FIGURING SELLING PRICES.
This is done by some employee designated by the Exchange Officer; sometimes it is done by the Exchange Officer himself. It is sometimes prescribed by the Council that when organizations (shareholders in the Exchange) order articles not in stock, the selling price shall be actual cost to the Exchange of such articles. This cost would, of course, include any transportation charges, etc., that were incurred, but the Exchange would get the benefit of all cash discounts. It is also prescribed in some instances that persons not stockholders in the Exchange who order merchandise that is not in stock shall be charged a commission of 5%. Both of these rules are sound, because, in the first case, any profits made by the Exchange would simply revert in dividends to the organizations from which the profits were made, assuming that all organizations transacted the same amount of this kind of business. If they did not, it would still be unjust to penalize one company for patronizing the Exchange by taking from it money for distribution in dividends to other companies, regardless of the amount of patronage the latter gave the Exchange. The second rule is sound because the transaction is a quick sale, and the money of the Exchange is tied up in stock for the minimum length of time. The selling price in the above cases is, therefore, very easily determined.
In figuring out the selling price for the ordinary run of goods, the process, while different, is never very difficult. We must base our calculations on the smallest value used in coupon sales, except in the case of staples sold only to charge customers. Ordinarily, the smallest purchase that can be made with coupon books is five cents. We should, therefore, in every possible case, make our selling price a number divisible by 5. Cheap articles may be sold “2 for 5”, etc. It is a bad policy to sell articles for 4 or 9 cents and have the clerk hand back change when a coupon sale is made.
Articles that can be quickly and easily sold can be handled at a small margin of profit, but articles that may prove to be “stickers” or those representing a considerable investment should be made to pay a larger profit.
In this connection, the general policy of the Exchange may be made to take one of two trends. The first policy is to sell all articles at the minimum price consistent with making the Exchange self-supporting. In this case, the amounts paid to the organizations in dividends will be proportionately small, and consequently, the various companies will receive little money to spend on their messes, athletics, etc. This plan would be of considerable benefit to such customers of the Exchange as are not stockholders.
The other policy is to charge about the same prices as obtain in the stores of nearby towns. In some cases of isolated posts, the prices could be put even higher. This plan would result in larger dividends paid to the companies but might entail the loss of customers, especially in these days of mail-order and catalogue houses. This latter policy is upheld by many able authorities, especially since the passage of the “anti-canteen” law. According to one of the most able officers the writer has ever known, this policy was stated about as follows:—“We should charge as high a price as the traffic will stand. I do not want my men to spend their money in town, for obvious reasons. I want them to spend it where they themselves will get the benefit of the profits made on their purchases. Therefore, give them good value for their money—as good as they can get anywhere—but do not try for low prices and do make the Exchange so attractive that they will naturally gather there and patronize it.”
In view of the above facts, and knowing the general policy of the Exchange it is not difficult in the ordinary case, to fix a selling price for our goods. We simply add the cost of transportation to the cost price of the goods, add the desired profit and this gives us our approximate selling price. In some Exchanges, other items of overhead charges, such as clerk hire, depreciation, etc., are taken into consideration in fixing the selling price. There should be ample space in the right hand columns of Form 28, the receiving record, in which to figure the selling prices.