(2) The second major reason given by Fortune for the existing situation is low pay.

Even more critical than training is the matter of pay. It is low. Store compensation systems cover a wide range from fat salaries in main-floor notion departments to fat commissions in the "big ticket" areas of home furnishings and appliances, but the average earnings boil down to $46 a week. In comparison with other occupations, salespeople are paid more poorly than they were in 1939.45

Fortune then raises the question "Can retailers afford to rectify the situation?" and answers as follows:

With the payroll cost of their selling employees now standing at 7 percent of gross sales and with profit margins of only 2 to 2.5 percent to play around with, retailers argue that cost cutting is the sole way out of the squeeze. In their book, the only result of an increase in pay would be a further subtraction from gross sales. They do not concede that there might be a cause-and-effect relationship between the two; that the incentive effect of better pay might be to increase gross sales and thereby lower the cost ratio. Indeed most retailers scarcely ponder the problem at all. Indexes of individual salespeople's productivity are the exception, and about the only rationale for their compensation remains, simply, what the retailer across the street is paying.

There is no lack of warning signals. In brochures, speeches, and studies, students of retailing have been pointing out that the big item in retailers' cost is not what salespeople are being paid but the poor performance they are making.46 After this analysis of the situation, Fortune states that retailers are more often than not unaware of the correlation between pay and turnover:

"Start a man at $1.10 an hour," moans a Seattle store executive, "and he finds he can get $1.50 to start in the warehouse union and you are back looking for another clerk." "A good many of my salesmen have poor morale," a Los Angeles store executive complains. "They are unhappy because their wives are making more money as stenographers *** than they are.' Two-plus-two becomes a dark enigma.17

How can this enigma be solved? Fortune says:

The result has been a sort of vicious cycle: the more management despairs, the worse the sales force becomes, and the more management despairs again. Theoretically, one solution might be to do something about it. This, however, costs money, and in their search for a more pleasant alternative retailers have hit on a question that seems to offer a magic escape: Are salespeople really necessary anyway? 48

Under these circumstances the ideal solution for the "inefficiency of the sales force is to eliminate it." Fortune quotes Malcolm P. McNair from Harvard University as follows:

The ideal perhaps would be to have practically everybody engaged in nonselling activities, in other words, to make the retail store essentially a production organization where almost all the work is done behind the scenes under factory management conditions, and where only a relatively small number of people have actual contact with customers.49

The editors of Fortune who seem to disagree with this point of view then explore the policy of stores which were able to increase their sales during a time when the sales volume as a whole was slumping. They conclude: "in every case these stores turned out to be precisely the ones that have concentrated on raising the level of their sales force.50

UNIVERSITY OF MICH

LIBRARIC

This conclusion is documented of them revealed a ratio of pay pared to a 6.4 percent nationa editors, however, recognize that in the depressed world of Unite

The whole point of view exp has been attacked in another a "Salespeople Can't Be Trained of this article, stated:

Fortune has come to the conclusion state. I couldn't agree more empha the way Fortune reasons from this f gors its argument, manufacturers and job of training them to do a better job.

But salespeople can't be trained. M There are always exceptions, of course, retailing is making the salesperson a h manufacturers realize it the better off th

The reasons given for this attitude

(1) There is no reason for trainin "responsible for more than a tithe retail stores American shoppers h been sold." 55

(2) Retailing, "in the old days, w personnel. Old-time people were more willing to serve." "The author

that are inherent in character" and

or even a 40-hour training course in changes in an adult." 56

The first point may have validity considered. But it is hardly applica per sales-personnel

The second point deserves little dis summary of a widespread attitude substantiated by the following statem

Retail salespeople have no desire to be tr They actively or passively resist training e in these attitudes by their labor affiliations.

They move in and out of retailing at suc department stores have a storewide annual over 60 percent. Train'em today; they're goi in training them at all.57

These reasons are a good example enigma." It is at the same level of workers are lazy by nature and then the human species.

In the course of his attempts to pro impact on total sales, the author of th following startling statement:

RETAIL ESTABLISHMENTS AND FAIR LABOR STANDARDS ACT 169

ented by: From 50 or 70 percent of our total retail volume in all categories except antos, of payrolls and oil, lumber and building materials is done by no more than 400 retail ational arganizations.58

e that the his neat summary of the strength of the monopoly element in United Natailing is followed by an expression of regret that-

Wexpressed L

e giant retailer has proved to be totally unable to attract the better type of her article arsonnel, to hold them or train them*** 59

and

job.

The way out of this dilemma is "the robot approach" and preselling rough advertising.

If the Freudian theory of childhood impression has any validity, then the deep press that brands are making on young minds will most certainly make robot tailing highly profitable.60

The manipulative mastermind of the future will be concerned with Muman being only in the most sensitive stage of childhood developbatent and will leave the more adult personality to the robot selling echniques of an impersonal machine. The author of the Fortune rticle states explicitly that "the day of the retail store as a 'factory arf distribution' is dawning." 61

ngs This not too alluring picture of the future prompted the editor of e of tortune to comment on the article by Mr. Weiss under the title Salespeople Versus Robots:" 62

are might seem slightly unnecessary to come out flatly, squarely, and fearlessly in ashavor of human beings. But there is a point to it occasionally. * * * mahe editor mentions the significance of the point of view presented:

what Mr. Weiss has done is to articulate with great candor what others have been bath to admit is their point of view. And it is a point of view that is likely to wave considerable influence.63

it is, furthermore, a point of view which is of particular significance or minimum wage legislation because its basic premises and the conlusions which are drawn from them are likely to be identical with those of the opponents of minimum wage legislation. It is, therefore, important that the editor of Fortune states flatly "The blame for the low quality of salespeople lies not so much with the salespeople as 5: with their managements." 64 He also says: "We doubt that any branch of retailing is so peculiar that it is uneconomic for management to give its people decent pay and training." 65

Last but not least, the editor of Fortune stated:

In the course of Fortune's research on retailing, a special effort was made to find out which stores were most conspicuously ahead of the competition on such cold figures as turnover rate, gross sales increases, transactions per salesperson. Not surprisingly, they turned out to be precisely the stores that have had the most enlightened pay and training policies.

One of the major issues which has been raised in the preceding paragraphs is the question of self-service. There is no question that selfservice is of great significance. It was an important factor in the

rise of the supermarket.67 And it is a growing factor in the limitedprice variety field: Under the heading "Number of Complete SelfService Units Increased Impressively in 1954," the annual report on limited price variety chains in 1954 stated:

Only 12 of the 29 firms operated complete self-service stores in 1953, but by the close of 1954, 20 of these concerns owned such outlets. The total number of complete self-service stores for these 20 firms increased from 171 in 1953 to 468 in 1954. Complete self-service stores as a percentage of all stores operated by all reporting companies likewise advanced, from 3.1 percent in 1953 to 8.5 percent in 1954. The figures for complete self-service stores expressed as percentages of the total number of stores operated by the 20 chains were 3.7 percent in 1953 and 9 percent in 1954.68

It is interesting to note in passing that self-service has been "used mainly in smaller stores." 69

There are many questions in regard to self-service which remain to be answered. Self-service and personal selling are not necessarily an "either-or proposition." 70 Self-service may release "a not inconsiderable number of people from routine chores so that they can sell." 71 It has also been said that "this (self-service) does not mean more salespeople-it often means less-but it certainly means more productive salespeople." 72

These problems cannot be further discussed here. Suffice it to state that the introduction of the "nonstore" retailing category in the 1954 census is a symbolic event with a very stark reality behind it: self-service and automation are the forces of the future. Wholesalers have taken the lead in introducing automatic equipment but retailers are just beginning to catch up. Bloomingdale's in New York, Filene's in Boston, Berland Shoes in St. Louis, and Broadway Department Store in Los Angeles, among others, now calculate sales totals and breakdowns each day on punch-card machines. Price tickets. in these stores are punched with a code showing price, color, style, manufacturer, etc., which is automatically reproduced on conventional punch cards. The cards are then run through sorting and tabulating machines. Both retailers and electronics manufacturers, however, expect to replace this cumbersome, "old-fashioned" electromechanical system with an electronic computer that will instantaneously calculate both sales and inventory from data fed it at the point of sale. **** This may serve as one among many possible examples illustrating the inroads of automation on retailing.

Before concluding this section a few comments on productivity in stores of different size should be added.

Table 128 shows the influence of scale of operation on sales per person. In 1939 sales per person increased from $4,900 per person for stores with no employees to $7,900 for stores with 8 to 9 employees. For stores with more than 9 employees sales per person declined until they reached the $6,700 level for stores with 100 or more employees. Harold Barger comments on these data as follows:

07 See Robert W. Mueller, Movements in United States Retail Distribution of Food, paper presented at the annual meeting of the American Economic Association and the American Marketing Association, New York, December 29, 1955. Mimeographed release, p. 5.

68 Lawrence R. Robinson, Operating Results of Limited Price Variety Chains in 1954, Harvard Busi ness School, Division of Research, Boston, 1955, p. 23. For further details see also p. 24.

73 See Charles E. Silberman, "Retailing, It's a New Ball Game," Fortune, August 1955, p. 180.

Judged by this test, productivity declines with increasing size after a modest size is reached."

It seems, however, that the situation differs in various branches of retailing. Data in department stores in 1954, for example, "sales per selling employee in the $1 million to $2 million group were only $21,000 as compared with a figure of $42,500 for the stores over $50 million." 75

Source: Harold Barger: Distribution's place in the American economy since 1869 Princeton University Press, Princeton 1955, p. 50.

THE ABILITY OF RETAIL TRADE TO PAY HIGHER WAGES

We shall now draw upon the findings presented in the preceding sections in order to throw further light on retailing's ability to pay higher wages.

The focus in such a discussion is often exclusively directed toward profits. The proponents of higher wages try to prove that profits are high enough to allow increases in the wage rates and those who oppose minimum standards of health and decency often argue in terms of low profits or at least low rates of profit.

While the relationship between wages and profits must be explored, a limitation of our inquiry to a mechanical-static comparison of profits and wages must, from the outset, be rejected as an inadequate approach to the problem. There may be cases in which profits are so high that wages could be increased out of profits. This is undoubtedly the case for some firms but the preceding data have not shown excessive profits for the industry as a whole.

There may also be cases in which a firm is simply not able to pay higher wages because its profits would be reduced to such an extent that it would have to go out of business. However we have not found any evidence that this would be true for any significant number of firms in retailing. Quite to the contrary, data presented in this section have shown that the largest and strongest firms are among the lowwage firms. The marginal firm in terms of profits will not be directly affected by the proposed extension of coverage to retail trade.

Up to this point a static-mechanical comparison of wages and profits has its value. But the ability of retail trade to pay substantially higher wages can only be explored in dynamic terms. The basic issue may, therefore, be formulated in these terms: What are the chances that the industry will be able to adjust to substantially higher wage 74 Harold Barger, Distribution's Place in the American Economy Since 1869, Princeton, 1955, p. 50. See Malcolm P. McNair, Operating Results of Department and Specialty Stores in 1954, Harvard Business School, Division of Research, Boston, 1955, p. 6. See also F. L. Foster, Jr., Operating Results of Department and Specialty Stores in 1949, Harvard University, Boston, 1950, p. 19.