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AUGUST 2,
THE
1924
MUSIC TRADE
REVIEW
5
Co-operation and the Trade-in Evil
George Q. Chase, President of Kohler & Chase, San Francisco, Before the First Annual Convention of the
Western Music Trades Association, Points Out How the Piano Dealers Can Eliminate Losses
in This Direction by Co-operating Along These Lines
H E trade-in problem is a bigger and more
important one than most of us have real-
ized. The term "trade-in" seems to have
acquired in the piano business great potency as
a pain-killer. We complacently accept losses la-
beled trade-in that would startle us under any
other name. This rose by any other name
would not smell so sweet.
Should your bookkeeper make a mistake
some month and put your loss on trade-ins
under the heading "Salesmen's Expense" there
would be some excitement around your office
until the loss was labeled "trade-ins," whereupon
everything would be calm once more. If the
erring bookkeeper happened to place this loss on
trade-ins under the heading "Taxes" and the
error was rfot immediately detected, most violent
language would be directed at Uncle Sam. I can
hear the words confiscation, ruin, outrage, in the
conversation you would have over the phone
with your attorney. I can hear you appealing to
the chamber of commerce and other organiza-
tions, and certainly those in the internal revenue
department at Washington would wonder why
their ears burned.
On the other hand, supposing the bookkeeper,
after a night spent in making a monkey out of
Mr. Volstead, should by error get the loss on
trade-ins entered in with the "Net Profit." How
rosy the world would look. What a fine busi-
ness the piano business would be, and I fear
before the error could be detected you would
have purchased a new automobile or have sent
the family to the country so that you could
celebrate in fitting style your amazing new pros-
perity. But when this error was ultimately dis-
covered and labeled "Loss on Trade-ins," I be-
lieve the old pain killer would do its work and
the bookkeeper alone would get all of the
cussing.
But blessings often come in disguise, and if
this innocent error of the bookkeeper would
only set the owner thinking, it might be that
with a little intelligent effort properly directed
he could transfer that loss on trade-ins, or most
of it, into his net profit column. At leSst, the
mere possibility of such a thing should suggest
that a sincere effort should be made to accom-
plish so desirable a result.
If you look at the matter another way. Sup-
pose a wealthy eccentric should go to you and
say, "I will give you your store or stores rent
free." You would surely feel that a good profit
on your business would thereby be rendered
certain. Your road to success would look
smooth and easy, and yet, if we compare our
losses on trade-ins and our rent bills, I am sure
that in many instances you will find that we are
losing more under the heading "Loss on Trade-
ins" than we are paying the landlord for store
rent.
Loss in Twin
We mustn't overlook the fact that loss on
trade-ins is twin. We have first the direct loss,
the difference between the amount we allow and
the amount at which the trade-in is placed in
stock. Secondly, we have all the usual handling
and bookkeeping charges against this second-
hand instrument, plus mechanical charges, added
to the fact that we rarely get a full profit when
the used instrument is resold.
I have heard dealers say: "Oh, I make a profit
on my trade-ins." But I find that what they
generaHf mean is that they make a small gross
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profit above what they have allowed. The gross
profit rarely is large enough to take care of the
selling, service and office expense, to say nothing
of other indirect losses they have failed to
figure.
Our trade has a worthy and necessary public
service to perform. Music is a necessity, the
third in importance to human beings, following
after food and shelter, although a banker told
me the other day that the automobile seems to
have crowded music into fourth place.
The public demands prosperity in those who
serve it. The rules of the game of business laid
down in the public interest are plain and strict
on this point—you must make a profit or cease
to exist. The public provides jails for those who
take what doesn't belong to them, and provides
bankruptcy courts for those who don't take
what belongs to them.
Over-Allowance
Over-allowances are destructive of legitimate
profits and are therefore against public policy.
"But," say some dealers, "over-allowances don't
destroy our profits. We boost the prices to pro-
tect ourselves." They forget that the best mer-
chandisers long ago learned the folly of trying
to flim-flam the public. Did Armour, Swift,
Ford, Marshall Field, John Wanamaker, Wool-
worth or any of the great merchants attempt
to bamboozle their patrons? They did not.
None of them would have been smart and
shrewd enough to succeed on that basis. Just
try to remember the names of those clever,
sharp, horse-trading fellows who were the com-
petitors of those merchants. You would have
to search the graveyards and potters' fields of
failure for their names, and even there you
would find no monuments to their memory.
"Ah," one might say, "but didn't many of these
great merchants get together and form combina-
tions, thereby making large profits, and espe-
cially didn't the packers co-operate to control
prices and profits?" Of course, they did. They
had the brains to see the enormous wasteful
losses of destructive competition on the one
hand and, on the other hand, the enormous
legitimate profits to be derived from intelligent
co-operation, and they were big enough and
broad enough to forget personalities and get to-
gether. Otherwise you would never have heard
their names and you would be paying more
money to-day for less wholesome meats. The
packers gave better public service and profited
greatly.
Pioneers
These men were pioneers in regulation
through co-operation, and the opportunities for
gain were so limitless that they probably went
too far—took too much profit—so Uncle Sam
stepped in and said: "You are getting too rich
and too powerful through this co-operation. So
I will lay down certain laws and rules to limit
you." But the laws were made liberal and the
packers have gone on piling up profits and, I
think, are serving the public well.
Many other groups of merchants, small and
large, are now operating within the rules of
the game until this intelligent regulation of busi-
ness through co-operation has come to be the
modern method. Yet, we in the piano business,
while co-operating in many worthy ways, have
not yet learned how to regulate the evils of our
business through association.
It seems to me that the trade-in evil lends
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itself easily to such regulation, as would also
the secret commission evil (which, by the way,
is illegal in England) and the crooked adver-
tising evil. It seems to me that our failure in
the past to regulate the trade-in problem has
been due largely to the fact that we have not
recognized it as a local problem. We have
looked for some national solution. The activity
of the National Association in investigating the
trade-in problem and classifying the various
makes as to their second-hand value is a worthy
effort and the information secured should be a
valuable guide to any local group of piano deal-
ers. But the National Association, it seems to
me, cannot furnish the answer to the problem
along these lines. It is the local dealers in each
town and city who in their competitive fields are
cutting each other's throats, while incidentally
cutting their own, and these competitive dealers
are the ones who should get together and by
eliminating the trade-in as a competitive factor
should find a way out.
Wake Up Locally
We must wake up locally. I do not believe
we have found as yet the right plan for local
organization but I think we can learn something
from other lines of business. Take the base-
ball business, for example. In that business they
found that, due to the extreme rivalry of the
owners of the various clubs in a league there
were many matters affecting them all which
they could not collectively agree upon. Neither
could one of their number act as president be-
cause his personal interests were involved and
he would become the object of suspicion. So
they found a man of unquestionable integrity
and good business judgment and a man worthy
of their confidence, employed him on a yearly
contract at a good salary and placed in his
hands arbitrary power over a certain part of
their business specified in the league by-laws.
In the piano business we have in each com-
munity an intense rivalry almost paralleling that
of the ball club owners. For a long time it has
seemed to me logical that we should organize on
similar lines. That is, we should elect a neu-
tral president of high standing and place in his
hands arbitrary control over such matters as
trade-ins, secret commissions, crodked advertis-
ing, instalment legislation and possibly other
matters which affect all of the dealers col-
lectively.
Handling the Trade-in Problem
A local association so organized would handle
the trade-in problem, I believe, with very little
difficulty. All of the appraising should be done
by one appraiser under the supervision of the
president. Dealers would accept the association
appraisal without the loss of time or expense
in sending their own men, thus eliminating the
question of allowance as a competitive element.
Customers could be closed on the first call with-
out waiting for an appraisal on being assured
that they would be allowed a valuation set by
the association. The cut-price dealers could still
cut prices, but they would be out in the open
and not cutting prices by the underhand method
of over-allowance. There would be no danger
of information leaking as the pianos appraised
would be carried in the association office by
name and number only. Dealers could secure
the information regarding the amount of an
appraisal by giving the name and number of the
instrument.
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