July, 1930J Operating Costs of Grain Stores 27 



Further comparison of store prices with market quotations reveals 

 that a time lag does exist between them. As the market rose, the av- 

 erage time lag of all stores was 2.6 weeks, but when it fell there was 

 an average lag of 4.8 weeks. 



Retail Store Prices Compared for One Week 



Weekly jn-ices during the first week in December, 1928, for No. 2 

 yellow corn, poultry wheat, standard bran, standard middlings, 36% 

 cottonseed and gluten feed are given in Table 19 by stores. These 

 figures show a considerable variation in prices. The greatest range 

 is 65 cents and appears in wheat prices and the smallest is 30 cents 

 api)earing in bran, middlings and gluten prices. Some stores were 

 consistently k)w in price for all goods, while others were regularly high. 



By referring to the store numbers in Tables 19 — 22 and Figure 1, 

 the effect of low or high costs on gross margins may be seen. Since 

 the gross margin reveals the effect of low or high cost factors, store 

 prices to the consumer are likewise high or low as the gross margin 

 rises or falls. 



On the whole, the more efficient managers, operating stores at low 

 costs, are passing the savings on to the buyer, although a few take 

 advantage of the lack of competition to obtain bigger profits. Close 

 competition more frequently works to the advantage of the customers 

 than does seeming lack of it against them. There were instances 

 where competition forced the managers to operate at a loss because 

 they dared not raise the margin for fear of losing trade. Their only 

 salvation is to reduce overhead costs; they may have too many em- 

 ployees, or be too liberal with credit, thus increasing the investment 

 and interest on net worth with the added possibility of large bad 

 debts. 



Effect of Credit on Retail Store Prices 



Grain quotations secured from the dealers were on the basis of the 

 retail cash selling price per sack at the store. It will be recalled that 

 some of these stores were on a cash basis while others extended large 

 amounts of credit to their patrons. 



When the stores are arranged according to the percentage of an- 

 nual cash sales along with their respective gross margins, it is seen 

 that store credit costs money and that the trade is paying for it. 

 (Table 20). The stores on practically a cash basis averaged $.0990 

 gross margin on eveiy dollar of sales. The stores having cash sales 

 ranging from 35 to 65 per cent averaged $.1200, and those with less 

 than 35 per cent averaged $.1270 gross margin per dollar of sales. 



The relationship between cash sales and gross margins is better il- 

 lustrated when the corn prices for one week are compared wath the 

 percentage of yearly sales which were for cash. (Table 21). The 

 stores which were doing a cash business sold corn at an average price 

 of $2.17 per c^^'t; but those with cash sales below 35 per cent, averaged 

 $2.31 per cwt. for corn. These differences occurred even though all 

 stores quoted cash prices. This shows that the customers obtaining 

 store credit are not paying in full for the service rendered because the 



