An Open Lrgttgf---

Deqr Mr. Retqil Lumbermqn:

According to Webster's Dictionory an odoge is q scying ol long-estoblished outhority qnd universol qpplicqtion; qs,

The Proof Of Ttie Pudding Is In The Eating

We oll reqlize how true this is, for personcl sotisfoction is the only reql test of cpprovol.

When you buy your next cor of PONDEROSA PINE (selects, common boords, *orldinil.'owholesole deoler to ship from *KESTERSON II'MBER CORP.

Klcnrr<rth Fcrlls, Ore.

And test Ior yoursell theIinequolity of texture, grode, millwork ond service, of which we ore justly proud.

Yours for sewice crnd sctiglcction, has been 36%% more than for the 18 year period. The progressive increase in the three 6 year periods and the trvo 9 year periods will be interesting. The gross margin of profit in the period 1925 to 1930 increased over 1919 to 1924 by 3t/+',/o, but the operating expenses ir-rcreased 20'lc. The gross margin in 1931 to 1936 increased over 1925 to 1930 by | 9/lO%,butthe operating expenses increased 35r/q%. The gross margin of profit in 1928 to 1936 increased over 1919 to 1927 by 3l/3%, but the operating expenses increased 68 3/lO%. These figures indicate clearly the extraordinary increase in the cost of doing business per dollar of sales,over these 18 years, and at the same time indicate the very small increase in gross margin of profit. A perusal of the actual records shows that every item of expense has increased per dollar of sales over the years. Telephone expense, for instance, in these records, has increased lOOTo in the period 1934 to 1936 over the 18 year average. Merchandise expense items, such as stationery for instance, have increased in the three years 1934 to 1936, 45% over the 18 year average. We all know how much more detail there is in the way of office work to handle a dollar's worth of sales and salaries that show an increase in 1934 to 1936 of 24% over an 18 year averag'e, and in the second nine year period have increased 847o over the first nine year period. As to wages, it is difficult to make a compariso,n over the years, due to changes in operations such as use of loading cranes, Ross Carriers and the like. We calculate that wages are now about 24% higher than an 18 year average. As far as the company I am with is concerned, rve are now paying in November of 1937 an increase throughout our yards of 64.7% over May 1935, exclusive of the time and a half for overtime and other such labor extras. As for taxes. these are also difficult to compare over the years, due to varying number of yard sites owned, income tax paid, etc. There is no question' however, that we are now paying per dollar of sales the

| 0 ilillion $ales Calls lor Philippine ilahogany llealers

Into the homes of your best customers every month go the printed sales talks of the Philippine Mahogany Manufacturers' Association, Inc. These sales talks are appearing in l0 million individual copies of American Home, Architectural Forum, American Builder, Yachting. Cash in on this sales effort by stocking Philippine Mahogany and telling your customers about it.

Write for illtstrated, desciptiae booklet to Phili|pine Mahogany Manzfactarers' Import Association, 111 WestSeaeath Slreet, I-os Angeleg CaliJornia.

Southern Calilornic Representative.

Eeglerson Lunber Corp. - Kcmcth Fclls, Ore. 3ll Financicl Center Bldg. - Los Angeles, Cclil. Telephone TRinity 9821

\iShest taxes-the industry has ever paid. City and County Taxes, City Licenses and such taxes are on the increase. The Social Security Taxes-Federal and State-are taking 3% of. your payroll in 1937 and will take 4% in 1938. Thi Sales Tax is an expensive tax to pay, due to the extra office detail it entails, and the losses in collection due to technical objections on the part of some and conscientious objections on the part of others. The Undistributed Profits Tax is an onerous thing for lumbermen or any other business man, and should be modified or repealed, and if any oI you have not been examined for 1935 and 1936 bv the Federal Income Tax agent, you have a surprise coming in the new method of depreciation now in effect, a,nd ho* it affects you by reason of the Undistributed Profits Tax. The Capital Gains Section of the Income Tax law should be amended so that if you sell a piece of land and lose $5,000, you can deduct the full amount onyour return, since you must report the whole $5,000 as income if you make a gain. At the present time the total loss you can take on capital losses, such as land and buildings, is $2,000. I_ could_go on and on about taxes, but suffice it to say that City, County, State and Federal Governments are still spending extraordinary amounts, that California's share of the Federal, State and Local debt is estimated at $2,905,- 24I,W or 42.I% of the assessed value of all the land improvements and personal property in the State and will eventually have to be paid; and that the lumbermen's taxes per dollar of sales rvill increase rather than decrease.

Conditions beyond our control are responsible for a large proportion of the increased cost of doing business, but a considerable amount of the increase in exDenses can be laid directly at the door of the lumber industry itself ; unnecessary and extravagant competitive practices are resp'onsible for much of it. If one yard puts into effect an unnecessary or extravagant service, it is not long before every dealer has to do likewise, and the cost of doing business gradually increases. Lumber dealers must progress. We must give proper and intelligent sales service to the buying public, and adequately promote the use ,of lumber and other materials we handle, but just remember one thing -that the wonderful sales advantage caused by the unnecessary, extraordinary and extravagant service of the one yard today becomes the burdensome expense of all yards tomorrow.

In my opinion, there is not a great deal that dealers can do to cut down expenses, but in my opinion there is a great deal that dealers should do to stabilize our market and to increase the low gross margin of profit which permea.tes this industry, and it is my hope that our State Association can be made a medium by which it may be done. One reason for the low gross margin is because lumber dealers have gradually evolved from lumber dealers to building material dealers. Twenty or twenty-five years ago, pr,obably 90 or 95% of. the lumber dbalers' business was lumber, and the other ,commodities were unimportant side lines, and any gross profit which they received on the side line was just that much more than they otherwise would have had. Because ofits convenience to customers and because it was eco,nomically sound, the lumber man has now become a building material dealer, and it would !r" *y opinion that 45% of the business done by so-called lumber yards in this State is something besidei Douglas Fir and Redwood Lumber. With more and more yirds being established, with lumber bearing a gradually smaller per cent to permits, lumber dealers, in my opinion, must rely on,'other commodities for volume, and the time is long past when all commodities must bear their proper relation to expense. It costs as much to han'dle commodities other than lumber as it does to handle a dollar's worth of lumber.

Another reason for our low gross margin is caused by what I call "Don't Touch It Sales." It is a common thing for dealers to accept five., .seven or ten per cent gross margin on various commodities because the manufacturer or wholesaler handles it direct to the iob for you and vou "don't touch it." This is a developmint whic'h, if not iurtailed, will still further reduce your chances of profit on your investment. You have investe,d money in land, buildings, equipment, and you probably have a more or less set p_ayroll, and yet somebody else's truck from somebody else's warehouse is passing around your plant and you are accepting a small net profit when you should have a proper gross profit to pay your expenses. What you are doing is rendering a complete store service-selling the job, servicing -the job, extending the credit and receiving a broker's profit. How little more it would have cost you to have purchased the goods and hauled them yourself and made a retailer's gross profit. Besides, some overly ambitious manufacturer or wholesaler, getting a taste of ihis sort of thing, will some day cut you out of the picture entirely. Again, "don't touch it" sales at a low gross margin on a large quantity has quite often the effect of breaking down t6e price on smaller quantities of the same commoaity.

Then there are those commodities that the deaier sells at a very low gross margin because of the fact that they have a large turnover. I do not want to be understood ai saying that there is nothing to turn over, because there is. However, in my opinion, there are a lot of misconceived ideas concerning it. Most dealers, and some accountants, confuse turnover and increased volume of sales. As a matterof fact, the rate of turnover does not mean increased sales at all. A little simple arithmetic will show you that if you have the same volume of sales in each commoditv. and you have or can borrow the money to invest in the stock of goods, that you are dollars ahead at the end of the year to sell a commodity that bears 25% gross profit and turns one time in one year, than to sell a commodity that