Music Trade Review
Issue: 1930 Vol. 89 N. 1 - Page 3
mo
Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
534367 A
i ofr,' L L N ' • M A I'D
Published Monthly
FEDERATED BUSINESS PUBLICATIONS, INC.
420 Lexington Ave.
New York
Serving
the Entire
Vol. 89
iaae Review
Music
Industry
January, 1930
Single Copiei
Twenty Cents
Annual Subscription
Two Dollars
No. 1
ross 'Profit
*
ROBABLY one of the most abused and
harmful phrases in the music trade to-
day, and for that matter in many other
industries, is "gross profit to play with,"
indicating that the margin between the cost of
the merchandise and the selling price is so wide
that the merchant can be careless about his sell-
ing and servicing expenses and still come out
with some neat figures in black on the profit
side of the ledger. In the first place, the term
"gross profit" itself is a misnomer, for the
mark-up on merchandise does not represent
profit in any sense, but simply provides a mar-
gin to cover all expenses incident to selling the
goods. What is left after all these expenses are
covered and the merchandise is fully paid for
by the buyer is the profit—that and nothing
more.
Nothing has contributed quite so much to the
creation of false valuations and the making of
extravagant allowances on used pianos, for in-
stance, than the feeling on the part of the dealer
that he could be careless with a goodly portion
of the amount lying between the cost of the
pianos and their selling price, and still come
out on top with some nice profits for himself.
That is why a net profit of ten per cent annually
in the piano business has been regarded as
something worth bragging about.
In the case of pianos, for instance, with a
mark-up of ninety per cent to 100 per cent or
more on the cost price, or a discount of forty-
live per cent to fifty per cent or more from
the selling price for the benefit of the dealer,
if it is to be figured that way, there is the gen-
eral impression that the average dealer is in a
position to clean up some real money with com-
paratively little trouble. If it is a question of
simply buying goods, carrying them for a few
weeks, and then selling them for cash, this
theory would work out splendidly, in fact, a
bench and a few free tunings would not prove
burdensome. Unfortunately, in practice there
are so many factors that tend to eat into the
dealer's margin that what is left at the end is
not at all out of proportion to profits in other
lines, except that on the average the piano man's
share is less.
P
By B. BRITTAIN WILSON
.Careful investigation has shown that the aver-
age overhead expense of a piano store or de-
partment is something like 36.5 per cent, which
covers salaries, commissions, delivery, repair
and tuning charges, advertising, rent, light and
heat, and depreciation, together with about
1.31 per cent of the amount set aside to cover
financing and the carrying of trade-in stock.
This percentage is an average, and of course
varies according to the individual dealer and
the manner in which he conducts his business.
Some of the factors in
piano selling costs that
make it essential that
the retailer
watch
every item of over-
head carefully to in-
sure a proper
net
profit for his effort,
But taken as an average, and covering, as it
does, only the essentials, it can be seen that
there is very little left to "play with" if the
dealer expects to have anything left for him-
self. It may be said here that this percentage
of overhead, while apparently high, is neverthe-
less quite low as compared with the overhead
in a good many other lines of business.
As we said before, the average mark-up on
pianos would be fair and in fact liberal if it
were simply a case of turning over stock
quickly and cleanly and banking the complete
proceeds within a reasonable time. But let us
look at the factors that interfere with this plan.
As a matter of fact, every new piano sold means
on the average, this year, an actual sale of 1.9
pianos for the reason that close to seventy-five
per cent of all new piano sales hinge upon the
taking of a used instrument in exchange, and,
on top of this, come the repossessions. This
means that for every hundred new instruments
there must be resold the seventy-five pianos
taken in trade plus that percentage, small or
large, which had been repossessed for one rea-
son or another.
Here are some interesting facts gathered re-
cently by The Review from the dealers them-
selves. Some eighty-seven dealers reported on
their 1929 sales as of November 15. These deal-
ers, small and large and scattered throughout
the United States, had sold altogether 3,432
new instruments, had taken in exchange 2,138
pianos and players, although only 251 were of
the latter type, had repossessed 846 instruments
and had resold altogether 2,792 used pianos.
Let us analyze these figures a bit. Here are
eighty-seven dealers who, to rid their floors of
3,432 new pianos, actually sold 6,224 instruments,
or 1.9 pianos for each new sale. It is granted
that the selling of the used piano requires as
much time and frequently as much effort as
does the sale of a new instrument even though
the price resistance may be slightly less. If
these dealers, therefore, broke down their costs
in a manner to determine the average selling
expense for each piano unit, they would be
compelled in fairness to practically double that
figure to cover the moving of each new instru-
ment. Were the mark-up on used instruments
equal to that on new ones the problem would
not be serious, but such instances are rare, and
in the majority of cases the selling price of the
old instrument represents a distinct loss with-
out taking into account handling and storage
charges, repairs and refinishing. If there was
ever an argument for convincing the dealer that
trade-in allowances should always be made on a
basis that will at least give them an even break,
then this is it.
Now to take into account the handling of
repossessions, which, for one reason or another,
appear to be slowly increasing in number.
The eighty-seven dealers reported to The Re-
{Please turn to page 17)
The Music Trade Review. Published Monthly by Federated Business Publications, Inc., 420 Lexington Avenue, New York. Single copies, 20 cents; $2.00 per year. Vol. 89. No. 1.
Entered as second-class matter September 10, 1892, at the Post Office at New York^ N. Y., under the act of Congress of March 3, 1879.
Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
534367 A
i ofr,' L L N ' • M A I'D
Published Monthly
FEDERATED BUSINESS PUBLICATIONS, INC.
420 Lexington Ave.
New York
Serving
the Entire
Vol. 89
iaae Review
Music
Industry
January, 1930
Single Copiei
Twenty Cents
Annual Subscription
Two Dollars
No. 1
ross 'Profit
*
ROBABLY one of the most abused and
harmful phrases in the music trade to-
day, and for that matter in many other
industries, is "gross profit to play with,"
indicating that the margin between the cost of
the merchandise and the selling price is so wide
that the merchant can be careless about his sell-
ing and servicing expenses and still come out
with some neat figures in black on the profit
side of the ledger. In the first place, the term
"gross profit" itself is a misnomer, for the
mark-up on merchandise does not represent
profit in any sense, but simply provides a mar-
gin to cover all expenses incident to selling the
goods. What is left after all these expenses are
covered and the merchandise is fully paid for
by the buyer is the profit—that and nothing
more.
Nothing has contributed quite so much to the
creation of false valuations and the making of
extravagant allowances on used pianos, for in-
stance, than the feeling on the part of the dealer
that he could be careless with a goodly portion
of the amount lying between the cost of the
pianos and their selling price, and still come
out on top with some nice profits for himself.
That is why a net profit of ten per cent annually
in the piano business has been regarded as
something worth bragging about.
In the case of pianos, for instance, with a
mark-up of ninety per cent to 100 per cent or
more on the cost price, or a discount of forty-
live per cent to fifty per cent or more from
the selling price for the benefit of the dealer,
if it is to be figured that way, there is the gen-
eral impression that the average dealer is in a
position to clean up some real money with com-
paratively little trouble. If it is a question of
simply buying goods, carrying them for a few
weeks, and then selling them for cash, this
theory would work out splendidly, in fact, a
bench and a few free tunings would not prove
burdensome. Unfortunately, in practice there
are so many factors that tend to eat into the
dealer's margin that what is left at the end is
not at all out of proportion to profits in other
lines, except that on the average the piano man's
share is less.
P
By B. BRITTAIN WILSON
.Careful investigation has shown that the aver-
age overhead expense of a piano store or de-
partment is something like 36.5 per cent, which
covers salaries, commissions, delivery, repair
and tuning charges, advertising, rent, light and
heat, and depreciation, together with about
1.31 per cent of the amount set aside to cover
financing and the carrying of trade-in stock.
This percentage is an average, and of course
varies according to the individual dealer and
the manner in which he conducts his business.
Some of the factors in
piano selling costs that
make it essential that
the retailer
watch
every item of over-
head carefully to in-
sure a proper
net
profit for his effort,
But taken as an average, and covering, as it
does, only the essentials, it can be seen that
there is very little left to "play with" if the
dealer expects to have anything left for him-
self. It may be said here that this percentage
of overhead, while apparently high, is neverthe-
less quite low as compared with the overhead
in a good many other lines of business.
As we said before, the average mark-up on
pianos would be fair and in fact liberal if it
were simply a case of turning over stock
quickly and cleanly and banking the complete
proceeds within a reasonable time. But let us
look at the factors that interfere with this plan.
As a matter of fact, every new piano sold means
on the average, this year, an actual sale of 1.9
pianos for the reason that close to seventy-five
per cent of all new piano sales hinge upon the
taking of a used instrument in exchange, and,
on top of this, come the repossessions. This
means that for every hundred new instruments
there must be resold the seventy-five pianos
taken in trade plus that percentage, small or
large, which had been repossessed for one rea-
son or another.
Here are some interesting facts gathered re-
cently by The Review from the dealers them-
selves. Some eighty-seven dealers reported on
their 1929 sales as of November 15. These deal-
ers, small and large and scattered throughout
the United States, had sold altogether 3,432
new instruments, had taken in exchange 2,138
pianos and players, although only 251 were of
the latter type, had repossessed 846 instruments
and had resold altogether 2,792 used pianos.
Let us analyze these figures a bit. Here are
eighty-seven dealers who, to rid their floors of
3,432 new pianos, actually sold 6,224 instruments,
or 1.9 pianos for each new sale. It is granted
that the selling of the used piano requires as
much time and frequently as much effort as
does the sale of a new instrument even though
the price resistance may be slightly less. If
these dealers, therefore, broke down their costs
in a manner to determine the average selling
expense for each piano unit, they would be
compelled in fairness to practically double that
figure to cover the moving of each new instru-
ment. Were the mark-up on used instruments
equal to that on new ones the problem would
not be serious, but such instances are rare, and
in the majority of cases the selling price of the
old instrument represents a distinct loss with-
out taking into account handling and storage
charges, repairs and refinishing. If there was
ever an argument for convincing the dealer that
trade-in allowances should always be made on a
basis that will at least give them an even break,
then this is it.
Now to take into account the handling of
repossessions, which, for one reason or another,
appear to be slowly increasing in number.
The eighty-seven dealers reported to The Re-
{Please turn to page 17)
The Music Trade Review. Published Monthly by Federated Business Publications, Inc., 420 Lexington Avenue, New York. Single copies, 20 cents; $2.00 per year. Vol. 89. No. 1.
Entered as second-class matter September 10, 1892, at the Post Office at New York^ N. Y., under the act of Congress of March 3, 1879.
Future scanning projects are planned by the International Arcade Museum Library (IAML).