Why We Joined the Merger

From the October, 1927, issue of the Magazine of Business

The company that bears our family name and of which I have been president for many years, consolidated about.l8 months ago with a number of other manufacturers. Ever since, I have been repeatedly asked why an organization that is as old, as well know{r, and as successful as our buiiness is. should have found it advisable to join a merger. I am going to attempt to answer that question in this article; and I am permitted to write under the cloak of anonymity, to be free to discuss the matter frankly.

We did not decide to enter the consolidation on any sudden impulse. Several times during the last 15 years we had opportunities to sell the enterprise at what would be generally regarded as a princely figure. But these ofiers did not interest us because we had no desire to retire.

On two previous occasions we were invited to merge the company with other organizations in this field; but we were not ofiered anything sufficiently attractive to compensate us for the sacrifices we would have to make, It is true that the money consideration was large, but we would have had to sink the identity of our business in the consolidation, although our trade-mark would have been continued.

If there had been any chance of the proposed merger being consummated, it was dissipated when we learned that our corporate identity company would be lost in the combine.

For sentimental reasons, if for no other, I have always been most anxious to preserve the separate identity of the business, The enterprise was started by my grandfather when he was 66 years of age. He had spent the better part of his life in the wholesale leather business, but was wiped out in one of the panics of the eighties.

A year later an endowment insurance policy for $30,000 which granddad had taken out in his more opulent years, matured. The iamily had maintained a scrap-book, ai a catih-all'f6r all sorts of curious clippings and memoranda. In this book there was a ragged old recipe which had always strangely fascinated my grandfather. He often said that if he were younger he would start another business to manufacture a product based on that recipe.

When the insurance policy matured, instead of retiring as most men would, granddad pulled out that recipe, changed the old barn on the family homestead into a miniature factory, and set to work. Before he died he had the satisfaction of seeing his little business modestly successful. He had a factory which was the show place of the community and had extended his sales over half a dozen neighboring states.

When my father inherited the business he was well along in years. In the 12 years that he managed the company, he "ran the sales well past the million mark and built his distribution to nation-wide pro- portions. Father, however, sold altogether through jobbers. In fact, a large percentage of his output was packed under jobbers' labels. The company had no direct rel4tions with the retailer and, of course, consumers never heard of the organization, unless they went to the trouble ol puzzling out the name of the manufacture4, which was printed on the package in a type too fine for the ordinary eye to read. My father sensed the dawning of a new day in business manage- ment. After I finished college, he had me take a post-graduate course in business administration. Later he induced me to take a correspondence course in advertising. In those days, one could study advertising only through the mails, There were no resident schools of advertising; if there were, I never heard of them.

So when I stepped into the presidency of the company I was wellprepared by education and by parental coaching for the job. In view of rqy training, it was natural for me to try my hand at advertising. Our first appropriation was for only $3,200, but I can still remember with what trepidation I signed the order.

I doubt if that first campaign accomplished much, but it did at least let the consuming public know of our existence. We began to get letters from people, telling us how much they enjoyed our product and informin8: us of new ways to use it. These suggestions were tried out in our laboratories and if found meritorious were incorporated in our advertising literature. Thus the consumer assisted us materially in expanding our market,

Letters also came from people who were dissatisfied. They had obtained poor results from the use of our product-mainly because they did not use it properly. These letters led us to believe that our printed instructions were not specific enough. So we remedied this deficiency. Thus the complaints which we received from a few persons who read our first advertising helped us to make a vitat imprbvement in our business.

At any rate, rre became convinced of the value of advertising; and from that day to this we have been one of the country's most coneistcnt advertisett Our sales have grown steadily, until now they arle at least 15 times what they were when my father died.

The business has always been highly profitable. Only one year in the entire history of the enterprise failed to show a profit, and that was 1920. We would probably have shown a profit in that hectic period, too, if we had not seen fit to compensate our dealers for the ioss ori oui product which they sustained when prices took a tumble that year.

Wi never had any labor troubles. In fact, most of our old employees are stockhoiders in the business, and all of our employees are paid better than standard wages.

I am still a young man, with an expectancy of at least 20 years of active business life. The burden of management is ably shared by several younger executives.

Thus-it would seem as though our business was harassed by few oroblems. In the languase of the day, we were "sitting pretty." To lhose who are familiai with our situation, it is inexplicable why we should have joined the merger. Many of my business friends accused me of sllling out becauie I became scared of the "trust." They called it "a case of cold feet."

But there is one fact about our business with which my critics are not familiar. It is a secret that I always carefully guarded, disclosing it only to my immediate associates' This secret concerns our selling cost.

Oui selling cost has been mounting steadily ever since I became oresident. II must have started to rise even before my time. No doubt my father struggled with the problem, for- our..old recoqds show thit during the list four years of his life his selling cost increased 7/o.

I do n6t know what granddad's selling percentage amounted to, but it could not have b-en high. I doubt if it amounted' to 10y'o. For a long time he did most of the selling himself'

When icame into the business, the selling percentage was l8Vo. The first year of my management the,figure jumped to 2l%. IttC revelation-frightened me, but the handsome profit we made stilled 'mv fears. Tle next year the cost dropped back to 19/o and the succeeding year it went to 20/o where it stayed for quite a period^.

Then tlie-figure began to sky-rocket alarmingly and kept on going up until it struck 30%, and eventually it passed 40%. The last year bifore the consolidation took effect, it cost 44 cents out of every dollar we took in to sell our product.

- 'We were fortunate in being able to increase our prices occasionally to take care of a part of the rising selling cost; but increasing thc price was at best only a temporary solution of the p-roblem..__I realized that there was a limit to what the public would be willing to pay for the article, and I also knew that any business whose selling iolt is rising as ours has been rising for several years is in'an extremely ticklish position.

We dia everylhing we could to solve the question. We changed our method of distri6ution several times. We cut out the jobber and sold direct to the retailer. But, finding that method too costly, we returned to the jobber and curtailed our retail promotion. We had 225 missionary salesmen calling on the retailer. This number was reduced to 50. We then discovired that the jobber would not work alone; he has to have missionary men to assist him. We were obliged to build up our missionary force to its former size. ithanges Whi;h Have Been iaking Place for the Last 25 Years"

We &ied the experiment, in a few states, of giving up salesmen altogether. In their stead we appointed brokers to represent us. While most of these agencies did very well, they did not succeed in stopping our rising selling cost.

For i long time we thougbt we were spending too much for--advertising; so we cut our appropriation in half. That year our selling: cost spurted forward to a new peak.

I think it was in 1922 that I came to the conclusion that the causes of our ever-increasing selling cost were not arising within the confines of our business. They were due to fundamental changes which have been taking place in distribution for the last 25 years.

For example, even a superficial analysis will disclose that it now requires vastly more selling efiort to sell a retailer a given amount of -goods than it did when my grandfather was acting as his own salesman. In the first plce, he did not find it necessary to call on retailers at all. It was sufricient if he made the rounds of the wholesalers a couple of times a year. But if he had made a practice of visiting the retailer, he would have been able to sell him his requirements for six or eight months ahead.

Today, no merchant will buy that long in advance. He does some buying every day and the chances are that.he does not stock anything ahead for more than a few weeks. This means that the manufacturer's or jobber's salesman has to call on his retait distributors much more frequently.

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..BEAUTIFYING MAPLE FLOORS''

"Beautifying maple floors through the use of ehemical stains and finishing materials, is proving very popular with the public and has already become an important factor in the merchandising of maple flooring," stated Mr. A. R. McDonell of The Wisconsin Land and Lumber Co., Hermansville, Michigan, manufacturers of "IXL" flooring, who was a recent Los Angeles visitor. Mr. McDonell, accompanied by Mr. W. R. Steel, Marietta Paint & Color Co., Marietta, Ohio, had just completed a tour of the Pacific Coast. While in Los Angeles, they made their headquarters at the offices of the W. E. Cooper Lumber Co., the Southern California distributors of "IXL" maple flooring.

Mr. McDonell stated that his company is now furnishing the lumber trade maple flooring in practically any color desired. The samples of colored maple flooring on display atthe W. E. Cooper Lumber Co. offices show the beautiful effects attainable through the use of chemical stains, American lacquer and varnitro. These stains, the formulae of the Marietta Paint and Color Co. are found to be uniformly dependable and excellent, he stated, and have been adopted by the l\taple Flooring Association.

The Wisconsin Land and Lumber Co. have oublished a booklet which is a technical treatise on the modern color treatment of hard maple floors, interior finish and furni- ture. The booklet shows eighteen beautiful illustrations of colored maple floorins together with the formula for s_ecuring the various colors. For each colored plate of flooring, there are also colored illustrations showing their interpretations of the various olates as pertaining to interior finish and furniture, which makes J beautifu-l harmonious color scheme for homes. This booklet, revealing the

Member Of Hardwood Industry Honored By Supreme Council Of Scottish Rite

Owen L. Gibson, secretary-treasurer of White Brothers, "Hardwood Fleadquarters," San Francisco and Oakland, was elected bv the Supreme Council, Scotfish-Rite Masons, in session at Washington, D. C.on October 18th, to receive the 33rd degree. This degree is an honorary degree and those so honored are selected for outstanding work in the order.

If e has been connected with White Brothers for over thirtv-one years and has been their secretarytreasurer for over twentv-two years. He takes a very active interest in the civic affairs of San Francisco and has been a strohg supporter of the Community Chest ever since it started. He has devoted much of his time to the Communitv Chest drives every year and last year acted in the capicity of Colonel. He will also act as a Colonel in the 1928 drive.

Mr. Gibson ranks high in the hardwood industry in California and is an executive of high ability.

hidden beauty of hard maple, is dedicated to the Hard Maole Industry bv the Wisconsin Land and Lumber Co.. for fortyyeari pioneer manufacturers of hardwood maple floorine.

These colored finishes are as attractive in price as they are in beau!1', stated Mr. McDonell, and {rom a utility standpoint."IXL" flooring so treated insures great duiabilitv.