CREDIT MANAGEMENT OF RETAIL STORES 1. E ffect of credit in retail selling.—Altho credit sales in the retail business do not usually constitute so large a percentage of the total volume of sales as they do in the wholesale and the manufacturing business, they are nevertheless sufficiently numerous to demand the closest attention of the proprietor or manager. Efforts made to abolish retail credit in favor of cash sales have so far proved only partly successful. Such efforts are based on the contention that the giving of credit necessarily increases the sell ing price of the goods, since compensation for the in evitable losses that result from bad debts, must be sought in that way, thereby saddling upon the prompt paying customer the losses occasioned by the defec tion of the non-paying. Discounts ranging from two per cent to five per cent are frequently offered to customers as an incentive to buy on a cash plan. Trade coupons, or trading stamps, as they are com monly called, are used for the same purpose.
With a view to encouraging cash buying, certain large city stores have established banking departments for the use of their customers. The latter are in vited to deposit their savings in the store's bank.
where interest at the rate of four per cent per an num is paid. When goods are purchased, the amount of the bill is simply deducted from the customer's bal ance on hand.
Experience shows, however, that in every city or town there is a large part of the population who pre fer to buy their supply of food, clothing and other goods on credit, and to make periodical settlements for their purchases. In many instances, local condi tions, as well as the manner in which the family in come is received, make such an arrangement almost a necessity. Even where no such necessity exists, however, the inconvenience of paying cash for every purchase is frequently sufficiently marked to make a periodical payment plan decidedly welcome.
from an economic standpoint, retail credit or personal credit—of which mention was made in an earlier chapter—is desirable, is not here a sub ject of discussion. It cannot well be denied that fre
quently retail credit is both convenient to the custo mers and valuable to the merchant. Its value to the merchant depends, of course, upon the skill with which the store's credit is handled. Assuming that credit is given judiciously, it nearly always has the effect of binding the customers more closely to the store, and of securing for the merchant a larger num ber of their total purchases than would otherwise be the case. The customer who pays cash for every thing he buys is likely to divide his purchases among a number of stores or to shift his trade at any time from one store to another, while the person who has his purchases "charged" is likely to limit his trade to a very few stores. For this reason, many merchants in their advertising encourage credit purchases. The familiar slogan : "Your credit is good," is evidence of that fact.
Even so-called cash stores arc rarely such in the absolute sense of the word. Persons who have es tablished a reputation for ability and willingness to pay for all their purchases promptly at fixed inter vals seldom find it difficult to arrange for credit ac commodation. Such persons arc, in fact, regarded by every merchant as ideal customers. Realizing the commercial advantage of possessing such a reputa tion, not a few customers make it a point whenever practicable, to establish credit relations at the stores where they make their principal purchases. They are, of course, always scrupulously punctual in the matter of making settlement on the date previously agreed upon for that purpose. In case of reverses due to illness or unemployment, such persons are al ways able to command the necessary credit accom modation to tide them over their difficulty. The per son who has neglected to establish such credit reputa tion at a time when he was not actually in need of credit, sometimes finds it difficult to obtain credit when circumstances make such an accommodation highly desirable.