Music Trade Review
Issue: 1925 Vol. 80 N. 18 - Page 5
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MAY
THE
2, 1925
MUSIC TRADE
REVIEW
The Trade-in and Its Effect on the
Net Profit of Piano Dealers
The Second of a Series of Articles Based on an Exhaustive Survey Recently Concluded by The Music Trade
Review of the Part Which the Trade-in Plays on the Net Profit of the Retail Piano Merchant
Together With a Study of the Methods Which Will Remedy Its Evil Effects
T
O what extent is the present-day retail
piano trade a replacement business? Es-
timates have been made in the trade and
in the trade press running as high as 70 per
cent of the gross sales, a figure, however,
which is purely an estimate and, like most es-
timates, greatly exaggerated.
Others have
placed it as low as 20 per cent, which in turn
erred on the side of being entirely too low.
However, it has always been admitted that sales
involving trade-ins constitute a considerable
portion of the gross business done by the aver-
age piano merchant, a condition which has
made the proper handling of the trade-in so
important a problem in the retail trade. Ac-
curate figures, of course, are a necessity be-
fore the problem itself can be given the proper
study.
Percentage of Trade-Ins
A detailed analysis of a large number of re-
ports made by retail piano merchants in every
section of the country to The Review has given
the following results in regard to this ques-
tion:
PERCENTAGE
centage
centage
centage
centage
centage
of
of
of
of
of
OF TRADE-INS
gross sales involving trade-ins
41.6
reproducer sales involving trade-ins. . 52
grand sales involving trade-ins
49.6
player sales involving trade-ins
42.8
upright sales involving trade-ins
37.8
A glance at these figures shows that for every
100 pianos which a retail piano merchant sells,
approximately forty-one re-sales of used pianos
are necessary, or, in other words, 1-00 sales of
TOTAL PIANO SALES OF DEALERS REPORTING 100%
PERCENTAGE- OF SALES
WITH TRADE-INS 41.
GRANP SALE-S WITH TRADE-INS 4 9
'III,
PLAYER SftL&S WITH TRADfr-INS A-Zdfa
UPRIGHT SALES WITH TRADE-INS 3 7 . 3 %
Percentage of Trade-Ins on Gross Piano Sales
and Various Types
new pianos mean that slightly over 141 sales
in the gross. Applying this average to a nor-
mal year in the industry with gross sales of
300,000 instruments, it will be seen that the
gross volume of the retail trade will reach ap-
proximately 424,800 instruments, considering
that practically the same number of used
pianos in the merchants' inventories are car-
ried from year to year. In estimating the
gross business done by the trade, no credit is
usually given for these excess sales. Consid-
ering that there is approximately a stock of
124,000 used instruments disposed of annually,
the importance of making a profit on the resale
of these instruments, and a profit in line with
the margin made on new sales, grows in im-
portance the more it is studied.
Present-day percentages of trade-ins involved
in the sales of the various types of pianos
throw interesting lights on the variation in de-
mand for each new type. Take, for instance,
the player-piano. One of the great selling argu-
ments for this type of instrument in its early
days was the fact that it took the place of the
dead piano in the home. When this was the
condition, trade-in percentages on the player
must have been much higher than they are
to-day. The present comparatively low per-
centage reported is largely due to the advent of
low priced instruments which are sold in a great
majority of cases to people who have had no
piano at all previously, and who would never
have one if there were not such a type of in-
strument to fill their needs. It is likely that
the percentage of trade-ins involved in player
sales will show a steady decrease in the future,
as has always been the case when a certain
type of piano has been first a novelty and then
a standard type in the industry.
The Reproducing Piano
This, however, docs not appear to hold good
for the reproducing piano which is the latest
development in the industry. Although it leads
all types of instruments with a trade-in per-
centage of 52 at the present day, this is com-
paratively low when actual conditions are given
consideration. It is evident that the reproduc-
ing piano, high-priced as it is, is not nearly
as much a replacement proposition, as the
player-piano was in its early days or as the
upright was when it supplanted the square. Its
merits have created to a considerable degree
an entirely new class of customers which is
basically a remarkable tribute to its selling
value.
The Upright Piano
The upright piano shows the smallest of all
percentages of trade-ins involved. This, of
course, is due to the fact that when an upright
is traded in, it is usually on the sale of another
type of instrument, which in turn make uprights
the largest percentage of used piano which have
to be sold. Although the upright is holding its
own in general demand much more strongly
than trade opinion gives it credit for, such a
condition naturally makes the resales more dif-
ficult which has its repercussion on the demand
for the new instrument of this type. This point
will be considered in more detail when the dis-
cussion of the methods of selling used pianos
is being taken up.
The Grand Piano
The grand is another type in which the per-
centage of trade-ins is lower than might be
expected at first glance. Here again it would
be naturally thought that the comparatively re-
cent popularity of the medium priced small
grand would inevitably lead to a much larger
percentage of replacement business than has
actually been the case. It, in its turn, however,
is working steadily to create a new class of
piano customers who could not be sold an in-
strument, from all indications, until the medium
priced grand came along to give them exactly
what they demanded.
Creating New Markets
These figures show beyond the shadow of a
doubt that new types of instruments inevitably
create a good percentage of new customers who
were out of the market until the former made
their advent. Of course it may be said that the
piano merchant places more exploitation behind
a novelty than he does behind a standardized
type of instrument, but, although this is
naturally a factor in the situation, it is not suf-
ficient in itself to account for the conditions
shown by The Review's survey-
Solving a Buying Problem
Thus it is shown that over 40 per cent of
the average piano merchant's sales of new in-
struments are bought from the latter's pros-
TOTAL DEALERS REPORTING W%
ALLOWANCE'S MADE- BY HOUSE- 58.82 %
ALLOWANCES MADE
BV SALESMEN £1.5fo
Wkm
ALLOWANCES MADP BY
APPRAISE-R 5 9 2
ances on Trade-Ins
pective purchasers for resale. The average
piano merchant is an exceedingly careful in-
dividual when it comes to buying his instru-
ments. He will spend time and money in in-
vestigating each manufacturer's proposition
thoroughly. Many of them have been known
to switch from one line to another because of
a difference of $5 or $10 in the wholesale price.
As a general thing the retail piano merchant
realizes the importance of the buying problem
as he should if he is a good business man.
Now let us see how he buys four used instru-
ments for every ten new instruments which he
purchases.
;
Controlling the Allowance
The first and most important factor in buy-
ing trade-ins, for fundamentally that is what
setting the allowance on the used piano con-
sists of, is the ultimate control of the price at
which the used instrument is bought, or to use
the usual terms, the control of the amount of
the allowance made. For if there are to be no
losses sustained in handling trade-ins, it is
vitally necessary that the amount of the allow-
ance be kept at a proper ratio to the ultimate
re-sale price of the used instrument, a ratio
that must not vary.
In regard to who sets the allowance on a
trade-in, The Review's survey shows the fol-
lowing figures:
House
Salesman
House and salesman in combination
Appraiser
58.82 per cent
21.56 per cent
15.70 per cent
3.92 per cent
These figures show the somewhat astonish-
ing fact that at the present time 37.26 per cent
of the piano merchants reporting in The Re-
view's survey permit an interested party to
have a prominent part in setting the price at
which a good percentage of the merchandise
they sell is to be purchased.
Interested Control
H e r e is a clarification of this s t a t e m e n t . T h e
(Coniinucd on pa
MAY
THE
2, 1925
MUSIC TRADE
REVIEW
The Trade-in and Its Effect on the
Net Profit of Piano Dealers
The Second of a Series of Articles Based on an Exhaustive Survey Recently Concluded by The Music Trade
Review of the Part Which the Trade-in Plays on the Net Profit of the Retail Piano Merchant
Together With a Study of the Methods Which Will Remedy Its Evil Effects
T
O what extent is the present-day retail
piano trade a replacement business? Es-
timates have been made in the trade and
in the trade press running as high as 70 per
cent of the gross sales, a figure, however,
which is purely an estimate and, like most es-
timates, greatly exaggerated.
Others have
placed it as low as 20 per cent, which in turn
erred on the side of being entirely too low.
However, it has always been admitted that sales
involving trade-ins constitute a considerable
portion of the gross business done by the aver-
age piano merchant, a condition which has
made the proper handling of the trade-in so
important a problem in the retail trade. Ac-
curate figures, of course, are a necessity be-
fore the problem itself can be given the proper
study.
Percentage of Trade-Ins
A detailed analysis of a large number of re-
ports made by retail piano merchants in every
section of the country to The Review has given
the following results in regard to this ques-
tion:
PERCENTAGE
centage
centage
centage
centage
centage
of
of
of
of
of
OF TRADE-INS
gross sales involving trade-ins
41.6
reproducer sales involving trade-ins. . 52
grand sales involving trade-ins
49.6
player sales involving trade-ins
42.8
upright sales involving trade-ins
37.8
A glance at these figures shows that for every
100 pianos which a retail piano merchant sells,
approximately forty-one re-sales of used pianos
are necessary, or, in other words, 1-00 sales of
TOTAL PIANO SALES OF DEALERS REPORTING 100%
PERCENTAGE- OF SALES
WITH TRADE-INS 41.
GRANP SALE-S WITH TRADE-INS 4 9
'III,
PLAYER SftL&S WITH TRADfr-INS A-Zdfa
UPRIGHT SALES WITH TRADE-INS 3 7 . 3 %
Percentage of Trade-Ins on Gross Piano Sales
and Various Types
new pianos mean that slightly over 141 sales
in the gross. Applying this average to a nor-
mal year in the industry with gross sales of
300,000 instruments, it will be seen that the
gross volume of the retail trade will reach ap-
proximately 424,800 instruments, considering
that practically the same number of used
pianos in the merchants' inventories are car-
ried from year to year. In estimating the
gross business done by the trade, no credit is
usually given for these excess sales. Consid-
ering that there is approximately a stock of
124,000 used instruments disposed of annually,
the importance of making a profit on the resale
of these instruments, and a profit in line with
the margin made on new sales, grows in im-
portance the more it is studied.
Present-day percentages of trade-ins involved
in the sales of the various types of pianos
throw interesting lights on the variation in de-
mand for each new type. Take, for instance,
the player-piano. One of the great selling argu-
ments for this type of instrument in its early
days was the fact that it took the place of the
dead piano in the home. When this was the
condition, trade-in percentages on the player
must have been much higher than they are
to-day. The present comparatively low per-
centage reported is largely due to the advent of
low priced instruments which are sold in a great
majority of cases to people who have had no
piano at all previously, and who would never
have one if there were not such a type of in-
strument to fill their needs. It is likely that
the percentage of trade-ins involved in player
sales will show a steady decrease in the future,
as has always been the case when a certain
type of piano has been first a novelty and then
a standard type in the industry.
The Reproducing Piano
This, however, docs not appear to hold good
for the reproducing piano which is the latest
development in the industry. Although it leads
all types of instruments with a trade-in per-
centage of 52 at the present day, this is com-
paratively low when actual conditions are given
consideration. It is evident that the reproduc-
ing piano, high-priced as it is, is not nearly
as much a replacement proposition, as the
player-piano was in its early days or as the
upright was when it supplanted the square. Its
merits have created to a considerable degree
an entirely new class of customers which is
basically a remarkable tribute to its selling
value.
The Upright Piano
The upright piano shows the smallest of all
percentages of trade-ins involved. This, of
course, is due to the fact that when an upright
is traded in, it is usually on the sale of another
type of instrument, which in turn make uprights
the largest percentage of used piano which have
to be sold. Although the upright is holding its
own in general demand much more strongly
than trade opinion gives it credit for, such a
condition naturally makes the resales more dif-
ficult which has its repercussion on the demand
for the new instrument of this type. This point
will be considered in more detail when the dis-
cussion of the methods of selling used pianos
is being taken up.
The Grand Piano
The grand is another type in which the per-
centage of trade-ins is lower than might be
expected at first glance. Here again it would
be naturally thought that the comparatively re-
cent popularity of the medium priced small
grand would inevitably lead to a much larger
percentage of replacement business than has
actually been the case. It, in its turn, however,
is working steadily to create a new class of
piano customers who could not be sold an in-
strument, from all indications, until the medium
priced grand came along to give them exactly
what they demanded.
Creating New Markets
These figures show beyond the shadow of a
doubt that new types of instruments inevitably
create a good percentage of new customers who
were out of the market until the former made
their advent. Of course it may be said that the
piano merchant places more exploitation behind
a novelty than he does behind a standardized
type of instrument, but, although this is
naturally a factor in the situation, it is not suf-
ficient in itself to account for the conditions
shown by The Review's survey-
Solving a Buying Problem
Thus it is shown that over 40 per cent of
the average piano merchant's sales of new in-
struments are bought from the latter's pros-
TOTAL DEALERS REPORTING W%
ALLOWANCE'S MADE- BY HOUSE- 58.82 %
ALLOWANCES MADE
BV SALESMEN £1.5fo
Wkm
ALLOWANCES MADP BY
APPRAISE-R 5 9 2
ances on Trade-Ins
pective purchasers for resale. The average
piano merchant is an exceedingly careful in-
dividual when it comes to buying his instru-
ments. He will spend time and money in in-
vestigating each manufacturer's proposition
thoroughly. Many of them have been known
to switch from one line to another because of
a difference of $5 or $10 in the wholesale price.
As a general thing the retail piano merchant
realizes the importance of the buying problem
as he should if he is a good business man.
Now let us see how he buys four used instru-
ments for every ten new instruments which he
purchases.
;
Controlling the Allowance
The first and most important factor in buy-
ing trade-ins, for fundamentally that is what
setting the allowance on the used piano con-
sists of, is the ultimate control of the price at
which the used instrument is bought, or to use
the usual terms, the control of the amount of
the allowance made. For if there are to be no
losses sustained in handling trade-ins, it is
vitally necessary that the amount of the allow-
ance be kept at a proper ratio to the ultimate
re-sale price of the used instrument, a ratio
that must not vary.
In regard to who sets the allowance on a
trade-in, The Review's survey shows the fol-
lowing figures:
House
Salesman
House and salesman in combination
Appraiser
58.82 per cent
21.56 per cent
15.70 per cent
3.92 per cent
These figures show the somewhat astonish-
ing fact that at the present time 37.26 per cent
of the piano merchants reporting in The Re-
view's survey permit an interested party to
have a prominent part in setting the price at
which a good percentage of the merchandise
they sell is to be purchased.
Interested Control
H e r e is a clarification of this s t a t e m e n t . T h e
(Coniinucd on pa
Future scanning projects are planned by the International Arcade Museum Library (IAML).