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The Percentage of Mark-up on Pianos
and the Dealers' Expenses
An Address by James J. Black, Treasurer of the Wiley B. Allen Co., San Francisco, Cal., for the Annual
Convention of the Western Music Trades Association in Seattle—Mark-up, at the Present
Time, Declared to Be Insufficient to Meet the Dealer's Needs
ENTLEMEN: In discussing the ques-
tion as to whether or not the present
mark-up on pianos is too low, and in
order to avoid unnecessary contention and ar-
gument, my remarks do not apply to him of the
five loaves and fishes, that miracle dealer who
always shows a profit in fair weather or foul,
whose collections are always 100 per cent,
whose reversions are next to nothing, and who
never knows at any time whether or not he is
solvent. Neither is it necessary to consume-
precious time in a mass of financial statistics
relative to facts of which all progressive and
thinking dealers are aware. So consequently
it will probably be more harmonious to discuss
the necessity of increased mark-up from this
angle—is the present expense connected with
operating the retail piano business too high in
relation to our retail sales profit, and, if so, is
our mark-up too low?
If our percentage of net profit on retail piano
sales in this day and time is too small in pro-
portion to our invested capital, and we feel that
we are getting our relative share of piano sales
in our respective localities, that our operating
expenses are as low as the present modern
methods of conducting a well-regulated music
business will permit, then our mark-up is too
low. If, however, on the other hand, we music
merchants are conducting our business in a
lavish and extravagant manner far out of pro-
portion to the market for our merchandise,
showing no relative business judgment in our
financial expenditures, then our expenses are too
high and the attendant lack of net profit lies
not so much in the mark-up, but in the proper
regulation of expense to that mark-up.
Business as it is conducted to-day in this fast
developing country of ours has ceased to be a
hit-and-miss affair and the question of whether
G
or not the proper mark-ups are being main- business when it was piano business and piano
tained in order to show a fair and equitable business alone that gave us our profits, and was
rate of return in proportion to invested capital and is the basic financial fundamental upon
and marketing cost is the dominant subject of which the music business was and is builded.
all progressive trade associations. This problem
Of course, gentlemen, for the sake of argu-
has been solved and is constantly being regu- ment there may be many sides to this question
lated by many of our country's largest in- of lack of net profit in piano sales at this pres-
dustries. Market surveys have been made in ent time. There is some talk of indifference on
order to determine potential sales volume; the part of the public to the piano, which of
financial analyses have been made in order to course if correct would certainly restrict our
accurately determine and average manufacturing market. By some it is said that other industries
and sales costs, and sales mark-up made in pro- have made themselves more attractive. Maybe
portion thereto.
we are too expensively organized as a retail
The retail music business, gentlemen, as we industry, but we do know that the public are
are all well aware, occupies a most prominent paying more proportionately for, and are ab-
position in the nation's business, and as such sorbing more of the manufacturing and retail
has grown proportionately. We have kept pace expense from the manufacturer to the dealer,
with the procession, and as a consequence have on the automobile, radio, vacuum cleaner they
observed our operating costs mount higher and buy, than they are relatively absorbing from
higher, and in the last few years so far out of the manufacturer to the dealer on the pianos
proportion to mark-up that the net rate of sales they buy. The piano should carry more margin
profit return on retail piano sales has just both to manufacturer and dealer. Our expense
barely justified the capital and effort invested, sheets tell ,us this. What is fair to the dealer
so much so that the question of mark-up must is fair to the public. We are entitled to more
profit on our invested capital. Therefore, in
be given serious consideration.
We have but to look over our balance sheets justice and fairness to ourselves as merchants
during this brief period to determine this, and we should make our mark-ups accordingly. An
many of us will be surprised to find—that is if additional $25 per instrument sold during 1925
we have not previously realized it—that the would have brought many a piano dealer across
profit derived from the talking machine business the dead line. So we Coast dealers, on the lines
carried a most substantial bulk of our operating of merchandise whose retail price we control,
are justified in marking them up in proportion
overhead.
Fooling ourselves with the thought of volume, to the expense connected with their sale from
the tendency has been to cut down mark-up and our stores.
increase expense, and now that our piano de-
So let us go quietly back to our desks and
partments, owing to the sudden change in the mark up those of our lines which we control at
talking machine skies, must stand on their own, least $25, and there are many of the lines
we are surprised to find our operating net profits handled so priced that they will stand an addi-
most substantially reduced, so much so that we tional $50, in justice to ourselves and in all fair-
must return to the mark-up that existed in our ness to the piano purchasing public.
Big Attendance at Opening Sessions of Western Music Trades
rapid sketch of its history and development and
stressed the advantages that have come through
the Pacific Coast music trades by the me?
dium which the Association provides for com-
mon endeavor in dealing with the problems that
(Continued from page 3)
confront the trade represented by its members.
G. F. Johnson, of the Johnson Piano Co.,
Portland, was the next speaker, his subject
being "How to Create Desire for Musical In-
struments." He handled his topic convincingly
•Illllllllli:
Mt. Rainier
From the
Northwest
Section of
Rainier
National
Park,
Seattle
and in detail, drawing from his own experiences
methods which have already proven their suc-
cess in the conduct of his own business.
Ellis Marx, of the Marx Music Co., Sacra-
mento, Cal., the last speaker of the morning's
session, talked upon "Should Advertising Fea-
ture Quality or Price Appeal," concluding in
favor of quality as the more efficient sales factor
in the retail sale of the musical instruments.
Luncheon
The first of the convention luncheons was
held at 12 o'clock in the Spanish Ballroom of
the Olympic Hotel under the chairmanship of
E. A. Geissler. The luncheon drew forth a
large attendance with many ladies present to
listen to the speaker of the day, William Gep-
pert, editor of the Musical Courier Extra, and
to the musical program given by the Jackie
Souders Orchestra, which appeared through the
courtesy of the Columbia Phonograph Co.
Second Session
The afternoon session was opened with an
address by Shirley Walker, of Sherman, Clay
& Co., San Francisco, whose topic was "Can
Music Dealers Be Allies Instead of Competi-
tors." Mr. Walker's address is printed in full
in another section of this issue of The Review.
He was followed by W. H. Graham, of the
(Continued on page 16)