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REVIEW
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VOL. LXXIX. No. 15 Published Every Saturday. Edward Lyman Bill, Inc., 383 Madison Ave., New York, N.Y. Oct. 11, 1924
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EPORTS which may be considered authentic are coming from agricultural districts in the West to the
effect that in many communities farmers, and those who depend directly upon the farmer for their
income, are beginning to liquidate indebtedness which has existed for three years or more. This is
the direct result of the improvement in the farm situation due to the higher prices that are being
secured for farm products, particularly grain.
We find, too, that in the big industrial centers, with the possible exception of certain districts in New
England, there is a minimum of unemployment and that the workers, being in receipt of regular wages, are
building up cash surpluses in savings banks and otherwise showing signs of prosperity.
All this leads to the question as to just what music merchants are going to do about getting terms con-
sistent with conditions and eliminating long-time paper which, even in periods of business dullness, can find
little excuse for its being. Judging from advertisements that appear in many of the leading newspapers of the
country, there still persists the dealer who makes his chief appeal for business on the basis of long terms. In
other words, the habit of urging the prospective customer to demand long credit appears too firmly imbedded
in some cases to permit of it being changed as the result of an improved situation.
Demanding and securing shorter terms, in the f ice of the ability of the average prospect to meet them,
is not alone a matter of good business sense or of taking advantage of a favorable situation. It is, in this in-
stance, a plain matter of self-protection, for if the music merchant is lenient with the well-fixed prospect that
individual is quite likely to spend the money that should have gone but did not go to the piano or talking
machine dealer for some articles that might fairly be called competitive.
In the financial world, when money is scarce, credit restrictions are raised as are rates of interest. But
when money is plentiful and there is not a heavy demand for accommodation the interest rate drops steadily
and consistently. In other words, the money market follows the law of supply and demand in matters of both
credit and interest. The dealer who sells on instalments, however, does not regulate his terms according to
that law of supply and demand even in the case where he regulates them at all.
By this it is meant that when the retailer, in his anxiety to build up sales volume, follows the line of
least resistance and offers long terms with a view to stimulating a buying interest that appears to be more or
less slothful he sticks to that principle as a matter of regular business practice and continues to offer long
terms when business is on a normal basis or better and when it does not require an artificial stimulant.
With the general situation, as it exists today, it would naturally not be policy for a dealer to attempt to
put his business on an all cash basis. But he can find in the situation an excellent opportunity for cleaning
house so far as credits go and he can demand and receive terms in accordance with the ability of the average
prospect to pay. When reasonable terms appear to horrify the prospective buyer it is likely to mean that he is
a poor credit risk, for, by the law of averages, this is a season when he should be able to make a substantial
down payment and assume a twenty-four or thirty months' obligation without suffering distress.
As has been pointed out on numerous occasions, it is not the customer but the dealer himself who is re-
sponsible for long time and, consequently, inferior credit risks. When the matter is left to the customer him-
self, as has been proven by experiment, he is ashamed to offer the minimum terms that would be accepted by
even a good sound house. He realizes, for instance, that he himself would not care to loan out $500, for ex-
ample, and receive only $25 of it as first payment and the final balance at the end of three years. One promi-
nent house which advertised leaving the question of terms to the customer found that the average down pay-
ment under this system was 20 per cent and the average term within twenty-four months. That was what the
customers considered fair. The music merchant, however, does riot only want to appear fair but positively
generous. That is why he cuts the down payment in half and adds 50 per cent to the length of the terms.