Contrasted with what are frequently the low ex penses of the individual stores in a chain are the high general office expenses—for instance, the large sala ries of skilled buyers and of other experts who serve the several stores. Even this large overhead ordin arily becomes of little importance when distributed over all the stores in a chain. No figures are avail able to show exactly what these expenses average. One chain of small dry-goods stores asserts that it does business on an expense basis of eleven per cent on sales. As compared with tbe expense percentage ranging from fifteen to twenty-five in most independ ent stores, this is exceedingly low. The average chain-store expense, however, is probably only three or four per cent lower than the average competing in dependent store expense, and some chains are ,known to operate on a higher expense basis than their inde pendent competitors.
5. Quick, turnovers and low profits.—An almost universal characteristic of chain stores is a recogni tion of the A B C of good retailing—low profits on each sale and quick turnover of stock. Suppose that a store normally carries a stock worth $5,000 at the marked selling price. It averages forty per cent profit on each sale. The gross profit on one turnover of stock, then, amounts to $2,000. If it turns its stock four times a year, the total yearly gross profit is $8,000. If, however, it were to be satisfied with a twenty per cent gross profit on each sale, it might so increase its sales thru lower prices of its goods that it would turn its stock ten times a year. Its total yearly gross profit would then become $10,000. This simple principle is applied by nearly all the successful chains.
The rapid turnover of stock which is usual in chain stores is not due solely to low prices, but in part to service, advertising and other features of manage ment. The average grocery is said to turn its stock ten times a year; the Bowers groceries in Memphis turn theirs forty times a year. The average grocery takes a gross profit on each sale of twenty-five per cent and a net of from five per cent to eight per cent ; the Bowers stores take a gross of twelve and one-half per cent and a net of two per cent. The average drug store turns its stock three times a year. Many chain drug stores turn theirs twelve times a year. The ma jority of independent tobacco stores turn their stock only four times a year; some of the stores in the United chain show a complete turnover of stock fifty times a year, or approximately one complete turn over a week. No wonder that the chains are ex tremely formidable competitors.
6. Public looks for low prices.—Finally, the chains derive a selling advantage from the fact that the public generally assumes that the chain's prices are always low and that its goods are better. This atti tude of the public mind, created by judicious pricing, excellent buying and extensive advertising, is a real asset to the chain and a real handicap to the indepen dent. Frequently the independent store must offer
lower prices and better goods than the chain in order to hold its share of the trade. In other words, the chain store often serves as the standard by which many consumers judge other prices and values.
7. Strength of chain stores in service.—One factor in selling strength is price. The other is service. Some of the chain store's service strength is derived from the size of the chain, but much of it the smallest independent competitor could have if be wanted it. The kind of service that results from the size of the chain is indicated by the sort of salesmanship that is found in some of the chains—tobacco stores and drug stores, for instance. Somewhere in these great chains is a man who specializes in retail salesmanship, who has studied the problem until Ile has reduced it to an art. This art he teaches to his salespeople. The salesmanship is standardized for the benefit of the customers. Other kinds of service that are standard ized in the chains are methods of goods display, ar rangement of the store, advertising and store fixtures. The pleasure and convenience of the customer are considered by the expert who standardizes these things just as much as are the reducing of expenses and the making of profits for the chain.
Many chain stores give particular attention to com plaints, and in other ways do what they can to satisfy the customer and encourage his continued patronage.
The smiling "thank you" attitude of some chain-store clerks is noteworthy. There is nothing in this kind of service which is necessarily confined to chain-store selling. Any independent dealer with an intelligent conception of his duty toward the public and of the real meaning of modern merchandising can adopt forms of selling service that will match the methods of even the most advanced of the.chains.
8. Strength in, organization.—Chain stores are or ganized in two ways. When stores appeal largely on a price basis they are often likened to huge ma chines; the emphasis is on methods, not on men. One chain-store official has said: "The world has been try ing to get things done by selecting men and trusting them unaided to do its work. Instead, someone in authority should first find the thing to be done, then find the best way to do it, and fmally teach the men to do it that way." This, of course, is the essence of scientific management. This principle, when applied strictly, takes out of the stores most of the necessity for initiative—the initiative is concentrated at head quarters. There is an obvious danger in this—the danger of killing ambition, leveling personality and retarding individual development. Of course, no chain wants to bring about this result, but its possibil ity is undeniable. Nevertheless, many chains believe that such risks are less important than the unques tioned development of mechanical efficiency which systematic, complete organization carries in its train.