74 BULLETIN 1317, U. S. DEPARTMENT OF AGRICULTURE 
The horizontal group composed of the highest one-quarter of all 
groups shows an average net profit of 6.91 per cent of net sales; the 
second horizontal quarter group, 3.14 per cent; the third, 1.16 per 
cent; and the lowest, a net loss of 1.51 per cent. Between the two 
extreme groups the difference is 8.42 per cent. Under the same 
grouping the difference in gross margin between the highest and the 
lowest is almost as great as in net profit, the gross margin for the 
highest quarter group being 22.70 per cent of net sales, and the lowest 
15.85 per cent, a difference of 6.85 per cent. The average of total 
operating expenses in the same two groups is 15.79 per cent in the 
highest, and 17.36 per cent in the lowest, the quarter group with an 
average net loss having expenses higher than the quarter group 
with highest profits by an average of 1.57 per cent of sales. Upon 
the basis of this group data it appears that the high range of net 
profit is due primarily to the gross margin obtained by the retailer 
and only in much smaller degree to saving in expense of operation. 
Since in the smallest concerns the work is done chiefly or entirely 
by the owner, whose wages must be estimated, and in concerns of 
medium size the estimated wage of the proprietor constitutes a 
substantial part of the total wage expense, it is desirable to make 
the comparison of gross margin, total expense, and net profit in the 
largest concerns separately, where all or substantially all the wage 
expense consists of definitely paid wages. Among the 49 concerns 
with annual net sales of over $100,000 the average net profits in the 
highest, second, and third horizontal groups were 6.27 per cent, 3.55 
per cent, and 1.98 per cent, respectively, of sales, and in the lowest 
group there was an average net loss of 0.06 per cent. The average 
gross margin for the four groups, respectively, was 19.42 per cent, 
19.02 per cent, 17.62 per cent, and 14.61 per cent of sales, and the 
average total expense for the four groups, respectively, was 13.15 
per cent, 15.47 per cent, 15.64 per cent, and 14.67 per cent. Accord- 
ingly, among these large concerns, where wages as well as other 
items of expense are definitely paid and not estimated, where book- 
keeping records are presumably particularly accurate, and where 
more definite commercial policies are followed than in smaller con- 
cerns, there is the same wide difference in gross margin and narrow 
difference in operating expenses, indicating that high range of net 
profit is due primarily to the gross margin obtained and only in much 
smaller degree to saving in expense of operation. 
High gross margin may result from taking advantage of lack of com- 
petition, from skillful salesmanship in selling meats of equal grade 
at higher prices than competitors, from making purchases at whole- 
sale on favorable terms, from cutting and trimming meats in ways 
to meet the requirements of customers and thereby bringing out the 
greatest value, or from utilizing merchandise thoroughly by avoid- 
ance of waste or deterioration. Skill in cutting and trimming and 
care in avoiding waste are special marks of efficiency in the public 
interest as well as in the interest of the dealer. Care and alertness, 
even shrewdness, in buying and selling are important factors which 
dealers exercise in their own interest. The most important factor in 
extreme instances of high profit or of net loss in taking advantage of 
lack of competition, on the one hand, or being subjected to unreason- 
able competition, on the other, the ultimate economic results of which 
