Music Trade Review

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Here Is How
The Carrying Charge
Is Working Out
A
LTHOUGH the carrying charge as a means for financing piano
instalment accounts on a profitable basis was introduced
into the trade some few years ago, it really did not receive
a full measure of attention until about a year ago, when it was
given earnest consideration in association circles and its adoption
strongly recommended in trade circles. It can be said, therefore,
that the carrying charge as a general trade method has had its first
year of real trial, and although there is still some opposition to
the adoption of the plan in various quarters it is significant that
the majority of those who have made use of it are for the most
part enthusiastic over results.
The piano business for 1927, having been admittedly poor, it is
interesting to learn that a number of dealers have given credit to
the carrying charge for a substantial reduction in overhead in the
collection department and a consequent reduction in the number
of repossessions, as compared to the situation as it existed under the
plan of charging regular interest on deferred payments. There
are still those who maintain that adding a flat carrying charge to
an instalment account results in increased sales resistance, and yet
it is significant that most of those concerns that have adopted the
newer plan during the first year or so have enjoyed a sales average
of a very satisfactory nature in comparison with the general trade
average, and in some cases have reported increased business for
the year. This is not to say the carrying charge increases business;
it has not injured it.
Fortunately for the piano man, he has not had to pioneer in
the introduction of the carrying charge to the public, for distributors
of many other products, particularly of automobiles, have done the
bulk of the work in educating the buyer to expect to pay a definite
fee for the credit accommodation that goes with deferred payments.
The piano man, therefore, has simply to explain the system to the
buyer as it applies to pianos and has not been called upon to enter
into a general explanation of the method itself.
There are many concerns who are experimenting with the carry-
ing charge in a tentative way and others that are considering the
adoption of that method as soon as they are able to study the
experiences of others. The companies who have definitely com-
mitted themselves to the method, however, are almost of a unit in
declaring it serves to cut down operating expenses, simplifies book-
keeping to a greater degree, cuts down the percentage of past-due
accounts, and to a great extent eliminates the difficulties that come
with endeavoring to collect interest from customers at intervals in
addition to the regular instalment payment on the instrument.
In order to present to the retail members of the trade the
actual experiences of those who have studied and adopted the
in
San Francisco,
Toledo,
New Orleans,
Seattle
Kansas City
carrying charge during the past year, The Review has queried a
number of representative dealers in all sections of the country and
sets forth herewith their expressions regarding the carrying charge
and its advantages. In cases where the opinion is not favorable, it
is felt that the criticisms may serve to clear up questions regarding
which some hesitating dealers are in doubt.
The main point to consider is not that the carrying charge adds
a substantial sum to the cost of the instrument, for so does straight
interest when it is bulked, but rather that it represents the aggregate
interest charge over the period of the contract divided on a pro rata
basis per month. Thus the customer in meeting his monthly bills
pays the interest charge together with the actual instalment amount
in one lump sum and has nothing further to worry about. An
outstanding advantage of the carrying charge appears to be, accord-
ing to a number of dealers, that it impresses the prospective cus-
tomer with the value of cash, encourages short-term contracts and
the wiping out of the account as soon as possible.
In view of the trade situation, if the carrying charge can reduce
the cost of handling accounts and collections, can influence shorter
contracts, can cut down past-due payments, and reduce the number
of repossessions, then it is worthy of being considered seriously.
The theory that the additional charge means more sales resistance,
has already been exploded in actual practice. With a view to
giving the experiences of the members of the trade themselves with
the carrying charge method, The Review presents the following
interviews with dealers in various leading cities.
San Francisco Music Dealers Find Carrying Charge Is Satisfactory
/ G E O R G E W. BATES, comptroller of Sher-
^-^ man, Clay & Co., San Francisco, speaking
of the carrying charge, stated that his firm has
always made a carrying charge, or interest, on
instalment sales of band or orchestra instru-
ments. For the past two years Sherman, Clay
& Co. have also used the carrying charge in
instalment sales of radio and talking machines.
"We find that it works very well and we have
practically no trouble," said Mr. Bates. He
.said that the company had discussed using a
carrying charge on pianos and had given the
matter some consideration, but thus far have
not adopted it.
The Association Plan
The Wiley B. Allen Co. is finding the carry-
ing charge on phonographs very satisfactory.
Speaking of this, James J. Black, treasurer of
13
the company, said that on talking machines it
uses the general schedule which the Music
Trades Association of Northern California
adopted and recommended early this year. This
schedule is very generally used by the trade
in northern California.
Following is the carrying charge on talking
machines recommended:
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