Why is it, as we have seen, that the department store cost of doing business averages higher than sell ing costs in other kinds of retail establishments? Selling costs in some great department stores have run as high as thirty-five per cent of the gross sales; many of the larger stores report as high as twenty five per cent, and the average is said to be in excess of twenty-six per cent. Such a cost of doing business would ruin the average specialty shop. Why, with its opportunities for economies in operation, has the selling cost in the department store reached such ex cessive figures? There are many possible answers to this question. One of them is that the department stores in a city are usually located close together. To a large extent they all appeal to the same people; none has a local ized trade; all are in keen competition with one an other. One store adds an expensive item of service, and others promptly follow suit. One moves to a newer, more favorable, and more expensive location, and the other stores follow its lead. The departmeiit store chooses the most central district with the highest land values, in the first place, and then 'the fact that increased trade is drawn to. that district raises still more the value of the ground occupied by the store.
All of these and inany other factors operate to in crease the department store cost of doing business, and counteract the many economies that are actually ef fected by reason of its peculiar form of organization.
24. Conveniences of department stores.—Depart ment stores owe their strength in large part to the conveniences that they offer to the public. These conveniences are obvious: central location, concen trated purchases, concentrated credit, systematic and extensive delivery systeins, elaborate rest rooms and other provisions for the pleasure and comfort of pa trons. All these things are appreciated by the public and enlarge the business of the department stores.
25. Department store buying strength.—The de partment store often has greater buying strength than the specialty store. This does not mean that the de partment store usually buys any one line of goods in greater quantity than the specialty shop dealing only in that line, altho this is sometimes the case. The buying strength of the department store arises from the fact that it is a much sought outlet for the goods of manufacturers; its support is often essential to the introduction of new goods; manufacturers are in keen competition for its services, and, to obtain its cooper ation, they often grant it buying advantages that are not granted to specialty stores. Many department stores will not buy thru jobbers ; they demand the jobbers' discount from the factories. The elaborate buying organization of 'a great department store is often in a position to pick up bargains, odd lots, and jobs that are never brought to the attention of the small, local specialty store. All these buying advan tages result in the possibility of low prices, lower often than those of specialty stores despite the greater cost of doing business of the department store.
26. Advantages due to often enables the department store to attract and to hold trade. While a specialty shop cannot afford to employ an instructor to give his whole time to increasing the welfare and the sales efficiency of the sales force, the department store can and frequently does do this. With a great variety of goods, each of which must stand its share of the advertising expense, the depart ment store very often uses large-space, expensively displayed newspaper advertisements. Few specialty
shops can compete with it in this respect. The fact that a business is big means that it can employ big men at big salaries. There are many exceedingly successful and efficient men in charge of specialty stores; but, speaking generally, the high salaried business generals of the great department stores bring to their work a vision, a merchandising courage and skill, a knowledge of business and its methods that are sometimes lacking in the case of the compet ing specialty store owner.
27. Elements of weakness in department There are elements of weakness in the department store.
Its size is likely to lead to decentralization of policy.
In a large organization, where constant super vision of employes by the more responsible officials is not possible, there is especial danger of injury to the entire establishment thru the unauthorized state ments or actions of someone who is only an irrespon sible cog in the machine.
Dealing , with thousands of customers, the busi ness must be conducted largely on an impersonal basis. Of course, the department beads and salespeople often build up a permanent clientele based as much on pleasant personal relations as on reliable goods and proper house policy. On the other hand, many spec ialty shops hold a large amount of their trade because many customers like to deal with individual owners or managers instead of with great machine-like or ganizations.
The extreme competition among rival department stores and the growth of public demand for increased and expensive service of many kinds often necessitate expenditures that are likely to bring the outgo dan gerously near the point of no profits. The story is told of one well-known department store that had drifted along with the tide of increasing demands for competitive service until it found itself confronted by a selling expense that ate up thirty-five cents out of every dollar received from sales. Only a sudden awakening to the danger and an immediate policy of careful retrenchment saved the store from failure.
28. Opportunity of the department store.—The de partment store has built up trade largely because of the service it offers to customers. There are indica tions, however, that many items of business-building service have proved so expensive that department stores are seeking to abandon or modify them. For instance, the delivery of goods on approval has been so often abused that many stores have greatly re stricted this part of their service. Some stores are cutting down the size of their rest rooms. Others are finding the tremendous ground rent of expensive lo cations almost too great a load to carry. If depart ment stores, because of the growing cost of their ex pensive kinds of service, are forced to abandon these services altogether, it will be interesting to see whether the department stores' remaining competi tive advantages will be great enough to retain for them their present prominent place in the merchan dising field.
As long as the department store is the shopping center of a community:many manufacturers will be forced to seek its cooperation. The low prices de manded by department store buyers, and the fre quent disinclination of such stores to handle any, brands except those bearing their own name, are a bar to the goods of a considerable number of manu facturers. Nevertheless, the tremendous output of department stores in shopping lines will continue to make such stores nmch sought outlets as long as they retain their present position of paramount importance in the retail world.