Here is another gem I found buried in a file, long forgotten. My grandfather and founder of Toy House, Mayor Philip H. Conley, penned these words in June 1969, two months before hiring my dad as his new manager.
I don’t know if this was penned to put his thoughts on paper for my dad, or if it was just something that struck him one day. I do not know if it was ever read again after that day (the file I found it in was pretty darned old). I don’t even know what one of the terms means (neither did my mom or dad). He refers to “marking capacity” and “markers”. I believe those were people who put price tags on boxes like my sister and I did as young children. He also refers to “jobbers”. I know that term. Those were the wholesalers or distributors of that day. I do know there are some nuggets in there that ring so true I’m calling them universal.
Here is his June 1969 manifesto in its entirety…
Business is a matter of balance.
Good business – successful business can be achieved as good government can be achieved using a system of checks and balances.
Balance as it applies to our business, there must be a balance between the number of customers, parking, inventory, shopping carts, sales people, stock people, marking capacity, office capacity, square feet selling space, square feet of stock space, store hours, checkout capacity, and giftwrap capacity. An excess of any of these factors creates too much expense for an efficient operation. A deficiency of a factor immediately creates an excess of all other factors – this is very bad for a profitable operation. Management’s responsibility is to maintain balance.
Enough free off street parking is an obvious example. Enough shopping carts is not so obvious. If people have to wait for a cart, then their parking space becomes non-productive , floor space, sales persons, inventory, etc. all become non-productive. Very wasteful, very expensive. We must realize that the customer may be on a time limit, therefore his waiting time must be subtracted from his shopping time. And, too, waiting is most aggravating and will result in a bad attitude for the customer.
Without customers, there is no business. If a customer is not satisfied after he is in the store, there is no sense in advertising to get him in the store.
Any time a customer is not satisfied with merchandise purchased in our store, he may return it for a credit, refund, or exchange. This matter should be handled more quickly than the original purchase.
Inventory balance is most difficult for us to achieve.
Excessive inventory is wasteful as it requires too many markers, too many receivers, too much work capital, too many sales people, too much stock space, and too many markdowns. If not balanced, this is the greatest cause of business failure.
An accounts receivable policy should be set up and adhered to with all being treated alike.
Inventory turns is the number of times your total inventory is sold per year. If you subscribe to the theory that you need only a 90-day inventory, then you should turn your inventory four times a year. Food stores may turn their inventory 40 or 50 times a year. Specialty stores turn theirs considerably less. This is the nature of the business. “If you can’t find it somewhere else, go to the specialty store and pay their higher price.”
Buying direct, although at a better discount, tends to create overstock conditions. In just buying dollars alone, your better price reflects at the most an 18% savings. However, your first markdown is usually 50%. I have not referred back to the other excessive expense factors. Buying direct, except under strict control, is dangerous.
In business the obvious is not always true!!! Example: “You’re nuts to buy from a jobber when you can get from us for less.”
Jobbers have been hurting for the past several years because so many operated on buying at the best price and selling at the lowest price hoping to move mountains (and doing so) of goods. (At a profit????)
So jobbers have been financially weak which is reflected in many ways.
- They do not carry a complete selection.
- The services of a competent salesman are not available.
- Their plant facilities do not allow for an efficient handling of vast quantities of goods.
Historically, three or four jobbers could not supply our needs. Their selections were never broad enough. We many times were forced to go direct to satisfy our needs for a “spread” of goods as well as supplying the needs of our customers, i.e. Monopoly money, Carrom refills.
Direct suppliers and jobbers giver preferential treatment usually to the largest customers. But not necessarily sometimes to the most regular – frequent – steady – GOOD PAY buyer. Over the years loyalty is pretty much a thing of the past.
No one seems to assess the market today. In years gone by, it was wise to spend time assessing how much could be sold profitably in the market and then budgeting the business accordingly. No one ever realized how large this nation’s ability to consume really was.
Business is a matter of keeping all relevant factors (and there are untold, unseen ones) in balance.
-Philip H. Conley
PS The more things change, the more they stay the same. This June I’m going to be speaking to the toy industry about how to keep things like inventory and cash flow in balance. If you would like me to speak to your industry, I have some insights that go way back.