One of the reasons advanced for the loss of coffee trade by retail grocers is that they price their blends in "round numbers", that is 20, 25, 30, or 40 cents; while their competitors "split nickels", selling their product at 18, 23, 28, or 38 cents.
Most of the retail enterprises in other lines of trade have built up their business on the penny-change plan; and many coffee men believe this should become the universal merchandising method among retail distributers of coffee.[343]
One of the leading advocates of "splitting nickels" has worked out a chart to show how coffee should be priced to make predetermined profits. (See next page.)
| Table Showing Profit Percentage on Sales | ||||||||||||||||
| If Your Coffee | And You Sell At | |||||||||||||||
| Costs | 25c. | 26c. | 27c. | 28c. | 29c. | 30c. | 31c. | 32c. | 33c. | |||||||
| 20c. | 20% | 23% | 26% | 28% | 31% | 33% | 35% | 37% | 39% | |||||||
| 201⁄2c. | 18% | 21% | 24% | 26% | 29% | 31% | 33% | 35% | 37% | |||||||
| 21c. | 16% | 19% | 22% | 25% | 27% | 30% | 32% | 34% | 36% | |||||||
| 211⁄2c. | 14% | 17% | 20% | 23% | 25% | 28% | 30% | 32% | 34% | |||||||
| 22c. | 12% | 15% | 18% | 21% | 24% | 26% | 29% | 31% | 33% | |||||||
| 221⁄2c. | 10% | 13% | 16% | 19% | 22% | 25% | 27% | 29% | 31% | |||||||
| 23c. | 8% | 11% | 14% | 17% | 20% | 23% | 25% | 28% | 30% | |||||||
| 231⁄2c. | 6% | 9% | 13% | 16% | 19% | 21% | 24% | 26% | 28% | |||||||
| 24c. | 4% | 7% | 11% | 14% | 17% | 20% | 22% | 25% | 27% | |||||||
| 241⁄2c. | 2% | 5% | 9% | 12% | 15% | 18% | 21% | 23% | 25% | |||||||
| 25c. | 0% | 3% | 7% | 10% | 13% | 16% | 19% | 21% | 24% | |||||||
| 251⁄2c. | 2% | 5% | 8% | 12% | 15% | 17% | 20% | 22% | ||||||||
| 26c. | 0% | 3% | 7% | 10% | 13% | 16% | 18% | 21% | ||||||||
| 261⁄2c. | 1% | 5% | 8% | 11% | 14% | 17% | 19% | |||||||||
| 27c. | 0% | 3% | 6% | 10% | 12% | 15% | 18% | |||||||||
| 271⁄2c. | 1% | 5% | 8% | 11% | 14% | 16% | ||||||||||
| 28c. | 0% | 3% | 6% | 9% | 12% | 15% | ||||||||||
Figuring Costs and Profits
While the cost of conducting a retail grocery business naturally varies according to local conditions and the size of the enterprise, an investigation among some 250 stores in small and large cities made in 1919 by the Bureau of Business Research, Harvard University, showed that the average cost was fourteen percent; that the net profit averaged two and three-tenths percent; and that stock was turned about seven times a year. Gross profits ran from ten and one-half percent to twenty-six and four-one-hundredths percent of the net sales, the most typical figure being sixteen and nine-tenths percent. Sales cost formed the largest single item of expense, varying from three and forty-one hundredths to nine and ninety-four hundredths percent, with the bulk of figures showing around one and eight-tenths percent.
According to advanced business practise the cost of doing business should be based on these fourteen points:
1. Charge interest on the net amount of the total investment at the beginning of the business year, exclusive of real estate.
2. Charge rental on real estate or buildings at a rate equal to that which would be received if renting or leasing to others.