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THE MUSIC TRADE
REVIEW
The Question of Credits in the Piano Trade.
By W. N. VAN MATRE, President of the Schumann Piano Co., Rockford, III.
You ask me to write my opinion as to piano
credits. The first thing to be considered in credits
of any kind is supply and demand. If you increase
the supply above the demand it necessarily must
force your sales ; and forcing sales either causes a
reduction of price or an extension of credit, both
of which are extremely dangerous to manufactur-
ing interests.
There is no other business that is run on the
same basis as the piano business. This comes from
the fact that fewer good business men are engaged
;
ii the piano proposition than in any other line of
business. A furniture dealer who is in the habit
of paying cash for his furniture will buy a piano
from a manufacturer and expect him to carry this
piano until it is sold before paying for it.
A customer will come into a music store who
does not even have a steady job and pay $3 down
with a promise to pay $5 more per month. This
piano will be delivered to him without so much as
looking him up. If this same customer should
enter a furniture store, or any other store, to buy
any other article you can think of, he would be
looked up as to his habits, earning power, whether
or not his position is permanent and, above all, his
honesty.
There is no reason in the world why a piano busi-
ness should not be conducted on precisely the same
lines as any other business. It is an artistic product
and, first of all, should be conducted in a high class
way.
Piano Credits Are Misunderstood.
Piano credits are misunderstood simply because
so many men are in the business who do not under
stand credits of any kind. Take, tor instance, the
little dealer in the country. He will buy a piano
and agree to pay $100 for it on four months' time.
He has no capital of his own, still he will sell this
piano to a customer on $5 monthly payments. He
reasons that he can negotiate this paper with a
loan company in time to pay the manufacturer for
the piano. So he goes ahead and sells the piano
on $5 monthly payments before he has made ar-
rangements to negotiate the paper.
\*ow supposing, for instance, he should sell this
$KH) piano for $300 (which on the face of it would
be robbery) and receive $5 as the first payment.
These payments will not average $4 per month by
the time the final collection is completed. But
supposing they are paid promptly. In the first place
he must pay the freights on this piano, stool and
scarf, drayage and other incidental expenses that
will run on an average of $20 cash. The other
selling expenses of the piano, the way they are han-
dled the world over, is not less than $50. Add this
to the other items and you have $70 selling ex-
penses. Every dollar of which must be paid before
the second payment is due on this piano. Conse-
quently your dealer has paid out $70 and only re-
ceived $5.
Now, as I said before, he starts without any
capital doing this kind of business, so he is $65
short. At the end of four months he has collected
$20, always providing the piano is sold the day he
received it and the collections are kept up promptly.
The note comes due and he has nothing to pay it
with. He is still $50 short on the money he has
paid out. Now he resorts to a loan company as
the only way to make good his obligations. He
goes to Mr. Loan Man and says, "Here is a lease
wherein a piano was sold for $300, perfectly good;
they pay each payment on the day it is due, con-
sequently have paid $20 on this lease, leaving a
balance of $280. This note is as good as gold."
But the man lending the money does not think so
and expresses himself in the following way: "If
you have a fair rating and will endorse this paper
I will take it at a discount of 12 per cent., which
will leave the net amount of the note $246.40."
The dealer thinks this is a nice bargain, as he
still made a nice profit on his piano. But the man
loaning the money says: "You do not understand
me; I will not pay you the $246.40, but will ad-
vance you 70 per cent, of this, or $172.48," and the
dealer still thinks he has made a good profit.
I believe 1 can safely say that not over 75 per
cent, of these deals stick. And in that case the
money received would still be reduced another 25
per cent, at least. So you can see that not one
man in 1,000 can afford to discount piano paper in
this way and still expect to make a profit. Still, if
this man keeps on doing business and can get a
large credit from a manufacturer, he will last a
few years, but he is sure to fail in the long run.
Now, overproduction causes the manufacturer to
extend credits and cut prices in a way that he
would not do were he to manufacture a reasonable
number of pianos. You will notice that in my esti-
mate I have placed the wholesale price at an ex-
tremely low figure, and the retail price at an ex-
tremely high figure.
Two Ways of Doing Piano Business.
In my opinion there are just two ways of doing
piano business. One is consignment and the other
is selling outright, the same as you would sell any
W. N. Van Matre.
other manufactured product. Consignment piano
business can be carried on in a profitable way, pro-
viding prices are high enough to justify it. But
my plan of selling consignment goods would be to
charge the dealer enough more for the piano to
enable the manufacturer to carry the paper and col-
lect same if the dealer should fail. This can only
be done, however, where a manufacturer has capi-
tal enough to carry on business of this kind, or
credit enough to borrow money irom the banks at
an interest rate not to exceed 6 per cent.
A manufacturer doing business of this kind must
consign at a price that will enable him to give a 20
per cent, discount for cash in thirty days, a 15 per
cent, discount for cash in sixty days and a 10 per
cent, discount for cash in four months, taking the
customer's paper drawing 6 per cent, interest, en-
dorsed by the dealer, with fair collateral to insure
the payment of sales that default.
The dealers have an idea that the manufacturer is
carrying them, which is not the case. Nine out of
ten manufacturers who are taking the dealer's paper
are enabled to do so by using the dealer's paper as
a collateral loan to his bank.
Bankers are curious people. They are liable to
want their money any day. The least little dis-
turbance and they are liable to call a loan; and
about the time they try to call a loan on piano
paper something is going to drop. They are learn-
ing this by experience, and this is going to cause the
banker to scrutinize piano paper very closely before
he accepts it. Now, for instance, supposing we
should cut the output of pianos in two and sell
them at a fair manufacturer's price to dealers who,
in turn, will sell them only to customers who can
afford them; and let the man who is not in shape
to buy a piano wait until he can do so and keep
up his payments as he agrees to, the piano busi-
ness would be in better position and we would all
make more money, both dealers and manufacturers
I know dealers in this country to-day who are sell-
ing from 200 to 300 pianos on this plan of busi-
ness that would get along nicely on one-third of
this amount run in the right away.
No Such Thing as "Piano Credit."
I started out with the idea of expressing my
opinion on piano credits. There is no such thing as
piano credit. The salesman starts out with the
idea of selling a carload of pianos to some dealer.
He docs nut go l<> this dealer and talk the business
over with him in an intelligent manner, discussing
the credit and ability of the man to pay; he simply
wants an order for a carload of pianos. He sends
this order in to the credit man to look up the
credit of this concern before shipment is made.
The salesman should be the credit man and he
should obtain information that would enable him
[o judge this credit before sending in this order.
The credit man is too far away. He is liable to
tvrite a bank and this dealer may be owing the
bank a large amount of money. The bank says he
is good for all you can sell him. He writes an-
other bank and it says, "We refer you to his bank."
lie writes a brother manufacturer and this same
dealer is into the brother manufacturer to some
little extent and he is not going to say anything
very bad about this dealer until he gets his money.
So what foundation has the credit man upon which
t.) base his credits?
If a real manufacturers' association could be
I'ormed, where the members would be frank with
each other, a basis of credit could be established
where a minimum of loss would be the result.
There is no business on earth where a bettor se-
curity can be established than in the piano business
if the sale is made right.
Would you, as a business man, buy any article
in wearing apparel, or anything else, from a firm
which would advertise, "We will sell you a suit of
clothes $1 down and 50 cents per month?" You
ivould know on the face of it that this would be
the cheapest possible suit of clothes that could be
manufactured and sold at an enormous profit.
Otherwise the dealer could not afford to make such
terms.
The same rule precisely applies to the piano busi-
ness. You will most always see the piano that is
sold at $1 down and $1 per week is priced at $750
and sold at $250, and never cost a manufacturer
more than $75. Any man who has ever investi-
gated these pianos knows this assertion is true.
I defy you to show mo one single piano of a
high-grade manufacturer which soils on these ridic-
ulous terms, even though he advertises something
better, he never sells anything but the poorest.
And his reason for advertising a reliable name is
to draw the ignorant customer into the store in
order to sell him something cheap.
No Better Security Than Good Piano Paper.
In my opinion, there is no hotter security to bo
used as a collateral in borrowing money from
local bankers than piano paper, if the pianos arc
sold the customer at a fair price and the customer
is honest and able to pay.
But the man who will buy a piano and agree to
pay $400 at $5 per month, with (i per cent, interest,
is not entitled to credit. His doing so shows him
to bo an exceedingly poor business man. The in-
terest on this investment will amount to $79; and
everyone knows that a dealer cannot afford to sell
a piano on time without interest. He must either
include the interest in the selling price or it must
be paid up on the lease.
Now the banker taking this paper as a collateral
security should know something of the wholesale
value of the instrument sold. If he were going to
loan money and take a farm mortgage he would
(Continued on page 9.)