VI INSTALLMENT CREDIT AND RETAIL SALES PRACTICES LIST OF TABLES Table Page I-1. Comparison of 1966 sales of survey retailers with sales I-2. Value of installment contracts as a percent of sales, 2 5 II-1. Net sales and gross margins of District of Columbia retailers, 1966_ _ _ 11. II-2. Average gross margins of District of Columbia retailers on best-selling items of appliances and furniture, 1966____ II-3. Average "retail prices" of District of Columbia retailers on best-selling items of appliances and furniture in 1966, assuming wholesale cost of $100 for each item II-4. Comparison of reported wholesale and retail prices for best-selling products, low-income market and general market retailers... II-5. Comparison of expenses and profits as percent of sales for 10 low-income market retailers and 10 general market retailers of furniture and appliances in the District of Columbia, 1966___ II-6. Net profit after taxes as a percent of sales and rates of return after taxes for District of Columbia retailers surveyed, 1966.. III-1. Average value of installment contracts of 65 District of Columbia retailers, 1966--- III-2. Number and value of installment contracts assigned and unassigned by District of Columbia retailers, 1966... III-3. Distribution of total installment contracts assigned to finance companies and banks.... III-4. Finance charges on installment contracts assigned and unassigned by District of Columbia retailers, 1966.. III-5. Installment contracts distributed by effective annual rate of finance charge (assigned and unassigned). III-6. Assigned installment contracts distributed by effective annual rate of finance charge.... III-7. Special provisions included in contractual arrangements between retailers and finance companies or banks... III-8. Unassigned installment contracts distributed by effective annual rate of finance charge.-- CONTENTS VII III-10. Debt suits filed in the District of Columbia by low- income market and general market retailers, 1966- IV-1. Marital status and sex of customers__ IV-2. Comparison of age (over 20) distribution of customers IV-7. Occupations of customers IV-8. Civilian occupations of customers compared with 1960 IV-12. Principal items and lines of merchandise purchased. II-1. Average Selling Price, Assuming $100 Wholesale Cost, Page 12 15 28 APPENDIX TABLES A. Value of installment contracts assigned to finance companies and banks by District of Columbia retailers, distributed by effective annual B. Value of unassigned installment contracts of District of Columbia general market retailers, distributed by effective annual rate of Summary and Conclusions This report presents the results of a survey of installment credit and sales practices involving household furnishings and appliances in the District of Columbia. The purpose of the survey was to obtain a factual picture of the finance charges, prices, gross margins and profits, legal actions taken in collecting delinquent accounts, and the assignment relationships between retailers and finance companies. The survey covered those D.C. retailers of furniture and appliances having estimated sales of at least $100,000 for the year 1966. The 96 retailers providing data had combined sales of $226 million, which represented about 85 percent of the sales of furniture, appliance, and department store retailers in the District of Columbia. USE OF INSTALLMENT CREDIT BY D.C. RETAILERS Sixty-five retailers with combined sales of $151 million indicated regular use of consumer installment sales contracts. The remainder sold only for cash or on a regular or revolving charge account basis. This report focuses primarily on retailers using installment contracts. These retailers were classified into two groups: those appealing primarily to low-income customers and those appealing to a more general market. D.C. stores varied widely in their use of installment credit. Some general market discount appliance stores made very few sales on credit. At the other extreme, a number of low-income market retailers sold entirely on installment credit. Installment credit was used much more extensively by retailers selling to low-income consumers than by retailers selling to other consumers. Low-income market retailers used installment credit in 93 percent of their sales. The comparable figure for general market retailers was 27 percent. 这 X INSTALLMENT CREDIT AND RETAIL SALES PRACTICES CUSTOMER CHARACTERISTICS OF LOW-INCOME MARKET RETAILERS A sample of installment sales contracts and credit applications was analyzed to identify the customer characteristics of low-income market retailers. The analysis revealed substantial differences between customers of the low-income market retailers and all residents of the District of Columbia. The average family size was larger-4.3 persons compared to an average of 3.5 persons for the District of Columbia. Almost half of the families of customers in the sample had five or more members. The median family income during 1966 of the sample customers was $348 per month. This is very low considering the larger than average size of the families. The Bureau of Labor Statistics recently estimated that the maintenance of a moderate standard of living for four in Washington, D.C., requires a monthly income of $730. Most customers were engaged in low-paying jobs. The largest proportion, 28 percent, were Service Workers, such as waitresses and janitors. Second in importance were Operatives (including such occupations as taxi drivers and laundry workers). Laborers and Domestic Workers also represented a significant share of the sample. Together, these 4 major occupational groups accounted for 75 percent of the customer sample. In comparison, only 36 percent of the general population in the District was classified in these low-paying occupational groups. There were 31 welfare recipients in the sample, accounting for 6 percent of all customers in the sample. There were also a number of customers in the sample dependent on social security, alimony, support payments, and income received from relatives. A review of credit references noted in the 486 contracts subjected to detailed analysis revealed that 70 percent indicated no credit references or references with low-income market retailers only. Only 30 percent of the customers of this retailer, therefore, had established credit with general market retailers. GROSS MARGINS AND PRICES OF LOW-INCOME MARKET RETAILERS The survey disclosed that without exception low-income market retailers had high average markups and prices. On the average, goods purchased for $100 at wholesale sold for $255 in the low-income market stores, compared with $159 in general market stores. Contrasts between the markup policies of low-income and general |