Music Trade Review

OCTOBER 27, 1923
THE
MUSIC
TRADE
REVIEW
7
What Is the Overhead Expense Limit
The Relation of the Overhead to the Allowance Made on the Trade-in- -Selling the New Instrument and
Re-selling the Trade-in a Single Transactio'l1- -Losses on Trade-ins Should Be Charged as Part of
the Overhead Expense in the Sale of New Instruments
In any con,id e rati o n which is g ive n th e over­
h ea d p roblem in conn ec tion w ith th e pi a no de­
partmen t in the gener a l mu s ic store, unqu es tion ­
ably th e tra d e-in must pla ya lar g e part. Funda ­
mentally, t h e s ale of a tr a d e -in piano co s t ~ as
Illueh in ov e rh ea d a s the sa le of a new in s tru­
m e nt; in Illan y cases the proporti o n of e x pense
is g reater, du e primarily to the fact th a t trade­
in s arc often di sp ose d of by JIlean , o f s pecial
drive ' s w ith increas ed p ubli c it y exp e nse a nd
oth e r in c id e ntal incr ea ses.
But grant e d th a t
the unit cos t of a trade-in sa le is "till th e sa m c
a s that o f a n ew instrument, the problem lo ses
Jlone of its c omple x it y and mu s t b e con s idered
a t a ll times.
Relation to the Allowance
Ove rh ea d in handlin g trade-ins is esse ntiall y
a pr oble m in relation t o the allowanc e . \;<,1li e n
the la tt er is s et by competiti o n and thu s t e nd s
t o a hi g her fi g ure than w ill y ie ld a profit up o n
the ultimat e r esa le of the old in s trument , th e
ove rhead ex pense in vohed in h a ndlin g the en­
tir e transaction is lI s ually disre ga rd e d with the
res ult that , under pr o pe r accountan cy methods,
the tw o transaction s in v ol ved will prob a bl y
~ho w a n et loss. On th e oth e r hand, wh e n th e
allo wa nce is set by the ac tu a l value of th e in­
s trument tr a d e d in, plus th e co s t of puttin g it
into salable co ndition and .plus t h e ove rhead in­
vo lved in its resa le, the net p ro fit is protected.
O f c ourse, it is t o be under s tood h e re that a
ri g id sys te m su c h as thi s cannot b e a dher ed
to und e r an y and all conditions, for in de a lin g
witlt th e int a n g ible c lem e nt s involved in ev ery
sale rul es a nd re g ulation s mu s t have a c e rt a in
d eg ree of fl ex ibilit y . It is th e ref ore essenti a l
th a t some m ean s b e found to kee p this flex­
ibility within s uch bounds of s afe t y that they
will automatic a lly c he ck the de ve lopment of
lo sses in v ol ved in h a ndlin g trade-ins which are
sur e to ri se under cert a in conditions alld thu s b e
a perm a nent part of th e lTI arg in allowed to cove r
the exp e nse o f a ll ~ al es .
Charging Expenses of Trade-ins
.\ dealer w h o has bcen suc cess ful in develop ­
in." s u c h a sys tem in hi s business uses a method
whi ch m ay be bri e fly o u t lin e d as follow s : E v ery
m ean s is us ed to k ee p a llo wa nces clo se to the
re sal e v a lu e of the instrum e nt. Whate ver losses
there m ay b e in dispo ~ in g o f acc umulated tr a cle­
in s are av cra!!;e d o v er a certa in p e riod of tim e,
s ix month .- fo r in s tance, whi c h is lo n g enough
t o a pproxim a t e th e actual conditi o n, :1nd th e
pe r cf' nt age loss c h a r ge d to o ve rh ea d as an
a ctu a l se lling expcn se. In other word s, in fi g­
urin g th e mar::;in bet wee n the cost pri c e of th e
new i ns trum e nt and th e se llin g price that m us t
he receiv e d t o co ver overh ea d and net proJi to ,
lo il e d where th( 'y ac tually belon g , th a t is, as part
o f the ne t "ellin g cos t.
T hi s is g ood a ccountan cy and it wo uld be
thou g ht th a t every r e tail pi a no merch a nt w ould
follow a s imilar m e tho d. Y et, stran ge as it
may se e m, th e re arc man y o f th em to-da y wh o ,
s o far a s t he m c thods th ey fo llo w are con­
ce rned, " ee lll to lac k any appr ec ia tion of th e
re la tion that (" ,i SIs bet\vcen th e sa le o f the ne w
in s t rum e nt and th a t o f the trad e- in whi c h is
in vo lve d th e rein. F und a m e nt a lly, thi s is a s in g le
tran sac ti o n which is n o t c omplet e until th l~
traded-in in s trUllI e nt h as bee " di spo s ed o f at a
price suffi c ie nt t o Co \ er not o nl y the origin a l
a llowanu m a d e, but of the cos t o f puttin.g th e
instrument in s hape , plus th <.: ove rh ea d involved
in r c,e llin"
First Depreciation
S om e time ago in a n a rti c le appcarin ~ in The
He v iew it wa s point ed out that the fir :' t d e­
[Jr ec ia ti o n upon an y pi a no is the ov e rh ea d in­
\'ol w d in its origin a l sa le. Tn other w ord s, if
~. custom e r w e re to bu y a n upri g ht in s trum e nt
a nd a month lat e r that in s trum e nt were to b e
o ffered a s a tr a de -in upon th e p urchase of a
g ra nd---thi s is a n extreme case, but one that
s om etillles happ e ns- t he upri g ht would ha ve
d epre ci a ted to the ex te nt of the o ve rh ead in­
vol ve d in its pri ce a nd 'which it h a d co s t to
mak e th e sale. 1 Jpo n th e ordinar y t ra d e-in,
howev e r, a n in s trument whi c h ha s been in th e
hands of its owner for pe rh a ps many year s,
the probl e m ass um e s a sli g htl y diff e rent aspe c t.
H e r e the ov e rh ea d s hould be fig ur ed a g a in s t
th e possible res a le va lu e and char ged off im­
m e diat e ly as a d e prec ia tion before th e ul t im a te
a llo wa n ce i, fi xed . If t hi s be don e, th e ma r g in
of saf e t y in the tra nsa c tion is mu c h wid e r t ha n
when th e c le ll1(' nt of ov e rh ea d is disregard e d
entirel y in fi g urin g the allowan ce which should
b e gi v en.
A Necessary Evil
Th e trade-in is admitte dly an evil, but it is
a n e vil which is al wa ys g oing to be with us
unle ss th e r e tail pi a no merch a nt is willin g t o
lilliit his po t e ntial mark e t to new custom e r s
entirely. Th e refore, no effort s hould be sp a r eel
to miti g at e the evil con sequ e n c<,s which it
b rin gs in its tr a in. This is p e rf ec tl y fea s ibl e,
for th e re arc ret a il d ea lers who, thro ug h proper
ha ndlin g of their tr a d e -in problem s and throu g h
a cons ta nt watchfuln ess r eg ardin g th e var ious
elemenb t hat enter into eve ry tr a nsac ti o n
wherein a tra d e-in is invoh-ed, ha v e succee d ed
in makin g th e trad e-in se c tion of th e ir busin ess
y ie ld a certa in profit. It m ay not be a lar g e
o ne, in fact, it n ev e r is, but at leas t it is no
e le m e nt of constant loss such a s is s o often
found in the avera g e r e tail piano ware ro oms
when the problem of the tr a de-in is in ves ti ga t e d.
Effect on Selling Policies
\-Vh e n th e ret a il merchant wa t c hes the qu es ­
ti o n of o vc rl lea d in relation t o the- trad e-in
p ro bl e m, he is .~· oin g to di sc ov e r th a t s uc h a
po li cy will hav e quit e a degree of e lTec t upon
th e w ork of his sa l e~ mcn. To-d ay , a s it has
been ior m a ny years, t h e s ale of a ne w in s tru­
ment involv in g a trade-in is th e line of least
resistan ce for the sale s man . It is an e as ie r
matter to s e ll a pro s pect who has a n instrum e nt
t o trade in, prima rily because th e pro s pect, in
a m a jority of cases, regards the allo wa nce made
t h e re o n as a form o f discount from th e real
s e llin g p ri c e. It is an eas ie r task to s ell a pros­
pect wh o is already sold II pon the ide a o f the
piano th a n it is to sell on e who ha s never own ed
an in s trum e nt. .\5 a con sequ e nce, it is pe r­
fectl y na tura l for the a ve ra ge sa les man to con ­
ce ntrate upon tho se prospects with w hom he
sees the great es t c han c es of success, w ith the
r es ult that th e pro [)o rtion oi sal t'S wherein
trad e-in s a r e in vol v ed te nd s to increa se a t th e
expen se of the proportion o f s ales where pro s ­
pects ar e be coming ne w piano ' owners. Thi s
tenden cy, a nd it has gone so far that at tim es
th e piano trade has been said to b e lar g ely a
re place ment bu s in ess, only seems to increase
w he n the dealer him se lf neglect s th e rel a tion
th a t ex is t s between th e que s tion of o ve rh ead
and th e a llo wa nce. Th e r ef ore, not only do e s
he suffe r lo s s es with th e tr a de-in per se, but
the e x pan s io n of his g ro s,; volume of sale s
t hro u g h crea tin g new o w n e r s is con s tantl y
be ine; checked. If thi s were th e case w ith a
fe w d ealers it w o uld , of course, ha ve but little
.-ITec t u pon the " x pa ns ion of the entir e indus­
try; but to -da y, and for s ome y ears pa st , it
ha" b ee n s uffi c iently important to be on e o f
the bi g fa c tor s that ha ve cau s ed the piano in­
du s tr y to lac; in re lat io n to the in crease of
wealth a nd population of th e country whi c h is
its prim a ry m a rket.
A Single Transaction
This brief res um e of the tr a cl e in s ituation
as it exi s ts in r e la tion to the overh ea d problem
i.s s ufficient t·o show th e injurious effec t s which
its n eg lect has brou g ht i'-; its train. No r etail
pian o m e rc hant, no malt e r how lar g e hi s bu s i­
ne ss m ay be or no matt e r how s lllall, can affo rd
not to g ive co ns ideration to th is problem . If
h e will but vi s ua li z e thc enti re s ituation as an
c le ment in the - cllin g c o s t of ne w in st rument.;
a nd if he will d efinit e ly provide in th e o ve rh ead
for th ose losses whi c h a t times ar c in ev it a ble
he w ill find not onl y th a t th e trade-in problem
ha s beco m e a comparati ve ly s imple matter, but
that hi s se ll in g policies w ill b e inrreas ed in
e fficien cy a nd r e" ults iron) bot h th e standpoint
of g ross sales a nd net p r ofit s. For when a ll
is said and don e, t h e s ale of a new in s trument
and th e resale of th e o ld instrum e nt is a single
tr a n sac tion , sin c e th e tr a de-in itself is nothing
sa ve an indu cement for t he pro spect to bu Y;
Once thi s is realized th e trade-in be c om e ~
lar g el y a pro blem of o ve rh ead a nd in that wa y
alone can it b e p roperl y handl e d .
AN INTERESTING NEW BROCHURE
Attractive Volume Just Issued Is Devoted to
the Welte-Mignon (Licensee) Reproducing
Action and Some of Its Possibilities
The Allto P n e umati c Action Co., of Nev.'
Y ork, manufactur e r of the famou s Welte­
:Mignon (Licensee ) r eproduclll g a c tion, ha~
ju s t publi s hed a new bro c hure of exceptional
interes t from the four point s o f view of t ra d e
histor y, of technical a c hi ev e ment, of a r ti s ti c
book-makin g a nd of s ale s effec tiv e ne ss.
The high qu a lity of the book is a pparent in
..ve ry detail. Th e co ver is a h eavy brown,
leat h e rlike pape r wi t h a three- color illu s tration
sy m b o lic of the b eaut y a nd joy of mu s ic. The
Hy-l ea f conta ins a qu o t a ti o n from l~ r rs id e nt
Coolid ge co n cerning th e d emoc ratic app ea l of
lIlu s ic; from there on e very page in the bo ok
is interestin g a nd deli g htful with life -like h a lf­
tones of famou s \-Velte-Mi g non (Li ce nsee)
a rti s t s or beautifull y printed hi s tori ca l, t ec hnical
or mu s ical fact s .
In th a t s ection of th e book which is d ev ote d
to th e \ -V elte-Mignon libr a ry are conta ined
quotati o ns from the end o r sr m c nts b y fa m o tl s
artists of th e W e lte-Mi g non . H e r e arc to b e
found such nam es a s Hofmann , Ga brilowitsch,
D c Pachmann , S tra uss, Du s oni a nd man y
oth e r s. The las t two pages of th e hook arc
g ive n ove r to a list of th e wo rld-falIled p ia ni s t s
who se pl ay ing may be h ea rd on th e vVe lte­
Mi g non (Lic e nsee ) .
RETURNS FROM A TRIP TO EUROPE
SCH ENECTADY, 1\. Y. , October 20. ]. H. Crapp,
Ill anage r of the pi a n o a nd talking m ac hine de­
pa rtm e nt ' o f the H. S. Ba rn ey ('0., of t hi s c it y,
ha s ju s t re turned from a t wo month s ' trip in
Europe. YIr . C rapp w en t t o E n c; land to v isit
bi s peopl e th e r e a nd took th e o pp o rtunity t o
h O over to F ra nce , where he v is it e d the battle­
rl e ld s. Mr. I ra pp is conductin g a sa le on pianos
to co mmemorat e th e nin e tieth anni ve r sa r y of
the s tor e and ha s be en a bl e to plac e a la r g e
numb er o f pianos into th e h o mh of pe opl e h e re.
Knabe, K o hl e r & Campb e ll, H a zelton , L ind e ­
lllan piano s a nd Vic tor talki n g machinc s a rc.
handled.
~",-L_