( Originally Published Early 1900's )
The markets which operate under different methods of doing business may be generally divided into the following:
1. The cash and carry market.
2. The market doing a credit business.
3. The market doing a credit and delivery business.
4. The chain store market.
The Cash and Carry Market
The cash and carry meat market is gaining in favor continuously, evidently due to the fact that meats can be sold at a lower price on account of the smaller operating expense involved. The methods which have to be employed in conducting any kind of meat market depend greatly upon the location of the market and the buying habits of the people.
In residential districts where meats are ordered over the telephone or are bought by the servants, the cash and carry store will not find such patronage as if it were located in a district where there is a great deal of transient trade. The cash and carry market has also been found to be the principal violator of good business ethics by fraudulent advertising. On account of catering principally to transient trade, misrepresentation of products is often practiced, as the great majority of that class of trade is attracted by price and is usually ignorant of the quality of the product bought.
The Market Doing a Credit Business
The market which does a credit business usually operates at a higher overhead expense as the market owner has considerable money outstanding on accounts and has to keep a bookkeeper, also he very often sustains credit losses.
From a business standpoint, conducting a business on this basis is not as economical as the cash and carry method. However, since a certain percentage of trade demands credit and is willing to pay the proportionately higher prices for this privilege, the retailer is very often in position to conduct this business more profitably than the cash and carry system on account of the higher prices secured.
While the credit business has its disadvantages, it also has its advantages by practically tying the customer to the market. Customers may often walk out of a cash and carry store if they cannot get exactly the cuts of meat they want, but they seldom do this at a market where meats can be secured on a credit basis. Rather than walk out, they buy meats recommended by the retailer. Another advantage of the credit market is that as a rule closer contact exists between the owner of the market and his trade.
The type of market and the business methods adopted depend entirely upon local conditions, which have been found to govern any business. It is a problem for every individual retailer to solve. A cash and carry store in a credit neighborhood will be a failure, the same as a neighborhood store will be a failure in a downtown transient trade district.
The Chain Store
The modern meat and grocery chain store is becoming one of the most important factors in retail meat distribution. Without the aver-age meat retailer realizing it, the modern chain stores are influencing many retailers to better business methods so they can compete with the modern chain systems. While many independent retailers have strongly opposed chain store methods, it was principally because the chain store sold meats at a lower price, or that they conduct their business at a lower expense.
From an economic viewpoint it must be admitted that the owner of either a chain store or an individual store who can sell meats, quality being equal, at the lowest possible prices to the public, is of the greatest benefit to the community. The modern chain store, when compared to the typical meat market, furnishes a striking example of what is wrong in the retail meat industry in general. The chain stores operate a meat business and not a "butcher shop."
The two principal reasons why the modern chain store can operate at a lower expense is due to :
1. The large purchasing power.
2. The absence of owner's salary.
This item of owner's salary however, is not eliminated entirely because the chain store system also has a certain amount of administration expense in conducting a main office. Usually there is one superintendent taking care of a certain number of stores which may range from 10 to 25.
Advantages of the Chain Store
To a newspaper attack made upon the chain store system, Godfrey M. Lebhard, Editor-in-Chief of "The Chain Store Age," replied with the following arguments in favor of the chain store:
1. "Their successful merchandising methods bring business to the community from the outlying districts.
2. Their stores are more atractive and efficient than the aver-age independent store, and raise the general standards of retail merchandising.
3. They usually pay more rent than the local independent merchant and thus tend to raise property values in the community.
4. They give employment to more local people because they do a larger volume of business.
5. They not only spend more money for advertising but their advertising is superior in character.
6. Because their own success is dependent upon the welfare of the community in which they operate, they are just as much interested in community affairs as any independent merchant could possibly be.
7. Because of their greater financial strength and the efficient manner in which they select locations, there is little chance of failure. The chain store sticks. The rate of mortality among independent merchants, on the other hand, is alarmingly high. Of 20,973 failures in the United States reported by Bradstreet's last year, 20,260 or 96.6% had a very moderate or no credit rating, and only 54 had very good credit or higher rating. About 90% of the failures were due to incompetence or lack of capital.
8. The chain store serves the community better than the independent store because its greater buying power and operating economies enable it to sell cheaper.
9. Of every dollar spent in a community, whether in chain stores or in independent stores, the major part, of course, represents. the cost of merchandise. Because the chain gives more merchandise for a dollar than the independent, perhaps SO cents represents the cost of the merchandise in the case of the chain and 70 cents the cost of the merchandise in the case of the independent.
In both cases, however, the part of the consumer's dollar which represents the cost of the merchandise leaves the community to find its way into the coffers of the producers of the merchandise wherever they may be located. The remainder of the consumer's dollar, about 15 cents in the case of the chains and 25 cents in the case of the in-dependents, represents the cost of doing business—rent, wages, heat and light, and the other expenses involved in store-keeping. In both cases, again, that part of the consumer's dollar will probably remain in the community—although there is no guarantee in either case that all of it will. The remainder of the consumer's dollar represents the net profit. The chain's net profit undoubtedly goes to headquarters. Where the independent merchant's net profit goes depends upon where he thinks he can get the most for it—usually in the nearest big city.
10. Finally, the savings the individual consumer enjoys when he deals with the chains more than compensates him for any loss his community may suffer because a few cents of the dollar he spends finds its way to the chain head-quarters."
Types of Chain Stores
Chain store markets may again be divided into different classes or groups. There is just as much difference existing in the quality of meats handled and the methods of conducting business in a chain store as in the typical average market. These may be divided into the following classes:
1. The cut rate chain store market.
2. The straight or combination neighborhood chain store market handling meats and groceries of fair to good grade.
3. The chain store market or combination store handling high grade meats and groceries.
4. The fixed price chain store.
The Cut Rate Chain Store Market
This type of market can usually be found in the shopping districts of cities. These stores are generally conducted as straight meat markets only. Business is secured principally on a price basis, by extensive advertising, either in local newspapers or by means of window displays and window signs. Markets of this type usually do not handle very good meats and always search the wholesale markets for bargains.
They become serious competitors to the typical high grade meat dealer. This is due, principally, to the lack of knowledge on the part of the public of quality in meats. The principal objects of such markets are volume of business and fast turn-over stock. They, therefore, operate on a very close margin of profit.
The Straight or Combination Neighborhood Chain Store Market Handling Fair to Good Grades of Meat and Groceries
This type of market may he considered typical of the average chain store system throughout the United States, of which thous-ands are in operation. Many of these chain stores are located on busy thoroughfares and corners.
The Chain Store Market or Combination Chain Store Handling High Grade Meats and Groceries
This type of store is rapidly becoming popular, as chain store owners have adopted a policy of trying to give the same service as the typical neighborhood market. There are a good many chain store systems of markets which handle meats and groceries of the finest grade. The prices secured in such markets are usually no lower than those secured in other markets. The main object of such stores is to build up a substantial business upon quality, service and a fair price.
The Fixed Price Chain Store Market
In recent years, a type of market has made its appearance which is bound to grow in number, namely, the fixed price chain store or the novelty store. In Greater New York and Brooklyn, the 5 and 10 cent chain of markets started quite a number of years ago. As the prices indicate, of course, prime meats can-not be sold and furthermore, prices do not always apply to pounds, but often to half pounds and pieces.
Another chain store of this kind is operated in Greater Philadelphia, as a 5, 10 and 19 cent meat store. The difficulty in the operation of markets selling at such low prices lies in the fact that they are unable to supply the trade at all times with meats they want at the above fixed prices. As this is practically impossible, owners of such markets usually buy what the wholesale market offers, so they can sell it at the pre-determined selling price.
10-20-30 Cent Meat Shops
An important improvement is found, however, in a new type of market which has recently been started throughout the middle-west, the 10-20-30 cent meat shop. Quite a few of these stores are in operation and inasmuch as the prices are fair and a good grade of meats is handled, it is expected that this type of store system, which has been copyrighted and patented as to design and method used, will grow extensively.
These markets are practically conducted with one man in charge. The meats on the counter are very attractively arranged, and prices are displayed prominently to indicate plainly what meats can be bought at stated prices. This type of market, does not confine itself entirely to these prices. It is evident that fluctuations in prices will occur and the price list is therefore prominently displayed, giving daily the names of products that can be sold at 10, 20 and 30 cents. This type of market is not in any way trying to deceive the public, nor can it be considered a "cut rate" market, but rather an advanced method in retail meat merchandising.
To furnish a list of the markets of chain systems or companies is of little value to the retailer due to the rapid expansion notice-able in this field. Practically all of the leading chain store companies are steadily increasing the number of their stores either by opening up new individual stores, buying out competitors, or by consolidation.