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new when they had a guarantee that a large quantity would be purchased as a first order.
The first employee in the New York office was taken on to keep the books and to relieve Mr. Woolworth of much office detail. Not until the office was moved into a small room on the third floor of the building occupying the northeast corner of Broadway and Chambers street was the luxury of a typewriting machine realized. Gradually the offices grew; the room adjoining was secured; the next year the lease covered several more, until to-day the central offices of this syndicate occupy the whole floor.
And the growth of the central offices may be called the barometer of the business.
As the stores increased in number and size and spread out into many states and scores of cities, the system of long-distance directorate needed a care in handling that commanded many correspondents and much careful supervision. Then there had to be the buyer for each line of staple goods. All this increase in home-office work demanded constant addition to the force of employees and enlarged space.
The success of these stores, at least in many particulars, might be better explained had we the viewpoint of their customers.
Some of the reasons are apparent from the name of the stores. A woman with five cents to spend feels no hesitancy about entering one of them. The coin has a purchasing value that is respected in this place, and after a few experiences of the kind she begins to feel a personal regard for the establishment. She is in no danger of being confronted by a costly array of goods far beyond her purse. No need to keep her eyes on the floor for fear of noticing a bargain sale of imported hats. No need to hurry to the basement stairway, and after much delay reach a corner far under the sidewalk where she can spend her nickel in peace.
Perhaps she has fifteen cents to spend. After buying the five-cent kitchen knife in the basement, she must walk a block through crowded aisles, go up a flight of stairs, and finally reach the counter where the cheaper hairpins are displayed. The cake of soap she wants may be on this floor, just over by the opposite street entrance. In the five and ten cent store she will probably find all these articles in the same aisle — and a greater assortment of each.
Possibly this is the viewpoint of the frugal wife. And as a frugal wife is usually a busy one, she finds she has saved several things; among them, time, money, and pride.
When the people are pleased, the success of such retail stores, where the goods that are handled are necessities, is assured, provided two points are considered. They might be called first cost and organization. Gross profit, minus operating expenses (taking it in the broadest sense), has always equaled net gain. And this is where the Woolworth stores have won out. They realize that organization must be so perfect that their purchasing ability will have every facility for exercise. Yet just as surely it must not go beyond that. What is gained in gross profit must not be spent in over-organization, or the net receipts will be in no way benefited. There is nothing new about this — except the care with which it is worked out; they believe in the economy of system.
This last point, coupled with their ability to buy in enormous quantities, has made it possible for the Woolworth stores to sell many articles for five and ten cents that the general stores could not handle at that price.
THE DEPARTMENT STORE1
By HARTLEY DAVIS
HE popular idea is that a department store is merely the grouping together of a large number of separate businesses under one roof. But the experiment of assembling businesses in one store to minimize the cost of rent and other fixed charges has been tried and discontinued as a failure. The success of the department store rests upon an entirely different principle — upon standardization. The departments are not independent, but highly specialized activities conforming to certain fixed laws that govern the whole establishment.
The old way of doing business was simple and the methods were highly elastic. The proprietor bought as cheaply as he could, usually in quantities that were measured only by his capacity to sell and by his credit. He marked the goods in cipher, sometimes giving the actual cost and the minimum selling price, sometimes only the latter, and left it to his clerk to get as large a profit as could be wheedled from the customer.
The proprietor was therefore absolutely dependent upon the cleverness of his clerks for his profit; the clerk who imposed most upon the customer was the best salesman and commanded a relatively high salary. The percentage of selling cost was thus enormous. Relying considerably on his own personality to win business, the proprietor usually stationed himself at the entrance of the store to greet customers and to settle disputes.
1 By courtesy of "Everybody's Magazine." Copyright, 1907, by the Ridgway Company.
Now the difference between the old way and the new is the difference between the old-time workshop, where everything was made by hand, and the factory, where machinery does the work. The machine makes articles exactly alike, in standard sizes, and the cost of production is enormously reduced, as every one knows. The modern methods of conducting a department store represent the introduction into mercantile life of this factory idea, in as far as it stands for uniformity, automatism, and cheapened production. Like the factory, the department store is itself a huge, extremely complicated machine, and the store that most nearly approaches automatic perfection in its operation is the most successful.
Probably the most important factor in the development of the department-store machine is the idea of "one-price articles marked in plain figures." This makes it possible for the goods practically to sell themselves. The element of bargaining, the most important feature of the old system, is almost wholly eliminated. The chief function of the clerk is to see that the machine works properly. He has no more to do with fixing the selling price than has the purchaser.
I do not know who originated this idea. There is a story that a glovemaker in Paris first put it into execution and grew rich thereby. The first of the great department stores — the Bon Marche in Paris, which does more than double the business of any other store in the world — adopted the plan when it first opened its doors. A. T. Stewart introduced it into this country before the Civil War, and John Wanamaker was quick to realize its value.
Another important principle of the system of standardization in the department store is that all departments shall make practically the same percentage of profit.
Manufacturers who sell to department stores are often puzzled by the operation of this principle. I know of one of these who sought the merchandise manager of a big New York store with a novelty that made a direct appeal.
"It looks promising," said the cautious merchandise manager. "How much?"
"We can supply you in quantities at six cents apiece," said the manufacturer. "The selling price is twenty-five cents."
"Very good," said the manager; "I'll give you an order. But we will sell it at fifteen cents."
"No, the selling price must be twenty-five cents," insisted the manufacturer. "We have taken large orders with that stipulation."
"We can't handle it at that price," said the manager.
A little later the same manufacturer sought the same merchandise manager with another article that also pleased, and the manager was ready to buy until the question of the selling price came up. The manufacturer gave the figures, explaining that they meant a profit of forty per cent to the store.
"Can't handle it," said the manager; "there's not enough profit in it."
The manufacturer went away persuaded that each department in that store did business according to its own notions. As a matter of fact, it was standardization that fixed the percentage of profit.
The first article would have been placed in a department that turns over its capital many times in a year; the second, in a department that turns over its capital very slowly. Now it is obvious that a department that does a business of, say, $100,000 a year on a capital of $10,000, can sell each article for a much smaller margin of profit than a department that does a business of $40,000 on the same capital. And the manager's apparent incon