(Briefed and extracted from a discussions of the problem of over-selling, under the title “Sales Resistance Stiffens,” by J. R. Sprague, in The American Mercury for February 1925.)

Mr. Sprague in this article devotes considerable space to an examination of the widespread development of time-payment selling, terming it a means of “forcing merchandise on an apathetic public.”

He cites the case of a young Texas mechanic who obligated himself for so large a sum that his monthly payments amounted to more than his wages.

“Even Henry Ford, our leading authority on thrift,” is, according to Mr. Sprague, “begging school teachers, office boys, and department store clerks to make their savings count and buy Fords at five dollars a week.”

Why, Mr. Sprague asks, has America cheerfully accepted the installment plan of buying, when England and France have rejected it as uneconomic and undignified?

Here, in his own words, is the explanation:—“The home market is becoming saturated, and we can not sell abroad because our prices are too high. Prices are too high because Big Business is weighted down by the expenses of “Weeks,” of conventions, of trade associations, of luncheon clubs, of uplift programs to keep the workers docile—of all the agencies that small men call to their aid as a means of boosting sales and keeping themselves in good jobs. Salesmanship has been raised to the status of an art, almost to that of war. Go-getters and flying squadrons hound the shop-keepers into buying more. The shop-keepers in their turn, hound the people of their communities. If a man cannot pay cash, then he must be made to buy at a dollar down and a dollar a week.”

Mr. Sprague fears that “the ultimate price paid for these things will be the breaking down of the whole morale of the nation.”

Most manufacturers are wondering where this quickly rising tide of time-payment buying and selling will carry us. Both business and general magazines have devoted many pages to discussion of the subject. Economists have made it the object of their exhaustive study.

The concensus of opinion seems to be that there should be some sort of control or direction of time-payment expenditures, if we are to avoid undue strain on the credit fabric of the country.

In many circles it is felt that the proper direction of a portion of these expenditures into utility rather than luxury lines would give the proper safeguard to an even larger spending on time-payments. Many utility manufacturers are already active in this direction.

The American Radiator Co., for instance, have successfully maintained their own acceptance corporation to care for time-payments on several grades of heating plants, for more than a year. The Save-the-Surface Campaign and many individual paint and some roofing manufacturers are eloquent endorsers of the time-payment principle. Manufacturers of heating appliances—household and labor-saving devices—furniture dealers—coal dealers—bond brokers—and even that great exponent of cash bargain sales, the department store, are taking advantage of the modern “Midas touch” (particularly on household products) to build an otherwise impossible volume of sales.

Despite considerable hostile publicity the adverse dealer attitude that once restricted installment purchases is fast disappearing, particularly since the high-grade department store is now competing with the so-called “time-payment house” for household utility business.

Time-payment buying is today also much popular with all classes of consumer buyers. Ask the department store credit man whether this type of business is limited to the lower element.

His whole problem has materially altered with the tendency toward time-payments on the part of people who would never go to an “installment house” to buy the higher grades of merchandise they insist upon having. Many credit men will tell you that time-payment business is a safer risk than the ordinary consumer credit risks he had to pass daily where the goods immediately became the property of the buyer with a charge account.

Some economists view with alarm what they call the present orgy of time-payment spending. A calm study of the facts, however, reveals no real cause for hysteria.

That many phases of our complex life, including the “mortgaging of our incomes” for months ahead at a time, have their serious aspects, no one will deny.

A case in point is that of Mr. Sprague's young Texas mechanic who found it so difficult to resist the wiles of the installment seller. But is his a typical case?

You can also find an isolated class who wouldn't even buy a home out of income—but who willingly pay twice its cost in rent in twenty years, and never own the house.

According to a study (see opposite page) prepared for the American Academy of Political and Social Science by Mrs. Christine Frederick, founder of the Applecroft Home Experimental Station, at Greenlawn, L. I. (and also Home Economics Editor of The Designer, see page 85) the family wealth or finances have trebled in the past twenty years, as compared with a ninety per cent increase in the cost of living.

This family buying power has been further augmented by the shrinkage of the size of the average family in the last 20 years—by half a person (4.7 to 4.3)—which means one-half a person less to feed, clothe, house and keep warm.

The World Almanac shows that from 1900 to 1920 the number of savings bank depositors has nearly doubled. The savings deposits, however, have a little more than doubled in that time. This means that twice as many people are each doing a better job of saving than they did twenty years ago.

Since the number of families has increased only 50%, and the number of bank depositors has doubled—this also indicates a greatly increased family income or spending power—which is the unit in which the utility manufacturer is mainly interested.

It is true that the majority of families no longer live on their former modest plane. But in spite of the higher plane on which they live, most of them display the same skill in balancing income and outgo as they did in the old days—which is one reason why prosperity steadfastly refuses to leave in spite of what seems like unbridled spending.

No wonder father buys an automobile—on time! He may not have the cash—but his family has what is infinitely more important—almost unlimited credit or buying power.

The population has increased about 50%1920105,710,620190075,994,575(Abstract of 14th Census)

The size of the average family is about one-half a person less.19204.3 persons to a family19004.7 persons to a family(Abstract of 14th Census)

The per-capita wealth is about two and one-half times as great1922$2,9181900$1,165(World Almanac)

This shows an increase of 43.0% from 1900 to 1920

Men Gainfully Employed192033,064,737190023.753,836 (Increase of 39.1%)(Abstract of 14th Census)

Women Gainfully Employed19208,549,51119005,319,397 (Increased of 60.7%)(Abstract of 14th Census)

Increased Consumption of Commodities

There are about seven times as many telephones in service192214,347,39519022,371,044(World Almanac)

Can time-payment buying go on indefinitely at the present rate? We frankly feel that there is no present cause for alarm.

If the increase in average family buying power were no more than $10 a week, this would mean that both mother and daughter could buy fur coats and the family washing machine, a phonograph or radio, and a vacuum cleaner—all in the same year's time-payments—without disturbing in any way the normal savings of the head of the family—whose income itself has increased out of proportion to the cost of living.

But no normal family ever buys all these things in one year—which means that there is still a fair leeway even today between what the average family does buy on time and what it could buy.

And it could still save more money than it saved per capita wage earner in 19001—which means considerably moreper family.

Twice as many depositors are saving a littlemore than twice as much money.Where do the extra depositors come from andhow is their new-found margin of income spent?

A large percentage of the new depositors are the feminine wage-earners of all classes whose newly-acquired financial status has proven such a disturbing factor in economists’ calculations. (See opposite page.)

The girl worker no longer waits for her luxuries until some man offers marriage as a possible means of acquiring them—she buys them now—frequently on the installment plan. She has not only lifted a burden from the head of the family by becoming self-sustaining—she has contributed materially to the family's spending power. The $5.00 to $10.00 a week that it used to cost to keep her unproductively at home, has been replaced by an income of $5.00 to $10.00 a week (in board).

No wonder the average family refuses to accept an economist's view of what they can afford to buy!

The very rapidity which time-payment selling is being adopted as a part of the national merchandising scheme, makes extremely difficult the compilation of an exhaustive list of the products sold under liberal terms.

Some idea of thee extent and variety of merchandise so offered, may, however, be gleaned from the results an investigation conducted by a Washington economist.* From Nov. 11 to Dec. 20, 1923, he found that twenty-seven newspapers in as many cities published’ 141 advertisements which made a direct appeal for time-payment sales on many products, among which were:* From the “Rising Tide of Time-Payments—Printers’ Ink, Feb. 28, 1924.

Furniture

The Widespread tendency among reputable stores toward the adoption and extension of the time-payment method of selling, indicates a determination to secure a share of the business that time-payments now lure to the “installment house.”

The fact that the products listed above are almost without exception regularly marketed through the department store should give rise to considerable thought on the part of similar manufactures.

We suggest that time-payment selling might be profitably extended to: Exterior and interior house alterations and repairs through the use of Compositions Shingles, Copper and Brass Roofing, Leaders, Gutters, etc., Awnings, Wall-Board, Tile for Bathroom and Kitchen, Built-in Bathroom Fixtures, Wallpaper, and to the purchase of all home appliances like: Home Fire Extinguishers, Cooking Ware, Fireless Cookers, Oil Burners, Automatic Refrigerators, etc. (Ed. Note.)

The feminine wage-earner is a child of a new generation who refuses to abide by the spending and saving laws of the old. She knows what she wants, and since her credit is good, she intends to have it. And notwithstanding popular opinion to the contrary, she's not entirely selfish, she's just as apt to be meeting installments on a washing machine for mother, or for a new heater for the home, as on a fur coat for herself. In most cases, as previously stated, she pays board—which means an additional family income.

Ask the telephone company what factor more than any other is responsible for the installation of the telephone in the average home. They'll tell you it is the young woman who fears she may miss a call by having to run over to the neighbor's to telephone.

Economists may view with alarm, but they will not change the luxury-loving tastes of the modern family. The best they will be able to do is to curb them or direct them into sage channels.

For they are like a family who for the past twenty years has been waiting for the settlement of an state, and has finally received their legacy—not in a lump sum but in the form of an increased family spending power. They keep right on saving just as they did before (an American family with a heritage of sane spending and saving habits does not so easily become shiftless wasters.) If anything, they save a little more. But they have been waiting for years for this “windfall.” Let anybody try to stop them from spending it—yes, squandering a part of it, if they will.

Declaring this to be “question of vital interest,” Good Hardware began a series of articles in December 1924 on the time-payment problem as it affects the hardware business. Hardware Retailer, another trade journal, is carrying editorial matter opposing time-payments as economically unsound.

These Good Hardware articles are roughly divided into three parts: (1) the adverse opinions of hardware merchants opposed to installment selling, (2) the favorable opinions of economists and well-known business authorities, and (3) the actual experiences of hardware merchants who adopted the installment plan with marked success.

The adverse opinions seem to be the usual conservative objections, i.e., the reluctance to aid the buying public in “mortgaging their futures”—destroying of the public morale—encouraging of extravagance—the higher cost of buying on time—and fear of losses on bad accounts—despite which retailers generally continue to prosper in the same ratio as they did before time-payments came in.

Four points seem to stand out in the face of these objections: (1) that the public have already become time-payment buyers, (2) that nothing short of the cutting of wages would stop this tendency, (3) that the present “selling era” does not permit a drastic cut in wages, for fear of cutting down mass buying, and (4) that the ability to buy luxuries of every kind on time has seriously cut in on necessity markets, for years past.

In one of these articles Alvin E. Dodd, of the Domestic Distribution Department of the U.S. Chamber of Commerce, sounded the keynote of true installment safety, in the following words:“When applied to the purchase of a really useful article, the installment plan is almost in the nature of a savings device and not necessarily an encouragement of improvidence as maintained by most economists until within the past few years.”

This series should be followed closely by all those interested in time-payment selling.

Sound economists recognize that what today seems like over-buying is merely the result of a greatly increased family buying power, and that this very overbuying is America's salvation during the next twenty years. They also know, however, that saving is going on in greater proportion than ever before in the country's history (see page 34).

Why should luxury products take the place of higher priced necessities—simply because they are easier to buy?

The tendency toward luxuries should be supplanted by the desire and the ability to spend for necessities that have heretofore been regarded as unattainable.

Many a necessity almost goes into the luxury class because it has become so much more difficult to buy in face of the time-payment lure offered by both luxuries and competitive necessities.

Inferior makeshifts have often been accepted because of the buying limitations which surround so many of the higher-priced necessities.

Good furniture, for instance. Cheap furniture is admittedly a false economy. And even then, it is usually bought on time. Good heating systems, good wallpaper, good paints, good household utilities, instead of make-shifts. Good floors.

No more postponement of the painting of the house because it must be paid for in cash, while a new car is being bought on time. No more waiting to fix the roof until the beams rot, and water comes through and ruins the ceilings and walls, so that members of the family can have fur coats from the installment house.

No reason why the house should not be restuccoed, copper-guttered, reshingled on the outside, or refitted inside with brass piping.

No reason why any move that will lessen the cost of living or enhance the value of one's property and at the same time protect the family's most cherished possessions, should wait while articles of transitory value are purchased with time-payment money that could do the utility job.