The Washington times., 1924-09-04
SALES FOUND To
/. RISE IN RATIO
WITH ADS
Harvard Survey of Depart
ment Stores in 1923 Just
Published

CAMBRIDGE, Mass, Sept. A.
Analysis of the operating expenses
in department stores for 1928, total
ing sales of over $1,000, 000, 900, has
just been completed and published
i'm Bulletin No. A by the bureau
of business research of the Har-
ward Business School.
This is the third report published
by means of the funds furnished
by the National Retail Dry Goods
Association, with the active CO.
operation of the Controllers Con.
|gress and the National Garment Re-
tailers Association. According to
the bureaus widespread study, sales
increase with advertising, and the
larger stores are beginning to re-
duce expenses by improved manage
ment methods. Attention is called
to an increasing tendency in some
quarters to shift the emphasis in
management from the buying to
the selling side.
The popular opinion that the de-
partment stores make large profits
is contradicted by the figures as
sembled by the bureau.
The Bulletin says, I'm the depart
of encouraging results. A substan-
tial increase was registered in the
volume of net sales as compared
with 1922; the total expense ratio,
on the average, was lowered Sigh
ly. and the average ratio of net
profit somewhat increased"
Stores with net sales Of less than
81 100000 spent Q per cent on
advertising with a net profit of
1.9 cents for every dollar of sales,
and turned over their stock "a
times in twelve months. Stores
doing over $1,OO0,O00 net sales
spent 80 per cent in advertising
and made a net profit of 3.6 cents
for every dollar of sales and turned
over their stock 81 times per
year. Graphic charts published in
the bulletin show that for every
dollar of sales in 403 department
stores reporting net sales OF less
than 100000 for 1928, total
merchandise cost was, 71.S per cent;
total expense of dbing business
1858 per cent; and net profit Ia
per cent. In 1853 department stores
reporting net sales of 81 ,0O0, 900 and
over for 1928, total merchandise
cost was 68 per cent; total ex.
pense 28.4 per cent; and net profit
SO per cent. Dcpartmentized spe-
cialty stores having an aggregate
sales Of $96,024 900 in 1923 were
separately analvZed, showing that
"a total merchandise cost of ST.
per cent; total expense 29.6 per
cent and net profit per dollar of
sales 3.S per cent.
In closing the bulletin says: "One
of the most important factors in
the present situation is the wide
spread interest in the problem of
expense reduction. In this connec-
ton, attention has been drawn par
ticularly to the relation of sales
volume to expense ratios. In keep
ing with the data secured by the
bureau for previous years in this
and other retail trades, the figures
given in this bulletin show that the
increase in expense was more than
in proportion to the increase in
sales for department store firms
with sales ranging from $780, 900 to
So, 999, 900. Furthermore, the aver
age cost of doing business for the
entire group of firms with sales Of
81 ,0O0. 900 and over was higher than
the average cost of doing business
for the entire group of firms with
sales below $1,O0O,O00. This evil
dence supports the previous con,
clusion of the buI eau that mere
increase in the volume of sales
does not result in economy of
operation.
THE theory commonly accepted
among business men assumes that
as sales volume increases expenses
do not increase in proportion. The
evidence so far obtained, however
points to the conclusion that this
theory is fallacious. This does not
mean, however, that it is impos-
sible for a department store with
large sales volume tn maintain 9
relatively low expense ratio, but
merely that under ordinary condi.
tons, including the human factor,
the tendency, by and large, is for
expenses to increase at a relatively
more rapid rate than sales, beyond
certain point in the volume
scale