9. Standardizing size and oppor tunity to standardize in a variety of ways is one of the greatest sources of strength in chain stores. When a large number of units are doing the same thing, and when sufficient capital is available, it is possible and advisable to devote time and money to finding the one best way for all of the units to do that thing. For example, one problem of any store is how best to deco rate the interior and exterior so that the appeal will be strongest and most pleasing to prospective cus tomers. The independent store has often neither the time nor the money to settle this question. The chain can hire experts, standardize the appearance of its stores, and derive great advertising value from such standardization. Similarly, the small independent store may or may not be ocuipying the amount of space which it can most advantageously occupy. The chain, on the other hand, can experiment with its many stores until it has found, for any given type of loca tion, the precise space which is needed for stock, for display, for customers and for clerics, and then stand ardize on that amount of space so that no unnecessary cent will be spent for rent.
10. Buying strength.—Some maintain that the greatest strength of the chain store is in its ability • to buy more advantageously than its independent competitor. This advantage takes the form of quan tity prices—the simple principle that two stores by pooling their purchases can buy in greater quantities and thereby get lower unit prices than one. Multi ply two by two hundred, and the buying advantage becomes still more apparent.
11. Inside prices.—Quantity prices, however, arc not the only advantage in price said to be possessed by the chains. It is frequently asserted that manu facturers, eager to get the great distributing strength of the chain system behind their goods, give to the chain certain secret discounts and inside prices, in ad dition to the ordinary quantity discounts that the size of their purchases would warrant. Congress has already given some consideration to the ethics of these inside prices, and there are indications that the inde pendents will attempt to fight them, charging them with being an important factor in alleged unfair com petition.
Another charge ofteii brought against chain stores and their suppliers is that long datings are frequently given on chain-store bills—goods are delivered to the chains, say, in January, and the bills are dated March 1. It is said that discounts for cash, intended to be taken in ten days or less, are permitted some chains even when they take a month or moife to audit and pay their bills. If these chain systems turn their stock twelve times a year—and many of them do better than that—and if they pay their bills in thirty days, they are operating on the capital of the supply houses, and at the same time getting the goods for a spot cash price. Certainly the evil of datings and the im
proper use of the cash discount are by no means uni versal in the chain-store field, and, where they do exist, it is probable that they are correcting themselves thru the publicity that is being given to chain-store methods.
12. Direct buying connections.—Because of the size of the purchases made for the entire chain, the chain store can usually command direct buying con nections wifh manufacturers. This means in the first place, the lowest wholesale prices, and in the second place, it means the opportunity to deal only with specialists in the various lines. The small store, buy ing thru a jobber, can buy only what the jobber can handle. Some manufacturers making desirable goods do not deal with the jobber; their goods are available only to the large-scale, direct-buying retail er, in which class are the chain stores. Direct buying also means that the chain stores attract manufactur ers who have special bargains to offer. The chain stores provide a large and sure market for the manu facturer's occasional surplus which the jobbers can not handle, and which the manufacturer must turn at once into cash.
13. Buying organization.—A chain-store system, doing business on a large scale, can frequently afford to maintain an elaborate and expensive buying organ ization. It can employ high-priced buyers who are masters of their work; it can have buyers in all the important markets to pick up bargains and to seek out the profitable novelties; it can command sources of supply and obtain certain goods even when the inde pendents find it impossible to get them; and it can afford to take chances on new kinds of merchandise which the independent would often not be able or un willing to take. A buyer far a New York drug chain, for instance, decided to try to sell umbrellas in drug stores; a single store in his chain succeeded in selling one thousand the first day. Finally, the chain can often buy, build or control whole factories, thereby taking the manufacturer's profit for itself, or else passing on this saving to its customers.
14. Jobbing profit.—Many chains credit them selves with a j obbing profit on their books, and bill goods to the individual chains at a price in advance of the first cost. It is said that in this way many chains could do an excellent business on their jobbing profit, even if they did not make a cent in their re tail stores. It cannot be denied that the expense of an elaborate buying organization and the heavy charges for central office overhead are likely to eat up a good part of the buying savings, but as long as these savings find any expression in lower prices to consum ers, or as long as the buying facilities provide unusual qualities and selections for the buying public, the chains have an advantage which their independent competitors have difficulty in meeting.