion that he wa* on the verfe
of bank
This is a typical case of a retailer who faced
business ruin because of his failure to take inventory and his
lack of complete, accurate knowledge of his profits and expenses. Had he known in season just where his leak or loss
!<>

life

insurance, tmt
:

18

The
occurring, he probul>ly could have stopped it.
time and effort that would have been required for taking an
annual inventory and keeping a few additional records would

was

have been a small amount to incur

for the insurance of his

profits.

that of a retail grocer in a large

fortunate, when he entered the grocery

Another similar case

eastern city.

He was

business, in securing

is

an unusually favorable location

rapidly growing suburb.

In

l'.M4,

in

after three years in tin

business, his annual sales were $130,000, but at that time he

had no records that showed him exactly where he stood.

The business had grown rapidly and profitably, but it was

necessary for the proprietor to be constantly in the store.
Me was relying upon personal watchfulness, without adequate accounts and records. In March, '.HI), he was visited
again by an agent of the Bureau, who found him just ready
to dispose of his business. He admitted that he was beaten.
I

With such a
drained

large

volume of business, unseen leaks had

his profits.
retailer in the

away

same city with a less favorable loAnother

but with a similar volume of business, put his accounting methods in order in 1914 and began to coin pan \\\<
results with those of other stores. In 1919, the Bureau found
that he was not only making a profit, but instead of being
beaten by chain store competition he was about to rearrange
the lay-out of his store in order to take care of a further expansion of his business. He was prepared to do it through
the knowledge of his business that he had gained by keeping
thorough records. The first of these two grocers had by far
the better opportunity, but he had failed to grasp it.
In retail grocery stores where an inventory is taken, tinstock is most commonly checked up between Christmas and
New Year's Day each year. Some stores take a semi-an n u
inventory the first of July, and there are a few large stores
that take a quarterly inventory.
cation,

19

The inventory

of stork

cent with a deduction for

the goods are purcha*-<i

seldom safe to assun
-li

-I

on luuxl

in

In

m market price*
cxwsenraUve nianagBine&i
unsold stork

worth more than he pail

ttceof a few grocers of tul

ves

at

ntory
considered auumi

pa|M-i

<

luinge,

.||

to avoid

retail

\\lu.-li

i:r.M.-i-

rlmiiulit

.1

loss.

In

the

expenses on the
thesale0.

sales.
.

fH|iialH

of the

nifililliK

artunlly o|Mratinf(
tin-

they

and
were
16| % of
xpenses
thcrcwtof thegoodssold,

the end of the year, for 16}

-T cost or
20% on the co^
t

WTlf

Koodii sold,

If

ml

pn.fit -jor; of

he wouli
nu thr x'llnm prire
.-Mir

ttiey

wh<n they WITP

some cases this was <lu<tit

at

OVer-

liaml.

us instances have conw

,

(he*

prrarnt.
especial care is necessary

^ork

the

nmr-

Under

lieen earned.

conditions such an
i

dealer'*

IB

riot

shows

imually taken at billed

any derlm.

used as the basi

for fiRurinx percent-

same basis was used f<>r U.tli profits and

The
more
practical mrtlxxl. from th< liureau's
expenses.
observations, is to figure lxth profits and expenses on sales.
ages provided the

HER Or CUSTOMBRS
'I'h.

families.

The hulk

business is essentially a trade with

almost every grocery store

of the sales of

made to regular customers who buy constant lv. m fact

Hi,- number of regular customers varies
many of th< m
1\
\\ith tli.- volume of sales. The average annual sales

are

to en

customer, usually a family, m 1914 and 1015

As a result of the increase in prices,

were from $175 to $200.

20
this average has increased in the last two years. In I'.Hs. the
average annual sales per regular customer for tlio grocers that
reported to the Bureau were $250 to $300. This represented
the average amount of sales made in a year by a grocer to

each of the families that he regularly supplied.

COUNTER. Tu.i PHONE AND RESIDENCE SALES

merchandise by three methods
at tinat
the
orders
and
resiby soliciting
counter, by telephone,
dences of their customers. To determine whether selling
Grocers

sell their

expense varied according to the proportion of the sales made

by the06 different methods, the Bureau carefully examined the
reports that it received in 1915. At that time the oondtiaofl
was reached that it made little difference in the salesforce
expense which of these methods predominated. Another

examination of the reports for 1918 confirmed

con-

this

The number

of stores soliciting orders at the residences of their customers declined somewhat in the last few
clusion.

years, but the salesforce expense continued to be about the

same in stores that had a large counter trade, in stores that

had a large telephone business, and in stores that solicited a

large part of their orders at their customers' resit lences. Over
one-half of the grocery stores reporting for 1918 stated that
7
they did not solicit any orders at residences. Prior to
about 33 % of the stores did not solicit orders at residences.
1

Delivery expense was about the same in stores that did not
orders at residences as in other grocery stores.

solicit

SALES PER SALESPERSON

average annual sales per salesperson is gen< -rally an
This is found by dividing the
especially significant figure.
'I

'he

annual volume of sales by the number of salespersons, including an allowance for the proportion of tin proprietor's time
that is spent in selling. In 1918, the average annual sales per

fl
salesperson in the retail grocery atom from which
were received amounted to about $15,800.

There

in

probably oppor

an

The highest

age sales per aalenpenion.

ifirrnuci in

the

figun- that tin-

Hureau

has found WHM $43,000 in 1918; this waa a atore with eight
salesmen and an annual volume of aalea of over 13m
u from eompanica oprntting chain
Some scattered in
||,:il
Morr,
in,l|,-:if,-il
ll.. if
:i\, n-.u.h V &)
gnmTV
J-T
I

salesperson frequently aniountiil to $30,000 or more. This

is one of the means whereby the chain stores have been able
to rrullrr thru n|M-i:itnm

\JN n~,

A high volume

of sales per salesperson is obtained through

the economical arrangement of the merchandise and th

out of the store, as well as by the adoption of other policies.

A plan of arranging the stock an. laying out the store so as to
make it possible f r he salesmen to wait u|x >n tuttoroers in as
short a time as possible tends to increase the quantity of
goods that each salesman can Bell. Another means that is
used in some stores for saving the time of the salesman
1

have him secure as many items as possible on the order of a

he beginning. This may obviate the necessity
and
>ing
recrosmng the store several times while filling
a single or
t

<

SAI.KS

A largr majority <f th, retail grocers did not keep records
wlm-h showed the amount of goods sold by each stkapcrsoo,
kept Home sort of a record of the sales
In stores operating branches, not
in.-lu. lnm chain stores, about one-third of the firms
kept sales
records of this sort. These were chiefly daily records. Not
..n,-

-..;.

in eight

made by each salesperson.

over

% of the stores made up a weekly or monthly summary

each employee. The stores which had these

were mainly the large stores where the difficulty
of supervising the work of each employee was rendered
of the sales of

sales records

by their number. In view

have been L'ained in other line- <!'

difficult

of the

i.l'

Mta

hn.ii^h the use

appears quite possible that they might

/
to a greater extent in retail grocery

it

records,

advantages that

IP

advantageously be
Stores employing more than tliree or four salespersons. Such
reenrds obviously would be only an added expense unless they
were utili/.ed by the manager as a guide for inerea-ini: the
In a retail grocery store with ten or
etiieieney of his force.
i 1 1

<

twelve salesmen. f>r example, with >ale> record- for eaeh

salesman, the manager knows how nnich each of tlie salesmen
is selling.

When

arises it is easy to

provided there

is

the quest i>n of adding another salesman

determine whether or not he i- necesaaiy,

some

of the force already

sort of reliable check

employed

is

upon what each

accomplishing.

SPECIAL SALES

An

inquiry was made regarding special sales and sales

About one-third of the single stores held special

leaders.

and a much larger percentage of the stores operating

These stores generally used staples as sales leaders.
In normal times, before the war, sugar was more -ommonly
used than any article as a leader. Other articles used for
this purpose were flour, butter and eggs, coffee, and potatoes.
These special sales were more common in the larger stores
sales,

branches.

<

than

in the smaller stores.

Advert

i-iim expense, selling ex-

pense, and average annual sales per salesperson were about

the same in stores holding -|-<-ial sales and in those not
holding such sales. The rate of stock-turn was generally no
higher in stores that used leaders and held these special sales.

\D\ HRTISING

Advertising

Many

is

a small

expense in most retail grocery stores.

they u<ed exclusively the advert it-

retailers stated that

ing matter furnished to them

turers.
Among the retailers

by wholesalers and manufac-

who

utili/.ed

this advertising

and display signs for the store were the most effective.
NejcttothesigM,inadvertii^
plays

were the samples supplied to the retailer to be dieVery few of the strictly eaah atom
ated a preference for aamplea. Doubtleaa this was doe
fn,t that cash stores leas frequently have the names

retailers,

ited to his trade.

<

and addraasea of

their customers, and therefore are not premail um h-t, or to mail the aamplea. The
furnish
a
to
pared
oih.-r forma of advertising most commonly used by retail

grocers were advert i-mn in local newspapers, trading stamps,

and premiums. About one-half of the grocers reporting to

the Bureau for 1918 stated that they ad vertawd in newspapers.

This waa a somewhat higher proportion than in previous
years. Among cash grocery stores a greater pereentafp used
newspaper advertising than among credit stores. For the
trade aa a whole, newspapers were more extensively used for
i

than

ig

by grocers

in citiea of leas

than 25,000 inhabitants

in larger cities.

Bureau before 1917, about

sortoBNH ftadbsj itaapi
This pro|*rtion waa about the same in caah stores and in

Of the

stores reporting to the

10', statr.1 thnt th-\

The

LM'.- Unfa

reports for 1918 indicated that the use of

ug stamps had become aomewhat leas common.

ber of stores whii -h had previously given

A num-

stated that th.-y had di- -..nt inn. -.1 the practice,

used trading stamps showed about the same volume of business as other stores. Their advertising expense, however, was
higher. The common figure for advertising expense, which
accord inu' to the System of Accounts for Retail Grocers inrludi* trading stamps and premiums, waa 1 .3% of net arnica in
stores that gave trading stamp*, and 0.3% of net aalea in

storrsthat did not mx,- M:tdn^ ISMspl

The use of premiums given away with sales of merchandise
was less common than the use of trading stamps. The com-

24

mon volume of sales in Storetin-

same as

Stores using

\\hich u>ed

for other stores.

i)iviniii!iis

premiums was about

The

ad\< riMiig expense for

was practically tin- same as for stores

which did not use either trading M.unps or premiums.

The only advert i>ing used l>y many grocers was window
display.

Some

tion, carefully

stores said that they gave this special attenplanning their display to fit seasonal demands,

or to take advantage of some appeal of current interest

Only a few of the grocers stated that they had found

cir-

cular letters a good form of advertising for their l>u>iness.

Those that used circular letters were chiefly the grocers who
carried high-price goods.

These conclusions regarding the various forms of advertising are based entirely upon the statements made by the
grocers themselves. In some cases it is possible, of course,
that some forms of advertising may not have been adequately
tried out by the majority of those who furnished reports.

CREDIT PROBLEMS
Only 10.5

of all the stores reporting to the Bureau, ex-

elu>ive of chain stores, did a strictly cash business. The average annual volume of sales in these cash stores in 1918 was

$50,000. Of the stores that granted credit, 12

reported
that about one-thin of their sales were credit sales; 26%
1

stated that about one-half of their sales were credit sales; and
of these stores the credit sales were two-thirds or more
62

in

of their total business.

The average annual volume

of sales

1918 was $55,000.

The practice of granting credit to customers varied according to the character of the business. Very few of the fancy
in the stores that granted credit in

or high-price grocery stores did a strictly cash business. In

three-fourths of such stores the average length of credit

allowed to their customers was one month.

Stores selling medium-price merchandise handled the hulk
of the retail grocery business of the country.

Although a

M
somewhat larger number of these did a strictly cash
than waa the case in the fancy grocery trade,
large majority told partly for credit. Eighty-five per eent
<>f
the ii.r.iiuiii-price stores that granted credit usually rei

heir customers to eetUe their accounts of toner

than

month

Store* that aold low-price merchandise gen.rally gave credit for an even ehotter time. Twenty-five per
hem allowed only one week's credit, and 38% ali

lowed only

wo week*' en

pite of the stricter credit

theee low-price stores, the losses from
bad debt* were aomewhat greater in proportion to aale* than
r

he other classes of grocery store*.

r stores that did a
strictly cash business, the total exleas
than
the
waa
stores
that granted credit. The difpense
t

feren

;U

The expense

expense generally was about 3

for total

interest

was

% of net sales.

slightly

less.

Office

expense in cash stores was about one-half the office expense

edit stores. Many of the cash stores, furthermore, did
not

(i<

In

iiandise,

and

this

was the

chief reason for

lower total expense. The annual rate of stock-turn was

practically thr XIIIM in cash stores and in credit stores.

One-fourth <>f the stores that operated branches sold only

.-h.
This does not in< lul< companies with a chain store
organisation. l>ut only those businesses that had two, three,
hr>.

Tin- .lnli.-ulty of supervision of credit

branch stores is probably the chief reason for the tendency

toward an all-cash

Mi-:i:ril

\\nisi:

l'knl',1

M>

BUYING

m average
ports, buys

hi*

retail grocer, according to the Bureau's remerchandise from not more than ten whole-

A few stated that they bought all their merchandise

from one wholesaler, and there were also a few who bought

salers.

26

from a larger number than the average. There was a marked

tendency, however, to concentrate purchases. Over 80% of
the retailers from whom reports were received for the last year
stated that they were seeking t<> buy from fewer ratlin- than
fn.m a larger number >f wholesalers. This tendency was
stronger in HMS than it was before the war. The grocer who
concentrates his purchases believes that he receives better
service

and better terms.

is

while to the wholesalers from

business becomes

whom

he buys.

more \vm-t h
From the

wholesaler's standpoint, furthermore, the credit risk is generally lessened through concentration of purchases by a

customer; a small number of creditors can more easily secure

the adoption of plans for averting bankruptcy, in case of
financial difficulty, than when there is a large number <>f small
creditors.

grocer submitted a report that showed a net worth of

$1 ,136, with bills and accounts payable of $22,474. His cash

One

on hand was $723, his merchandise inventory $15,005, and

He was buying from ten
his accounts receivable $6,603.
from
more. His stock-turn
wholesalers and aiming to buy
was 4.5 times a year. This retailer was plainly over-buying,
and his efforts to purchase from a larger number of sources
rendered his situation only more precarious. A comparawould wipe out entirely his ecjuit y
in the business and render him bankrupt unless he were given
tively small drop in prices

temporary assistance by his creditors. The creditors would

be much more likely to give him this assistance if his purchases, and hence his obligations, were concentrated.
Cooperative buying associations have been organized in
increasing numbers during the last few years. The Bureau
is

not prepared to state any conclusion, however, regarding

it has made further investigations.

these until

n
SOURCES or SUPPLY
1

n the course of

it

in<|uiries

the Bureau obtained

iistiiiiiia

merchandise wa^
regarding the sourcechased. The replies to this inquiry, of course, were estimates,
these seem to furnish some conclusions that are worth
In general, the methods of buying appear to have
u
-h
nun
been
the same in 1018 as in the preceding four years.
Unless otherwise indicated, the statements in the following

sections cover the entire five-year period.

In puivhaMiijj flour, over 35% of the retail grocers bought
all thru tioti!
,,!,i the manufacturers.
One-third of

rom the mansome purchases from

the manufacturers but not exclusively from that source, a
the grocers did not pun-ha*- any Hour
;. Among those who made

Some of the
large majority bought over one-half direct.
that was not In.imht dim from the manir
was
t

The proportion of grocer* purA large part

*rs however, was snm
of the Hour that was not bought dirert from the manufactlit

from Hour

jol>U-rs.

1 1

was purchased from wholesale grocers.

Sugar was purchased mainly from wholesale
rs

grocers.
the n-tailrrs reported that all their sugar was
that sourrr.
Less than
purchased sugar
r\rlu>i\vl\ from the mamr
ft Most of those who did
fifths of

.")

inanufarturers were located in the

purchase sug
of
eastern part
the country.
Salt, baking powder, and soda were purchased mainly from

wholesale grocers. About four-fifths of the retaflen reported

that they U>u^ht these articles only from wholesale grocers

and many

<>f

made

salers

those

who

at least

did not l.uy inclusively from wholeof their purchases from that

a pan

ouree*

Two-thirds of the
u

li<

purchased all their soap

add it ion 20% purchased over
hased toss than one-half from wholesale

retail grocers

lessle grocers,

alfand:.

pn

and

in

28

About 4 % bought

grocers.

their entire supply of soap direct

from manufacturers.

Over

four-fifths of the retailers

clusivcly from wholesale grocers,

retailers

made any purchases

bought l>reakfast foods exand less than l.v, of tin-

of breakfast foods direct from

the manufacturers.

The

trade in crackers and bakery goods,

in

<

-ontrast to the

mentioned above, was largely with tinmanufacturers.

Kighty-five per cent purchased all their
crackers from the manufacturers, and over 5% of the others
trade

in tin- articles

purchased a part of their supply direct. Only 8 % of the retailers purchased all their crackers from wholesale grocers.
In the case of bakery goods, which are largely of local produc-

and subject to rapid deterioration, 95 % of the grocers

purchased solely from the bakers. These are products in lie
distribution of which the wholesale grocer has almost no

tion

place.

Coffee was purchased only from wholesale grocers by 29

In addition to those who purchased all their

of the retailers.

coffee

from wholesale grocers, 10% purchased over oneand 13% purchased less than one-half

half of their coffee

from wholesale grocers. Forty-eight per cent, or almost onehalf of the retailers, purchased coffee exclusively from coffee
roasters

and specialty wholesalers. Thirty-six per

cc-nt

of the

purchased tea only from wholesale grocers. About

purchased a part of their supply of tea from wholesale

retailers

15

buy entirely from that source. The others

tea
from
importers and specialty wholesalers.
bought
Four-fifths of the retail grocers purchased cocoa, dried
fruit and nuts exclusively from wholesale grocers.
In addition 10% made part of their purchases of these articles from

grocers but did not

that source.

Slightly over one-half of the retailers bought

from wholesale grocers.

of the retailers purchased extracts ami
essences only from wholesale grocers. Fifteen per cent reall

their spices

About one-third

M
portal

hat

part, hut

not

of their

nll (

purrham

of these

wan made from wholesale groom. Thirty per eeoi

tho retailer* bought their entire supply of extraru and

article*

of

m manufacturers. Ten per cent purchased

from manuf act urers, ami another 10 % made
part of their purchases from manufacturer*. Two-third* of
the retailers placed all their order* for condiment* with

essences

(i

>

The proportion piirnhaaing mnlaam dimanufacturcni wan Miiall; 87% bought it only

uh..|,-a!.- LM.xvro.

wholesale

groct-t

fresh vegetables,

the

ami frwh

fruit

varic<i in different

parU of

located in Htnall town?* in fanning disinorr of this prfrom the

<<

purchaaed mnrh
farmers than was poanhlc for he retailers in the larger cities.
per cent of the retailers purchased all their butter
<

toduoers,

Many

chases direct.

and

20% made

retail grocers

part of their pur-

purchased these products

commission merchants and jobbers.

Eleven per cent of the retailers purchased all their cheese
direct from thr producers, ami in addition 1.V, m:id<- *mn* of

larg<

Over one-third of the

their purchases direct.

chased all their ,-h.i
bers.

About

30%

groc<

dairy products

retailers pur-

commission merchants and jobbought thci

uppb' from wholeiale
less perishable than other

makes

fr.nii

it

have a larger share in

possible for the wholesale grocer to

its distribution

than

in

the case of

.utter, for

example.
Eggs were purchased either direct from the farmers or from
rommiion mrrrh:int-. juLU-r-. :md ..th.-r di-trihutrr* of
I

Wholesale grocers take little or no

The source from which eggs
are bought depends almost entin ly uimn the section of the
country in \vhi -h the store is located. The same conclusions
hold true for f re*h fruit and vegetables. In general, however.
perishable

fo<

part inthedistnl.ufH-M of oggn.

30
the commission merchants

aad jobbers

have

the trade in fresh fruit :m<l vegetablowthan in

larger -hare

(lie

<>r

radeineggs.

Fresh meat was bought from butcher-, pa eking companies,

or commission men-hunts. Then- seems to have been some

tendency for

retailers to increase their purchases

meat from the butchers and parking companies.

In

tl

ports received prior to I'.HS slightly over .">()', of the retailerpurchased all their meat direct from the butchers and packing
made some of their purchases
companies. In addition
'

.">

there.

About 40 %

stated that they bought only from

com-

mission merchants and jobber-. The report- for I'.HS, while

not fully comparable with those for the previnu.- period, indi-

cated that fewer retailers were buying entirely from cummission merchants and jobbers and that a larger pro|>ortion were

buying only from butchers and packing companies. A similar

seems to be indicated in the trade in canned meat, the
tendency being to purchase more from the packers and less

shift

from wholesale merchants.

In the distribution of canned fruit and vegetables, how)ver wo-t birds
ever, there seems to have been little change.
of the retailers purchased their supply of canned fruit and
vegetables entirely from wholesale grocers, and over 20 % additional purchased at least a part of their supply of canned
fruit and vegetables from wholesale grocers.
The other
purchases were chiefly direct from the aimers.
Over 40% of the retailers bought confectionery only from
(

manufacturers.

Numerous

supply direct from

others purchased a part of their

The remainder was
manufacturers.

bought either from wholesale grocers or from specialty

wholesalers.

The tobacco sold by retail grocers was purchased largely

from wholesale grocers. Over 60% of the retailers bought
their entire supply of tobacco from that source, and 15%
bought their supplies solely ft m -pecialty wholesalers. .( )nly
2 % or 3 % purchased exclusively from tobacco manufacturers.
<

81

\M> I'M KACJB GOODS

Mi IK

was also made regarding UK* relative quantities

le* wild in bulk and in r^^fr*
The
hut
were
of
court*-,
jtury
only estimates,
iimerou* inaccuracies they seem to have
In the stores fn-m *hi. h reports were received prior to
sold Hour only in (lockages. In 1918, the propor5,

80%

imrkafBs was even higher.

thai they Hold
war, 38%
hulk.
In i''iv l<iw than 6% of the stores sold

<olliiiK

Before

tin

<>nly

in

(!

of

hulk.
h tin- r:irhrr |HTIM| furthermore, nnly
15 r c*)ld package sugar cut inly, hut
I IMS over one-half of
the stores n>i
sold
sugar only
they
jinrkigjM
This difference is so striking a* to in<limt< u law inrn-.

most parts
lurini: tht-

of the country
l.-i-t

Breakfast foods were sold

tum

retail

about

the sale of sugar in

p^^^gEt

tive years.
hi.-i!

v in

None of the

packages.

sold hrrakfast food>

90%

hulk,

and

handled only package goods in this

Before the war, 7% of the retailers reported that they
here was not a single
handled only hulk packers. I
who
he
that
handled
crackers
stated
grocer
only in bulk. The
numU-r <f M<IV> >rllum rackere only in parkagM, moreover,
1

<

Before the war, 12% of the stores

that they sold crackers only in p^^ftgff, whereas in

seems to have increased.

1

40% were carrying only package goods.

There has also been an apparent increase in the number of

1918 over

stores that earn- dried

fruit, coffee,

and tea

in pai-ksgas.

of the retailers sold dried fruit only

Before the war, about 6
in
In 1918, one-third of the stores stated that they
packages.
did not handle dried fruit in hulk. There has been a similar
.-i>-

in

the sale of coffee

and

tea in parkigns

In the earlier years, 15

of the retailers carn^i hut ter only
in hulk .in.i 50% only in packages.
In 1918,

32
butter was sold in every store that furnished a report, ;m<l
over three-fourths of these stores sold butter only in packages.

BRANDS
Along with the increase in the quantity of package goods
an increase in the quantity of branded
merchandise carried. Most of the retailers stated in reply to

sold there has been

the Bureau's inquiry that there has

be.
ing tendency
customers when ordering goods to specify tinbrands that they preferred.
One of the problems facing the retail grocer is the .-election
of the brands that he is to carry on his shelves. Over one-half

among

their

of the grocers" reported that they were making an attempt to

restrict the number of brands that they carried in order to

keep down their investment in merchandise, to avoid losses

through deterioriation, and to obtain a faster rate of stockurn 1 1 is probable, however, that most of the stores still carry
an unnecessarily large number of brands in numcrou- line>.
Many retail grocers have private brands of their own in
some lines of merchandise. The articles on which the retailer's private brand is most commonly found are coffee, tea,
canned goods, and flour. Others also have private brands of
t

such articles as ammonia, starch, soap, olives, cereals, cocoa,

spices,

The

and bottled goods.

retailers

who

carry private brands believe that it is

attracting to their stores customers who<e

good advertising
trade they are likely to retain. In some cases the retailer
obtains a larger gross profit on the private brands and prefers
them on that account. He also is not forced to mark down
his own brands to meet the price-cutting policy of his competitors. The reason most commonly given for he preference
t

for retailer's private brands, however, is that it strengthenthe hold of the retailer upon the trade of his customers. Yet
in

he stores that

a higher gross

sell

profit,

private brands there does not seem to be

a higher net profit, or a lower figure for

expense than in the stores that do not carry private

The rate of sUx
urthennore, U about the
same in stores that tell private brands as in stores thai do not
nell them.
total

brands.

(,>i

vsim DISCOUNTS
Somewhat over one-half of all

were
main

n>

fa\.r of qua-

the stores reported thai they

i^xxinU from wholesalers and

quantity cliiicount is a
given for a large order.
V

the price that

that were opposed to quantity discounts, nearly one-half of
the total, the chief reason given was that they felt it gave the
in

ran unfair ad vantage over his smaller competitor.

others stated that they were opposed to quantity dis-

large retail'

Many

counts because these discounts tempted the small retailer to

and ix urlcwe through depreciation of his stock. As
i

instil

be expected, the larger stores were the ones that

rot of quantity discount*.

The

rate of stock-turn

about the same in stores that favored quantity discounts as in

those that were opposed to them.

IVlKHKSK
v retail

grocers kept any sort of a continuous inventory

on hand. This would require entries from

of their stock

and the numi* r <.f brands carried in the average

retail store is so great, and the average amount of each sale
so small that much -\tra work would be involved in lrMTiiig
a continuous
y. The few stores thai have installed
-11. -h a
system have apparently found it worth while. Under
present conditions prevailing in the retail grocery trade, howit does not seem
probable that the use of stock records
will soon become general.
As a substitute for a continuous inventory of stock on
hand, a purchase record is being used by a number of stores.

sales slips,

VGB desirable information to assist in buying.

84

A suggest^! form (enlarged in size) for these purchase records 18 shown on the opposite page. Tin- form can readily
be varied, of course, to meet the special problems of each
individual store.
inches m <i/r are used.
For these records, cards 3 X
is made OUt for each brand of merchandise earned.
">

One card

At the top the date of the

first

actual inventory

i-

entered,

and the quantity on hand when the inventory was taken.

In order to facilitate comparisons, the quantity on hand at
the next inventory date is also entered.
^u the body of the card in the first column the d;r

entered when each order

is

placed.

In the next column the

entered when the shipment is received. The third

column is for the name of the firm from which the goods ;m
purchased. The following five columns are for packages or

date

is

If a certain brand of cocoa were purtwo sixes, for example, one-pound and half-pound,
two of the columns would be used. At the head of the firM
column under "Size" would be written "1 Ib." At tin"
"
would be written
head of the second column under Size
Ib."
an
order
was
for
twelve
When
"|
given
one-pound
"
"
would be entered in the column
12
packages, the number
headed "Size 1 Ib." The total cost of the twelve one-pound
packages would be entered in the column headed "Total
If twenty-four half-pound packages of the same
Cost."
"
"
21
would he entered on the
brand cocoa were ordered.
second line in the column headed "Size \ Ib." The total
cost of the twenty-four half-pound packages would !>< entered similarly under" Total Cost." In the column headed
"
" Cost
the cost for each unit is entered. If the
per Package
total cost of the twelve one-pound packages were $3.60, this
would be divided by twelve and $0.30 entered in the " Cost
"
column. If the total cost of the twenty-four
per Package
half-pound packages were $5.20, $0.21$ would be entered in
"
"
the
Cost per Package column on that line.

units of different sizes.

chased

in

86

Th
column headed "Selling

of

package

The

is

entered in the

gross pn.fit

in

per-

centage of selling price i- entered in lie last column. At the

bottom of the card an entry is made of the total quantity of
t

each

si/.e purchased during the period covered by the canl.

one card were used for six months for example, tin- total
at the bottom would show the total quantity purchased durThe total cost of all purchases of this
ing the six months.

If

brand is likewise entered. An entry may also be made at the

bottom for the average length of time between purchases for
each size of package, to be determined from the entries of
order dates.

When such records are used, it is easy for the propi..

to guard against over-buying. This record will show when
the merchandise has been bought, and in what quantity.

When it is necessary to re-order, he can readily determine

the length of time it has taken him to dispose of the quant it y
bought on the last order. From this he can judge whether
or not the size of his order should be cut down.

If it

were a

slow-mover, then he would ordinarily reduce substantially

the quantity to be purchased on a new order.
By comparing these records with the stock on hand at as
frequent

intervals as possible, the grocer can detect slow-

movers before the time comes for re-ordering. This helps

him to keep his stock fresh and clean, and to avoid the expense and loss that comes through the accumulation of .-lowselling goods. Records of this sort are bcmu u--d wit h -uccess
and with comparatively little extra labor by several grocers.

ARRANGEMENT OF MERCHANDISE
An investigation has been made by an agent

of the

Bureau

twenty-three grocery stores regarding their methods of

arranging their stocks of merchandise. These stores were
in

representative of various types of business. They included

stores with a large volume of business and stores with a small

57

\!

im< of business.

-lin.i:

and

11>ry incltided

town* ami rurml diHtrirU.

-.nil

!..

in

top*

tttiiv

ajd

included storm

Thry
a medium grade
sJiio

KToccries, stores with

-.

tort

erf

foods,

stores selling low-price merchandise.

and shape of the door space

and because of differences in

(Terences in the area

in

m<ii

fixed,

arranging

then
sanx

ores,

patronage of crocej? stora,

Htandardiied plan of la>
id.-

..i

it

b obvious
*tore

aad

merchandise can be applied to all. In

lly two stores which can be laid out on just the
Nevertheless, the Bureau found that there were

tt><

substantial opportunities f<i improvement in the methods

of arrangim: tti<
rrhandisc in a large proportion of the
<tl.
These general principles seem to be obvious, but there are apparently many stores which are not

observmn

tlirm.

inain

customers can
'ii

'

least

tin-

h
i

tit

uu#t satisf;
-mlu. There
have adopted intentionally a policy
sales counters at points which are not

appears to irm-

The purpose

their customers.

IIM.M

tin

som

are

vaks

b<

kuiK such an arrangement

st<

passed

play-

is

of

to force the cus-

I MT.II r that more dis-fn making a purchase. This is

-uiintn* will

be induced to purchase

more goods. The results in stores following this policy do

not seem to be as satisfacton', as a rule, as in the stores which
re rapidly

customers can be served, the

sales expenses c

It is

doubtful, fur

long run a merchant succeeds in increas

ii'K

his sales substantially

by mak

MS convenirir

to reach the main counter where they will

M
Another minor point, which may be
portance

Time

is

of considerable im-

aggregate -aving-. i- tin- location of t.he Mates,

saved by having the scales locate.) near the bulk
in its

unter
goods. In determining the location n f the mail;
and Mich accessories as scale-, however, the delivery pl:ms
also must lie taken into account
A store that delivers a large
.

portion of
finds

located

at

merchandise and shipadvantageous to have

its
it

where

from the rear of the

it

its

main

counter

-ale-

delivery orders can be

In such a store care i- necessary to avoid
a jwtint

tin-

made up

Nocking
rapidly.
the approach to the main sales counter with merchandise or
with delivery baskets.
In arranging the merchandise,

it

is

primary rule

to

have

the entire stock of each article in one place.

In a mini!
stores that were visited this rule \va< not observed.
When

merchandise came
there

happened

in. it was put upon the shelves wherever

to be a vacant spot, irrespective of any stock

same brand already on hand.

that small lots of one article would be found

of goods of the

different places,

and some

of this stock

The
in

result wa.-

three or four

was becoming

-tale.

In general, customers can be served more rapidly and satisfactorily and goods can be bought more intelligently if the
is kept in one place.
have given the most careful attention to
the problems of arrangement, the merchandise is located according to the frequency with which each article or brand is
sold. In one store, for example, on the -helve- directly back
of the main sales counter were breakfast foods.
Then atto
wencanned
the
of
store
front
the
milks, cocoa,
tending
extracts, and spices; to the rear, canned vegetable goods.
The shelves in the rear of the store at the end of the sales

entire stock of each article

In the stores that

counter were

filled

These shelves could

with such articles as soap, bluing

1.from the main sales counter
I

by taking three or four steps. Under the main sales count, er

were bins for bulk goods, such as beans, rice, and sugar, or

helves
an.l

package* of these goods already weifbed

his arrangement permitted ihr

CM

wrapped

salesmen to

nlrr-

th.

fill

the

fern*

n&andise carried

Thelocati'
AH- on the anif

possible steps.

placing the goods

wan an active demand EM near aa possible to
.!..! M,.
liere wai the least acthe Halt*
In man \ other stores,
iemand at the more remot
mi ihi- uthiT liaixl. \\liere no systematic anrangemeir
in

ti

re

<

and

roes

recross the store

and

ravel

frequri

a single order. This

time that the amount sold by each sales..f

wasted so much
man was small ami
i>

tin-

tin-

goods that an-

MI.H-

pla.-.-,l

tilling

selling expense, therefore, high.

<-am<-<i

near the main sales coimi

.

111

hulk are generally located

y specialties an-tore

where

their

di-

fn-!: trim and vegetables near the door where they could
-everal stores slow-movm
custom*
be s<
were displayed on a table or
and Heasonabli
<>f

'

o.untrr
i

tliat

thi-

d
!y

in

U-liind thr

stodo of
Another method of
advantage.
some stores was to use the shelves immeinerchanmain sales couir
wav thrv roukl dispose of

their

wished especially to attract

disc

hese
were changed frequc
arrangements for display, however, were not permitted to
uith th< plans for serving customers conveniently
and rapi.lly.
that th<- turn- >|x-nt in arranging the merIt is apparent
attrnii>n.

lays

han.liM syatemnt

means economy

in selling

confusion and untidiness

and also counts heavily

in the

im-

40
pression given to customers of
of the merchandise sold.
In arranging

merchandise

in

tin-

cleanliness

the storeroom,

and chai
tin-

most suc-

cessful grocers followed a plan similar to that which worked

most >ati>fartorily in the store itself. The entire stock of

each brand or of each ait le was kept in one place, and those
articles for which the demand was heaviest were located
wheiv they were most readily accessible, 00
to MWe time in
i<

transferring goods from the store mum to the store.

Numerous instances were found in which there was no
semblance of order in the storeroom. In one store. \\ \
ample, empty boxes and merchandise were scattered around
<

itself.
No record was
and while the agent was in
the store the proprietor gave an order for a widely known
brand of crackers, stating that his stock was exhausted. A

promiscuously,

much

as in the store

kept of the goods in the storeroom,

few minutes later, in looking over the goods in the storeroom.

the agent found four cases of t.his particular brand of crackers
located in a corner behind a pile of boxes. These four cases

storeroom for about a year. This may not be

but
there are apparently a large number of
case,
of merchandise carried is too large
stock
in
which
the
stores
in which there is lo<s through
of
and
volume
sales
for the

had been
a typical

in the

deterioration because of the lack of order not only in the store

itself but also in the storeroom.
In filling delivery orders there is

a saving

in

ime by having

a regular system according to which all the orders for each

route are kept together. Some grocers have fallen into the
habit, in filling their delivery orders, of placing the delivery
baskets on the floor of the store instead of in their delivery

room, even when there is adequate space in the delivery room

for these baskets. In a few stores, on the other hand, which

among those that are most successful, careful consideration has been given to the arrangement of the delivery basket <

are

according to routes.

This arrangement avoids the nece

n
and result* in much
and tower delivery expense. In a store where
or lew conf union now exists, an inexpensive rack
of handling the banket* several times

km

tiston

times be placed

room. Sparer can be assigned

route
and baskets placed in the
dettvwj
rack according to the route to which they belong. This will
in tlu>

I:I,-K

<..

in th.-.i. livery

.-.i.i,

mean a worthwhile
grocer*

Having.
ii- of the
fin

management problem

profitable

it

><m.

'

COWOLDI
of the Bureau have covered numerous quesmanagement in addition to those disru*.,1- u'page*.
The testa that h:t\r U^n applied tci th.not in.lt.howev r
uethods that are capein u-s

MM-

PI.

.!<

s,

<r

rrnnnniic:tl

ci:ill\

ihrn-t'on-.

n-a.-hc,!,

protit:tt

th:it

Th.- concluKion

>lr.

tin-

vital

pofoll
iiianageinent of a n-tail grocery store :i
(1

hi

acccHintK, taking stock at least

<

has been

m fa

once a

:ir.

(2)

Toscctm-H

hi^ii >to.-k turn.

Avoiding ov

.tvhases to goods for which theni-in:iii,i

To

(3)

t*!<>iii

To

(5)

:i

a- tO

\\:i\

aexMirr

:i

sales per salesperson.

fixtures in the nton- in

'

we and

!.i<

'OCUSlOmeiB.

ill

iiiinununi

irli\-ry

r\|>ense,

Cfx

(6)

employing

xissible.
in-

heavy

lotwen

thr in>t
:in-

and

a ready

inCTH.

nl.t:iin a l:ni:<- \i>lui!>r

SUch

i*

ilfvrlopu^ an.!

In ion, lusion

it

M m:' li.-nini:
i

'h-

from

IMK!

-i

-iii-.-iwfill rrtHil
it

KP

bwiDMMi

should also be pointed out that there are

trades in whi-h

th<- a\-mgp opei

penses and the average gross profits are lower, in percentage
of sales, than in the retail grocery

few,

-tail

GENERAL

M1.IK

II

\\

USE STORES

In tin- course of its study of tin- retail grocery

before 1919, tin- Bureau received report! incidentally t'r. m
several general merchandi-e stores that wished to co()|X'rate
in
is

The

the research.

so do-ely related to

has been made

business of gnu-nil merchandise stores

tlie grocery
rade that a special inquiry
t

and reports received from !." general

merchandise stores covering tin- business year 1918. The
It is to be
results are presented here.
understood, of cour-e.
that the investigal n of tlie >u-iness of general merchandise
stores lias l.een far less comprehensive and
horoughg< ling
than the study of the retail grocery trade. The facts that are
stated here are based upon information from too few stoin I'M!)

i<

drawing any

justify

Bureau believes

final

conclusions.

that the n-Milt- have

warrant their publication

at

Nevertheless,

tin-

enough significance to

this time.

proprietors of 115 general men -handise stores located

small towns in thirty-eight states funiished reports for the

The
in

business year 1918. Of these stores 48% were located in hein the Middle West, 23.5
in the East, 8.5
in
West, 14
the South, and
in the Pacific Coast States. The volume
t

6%

of sales of

nil

kinds of merchandise

$8,400 to $520,000 a year.

The average inventory

$51,000.

higher in

in

these stores ranged from

The average annual volume was

MM!), than

in

was 14%

in these stores

January, 1918.

January.
accounted for chiefly by the higher range of

This

is

prices.

OPERATIC; EXPENSES IX GENERAL

MERCHANDISE STORES
The

figures for operating expenses in these stores

have been

adjusted to the accounting system for retail grocers, which

has been found applicable to the jzeneral merchandise bu-i
ness.

The

table on the following page gives a

summary

of

4*

TAW.

I!

HANI

<

\V:iK.-*f

T
J

Sulr.1,,1.-,-

Hbk-I00%

f"

Wrapping* ami Other

Selling

DM
.

(i

Management and

Office
*

*,

" 17

Total Delivery Kx|>eii*>

(ls

Postage and Other

Management

0.2

Kx|ieii.ie

and Management

;viiiK

JS
.

Inirn-M

Heat

l'n\\.

tii.l

.1

i.M^)

inrninr :iml

0.49
nni

n;i

0.09

DJO

0.0

OUT
-

oiil

piiH-nt

Repji

.pin.
j. -

:iri.l

Miacellaneoii

<

Total Expense

0.09
0.3

Jll

BJI

0.07

OJ8

IM.J

j,,|

!".*

>ss

n:;s

Q.05

I'pkeep

IV

Ha.l

iit

5.0

29.5

15.5

riT

.\\i

Lwl

Oiifi

S1J

(Jross Profit

Net

Profit (or

Lon).

IJ

Profit 17.7 /*-. 10.18 /*m>

1".,

operating expenses and profits

general merchandise stores

percentages are based u MI net sale-. The

common figure for each item is the one that is mo>t represenir romp
tative and may he used as a Standar
fur I'.MS.

All the

><

TOTAL

mimon figure for total expense in 1918 in these

This
stores was 15.5% of net sales.
merchandise
general
llu

e<

corresponded closely to the common figure shown by the reports m-eived for the preceding years. Most of the Btoree
that maintained their

own

delivery service showed a higher

figure than this for total expense, but taking the stores as a
whole ">.5
was the standard figure. This includes not only
1

sueli

expenses as wages of salesforce, advertising, taxes

insurance, but also a salary for the proprietor or partners.

both on borrowed money and on the proprietor's n<

interest

investment, and

rent of the store

whether owned or leased.

SELLING EXPENSE

The

which varied
figure

was wages of salesf.

The common
2.1%
substantial proportion of the stores, how-

largest single item of expense

in

was 5.6 %.

1918 from

to 13.08%.

than 5% for wages of sale

includes not only wages
which
expense,

ever, spent less

selling

total
of salesforce

but also advertising, wrappings and other selling expense, the

common

figure

was 6.4%

of net sales in 1918.

DKI.IVKKY KXPENSE

about one-half of the stores had any expense for delivery. In the stores that maintained their own delivery equipment the common figure for total delivery expense was 1.7%
<

>nly

of net sales in 1918.

Store* that employed cooperative de-

livery service showed a total delivery expense only about

one-fourth a* high as was shown by stores that maintained
their

own equipment.

M(

I*] MdKft

item m, hide* salaries and wages paid to the office

mployeeaand also a part of tlir *.la:
proprietor or
it.

i-

partner*

and

The common

nmiianmn

ua-

..fhrr salanr..

.<>t

it, -in

II-KKH- KxiKNJI
rharge* and upkeep expense
o.'>\', to 1.05%. The comI'.HV
was 2.2% of net sales.
D

in h\..l
i

tiuurr

from

iip-d

t,,tal

f,.r

Tin- \\a- ovef twice

high as the
stores,

that thr

Tin- tMtal intrn->t

I,

tal

k-tum

-..,

and

also intn,-t

..n

fact

in

merchandise
inrhnlr- inirn-t on MT rowed capiI

the average net invc-

t!

-hi.- t..

wasprobtihly

comnx

owing

\\a> lo\\.-r in genera)

thr roniinon tmntr

>liluly !-> than

m^.

pijx

CHMC,K- NM

figuri- for l.u>

the

1918 was 0.9%.

This was
a difference that
general merchandise stores
rade,

thr fart that

For the general

iiM.nly lonitnl in Minill towns.
t,.
P.MS, thr common
handise stores that re|><>t'
figure fo-

Thr rnininon
pensc, whirh

inrlu.lr.s not
!il

r.juipinrn;

net sales.

ti^niv for total ti\.-l <h urges

JM. \\.-r.

and upkeep

only total interest and rent Imt also

ta\r-. in-ur:in-r. repairs of store

and depreriation of store equipment, was

5% of

nrt

STOCK
The

11

l:\

IN

.l

v
-

highest figure for sto< -k-turn

was

13.1 tiroes

year.

This was in a store in which a large part of the sales were

groceries. The lowest figure for stcx-k- turn was 0.86 times a

46
year. The common
stores in whichever

fiin ire

was

few showed a stock-turn higher

eral it appears that an
ii

a year.
were groceries,

2.4 times

of the sales

;><!',

ili:m
n

times

hov,

year, li
the rate of stock-turn
1

;i

is

ordinarily possible of at tainment in these st<.n-.

MANAGEMENT PROBLEMS l\ GENERAL

MKIJCHANDIS! STOW SALES

On

01

DIFIVBBNT KINDS OF MERCHANDISE

the form that

was sent to general merchandise stores

each merchant was asked to state the amount of his sales of
dry goods, shoes, men's clothing and funii.-hin.us.
furniture, hardware and cutlery, crockery :tnd kitchen-ware,
farm implements and other line-.
'mm these reports perhave
show
been
to
the relative amount of
centages
compiled
>ales in each line. While in a few stores the sales of j-roceriewere only 15 % to 20 % of the total and in a few others over
80 %, in a large majority of the stores groceries made up abou
groceries,

one-half of the total sales.

In a majority of the stores the

sales of dry goods were about 20% of the total sales, slm,-

10%, men's clothing and furnishings 6%, hardware and cutlery 3 %, and crockery and kitchen-ware 1.5 %. In the s;
that carried furniture, the sales in this line amounted to about

2% of their total sales.

ments, the sales in

In the

store.- that carried

his line generally

amounted

to

farm imple-

about 2.5

of their total sales.

AVERAGE SALES PER CUSTOMER

The average sales per customer were

generally from $200 to

$300 a year.

CASH AND CREDIT SALES

One of the services commonly rendered by
chandise stores

is

general merto grant credit to their customers. Only

13

% of the mere!

cash

m*7

ti

uroished reports sold t

( these stores.
Inabouton*i

half <f the stores

-n

weeks to a month
length nf r, -in ua>

t\\<.

IM<1

III

was from two

the utorw the avtrajp

month*, in 15% from three to five

In ..nr-i.fth

..f

AVKUV..K SM.K-

SM

i-nc

|p|

MOM

average annual aalea per salesperson ranged from

to
wan $14.000. This is
$29,000
$5,900
tit
a |MI
since
the
stores in which the
index,
sales
low
were
ige
per salesperson
nearly always showed
<-

high salesforce
in th<

eeononiy

.f

a general merchandise store, as in

Mth.-r retail l.tijunoHMo

\

-luiiio

lp plans for obtaining a

high

of sales per salesperson.

PURCHASES OP PRODUCE
In uni.

.i

[Mirrha>rf:mii

inline stores it is

pr<

ncral

the

common

istomenor to accept
in<

practice to
it in trade.

hundise stores that furnished reports,

r<

th.-y received produce fmm their customers.

roduce received from customers varied, of course,
try in \\hirh the store was
rdmgtotheai

^ut-l that

located.

In thr stores that dealt in produce,

eggs, 72

% butter, 55

jxMiltry.

7%cream,5 r

II

These
thr

fruit .<md

',

lumU-r.
lanl.

M^

bought

meat and
vegetables, 31
r
1
cot
c grain,
ton, 16.5%

4%

hides and tallow.

-hn-v

figures are to be considered merely as an indication of

i.-alt in
by general merchandise stores,
woul.l
.i.-uhtleas
be changed if more
figures
rtain sections of the counbeen received
:

.-id

In thr Smith, f.iri-xjiinpl'

l>ut

ore* purchase cotton,

a
number
southern
small
of
only
general

stores furnished reports.

48
Tin* amount of produce purchased l'n>m customers ranged
from 1200 to $130,000 in MM*. En th* atom thai purchased
such produce as eggS and butter,
large group reported th;it
the amount <>f their tnt:il purchases of produce wa< from
$1,000 to $8,000, another group fnm $4,000 to $8,000, Then:t

\\ere also

numerous

ing to over $15,000

stores with purchases of produce

amount-

a year.

M.out one-fourth of the stores that purchased produce

from their customers used tokens, -uch as metal check- or
trade chips, in payment. Payment was also made in cash, in
merchandise and by credit in this radf. No one method was
used predominantly.
The accounting methods in general merchandise stores
Many of the
closely resemble those used by retail L
conclusions stated regarding accounting and management
methods in retail grocery stores also apply to general mer.

chandise stores.

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