LDF Price

l proposed, . to the small retailer to buy brand-name goods for cash (no bills the beneficiary or loans) and buy a larger quantity of goods (increase in discount), . cancel the collection of orders and delivery option (this will help eliminate the cost of shipping and handling) and completely destroy the function of sales and advertising, . that, . usually, . served large regional warehouses.,
. Sol Price said: "Commodity - this is not science but an art"
. Price lives, guided by its philosophy, and his name is associated with a very clever pricing strategy, with which he managed to overtake the giants of the industry trade. Created them industry by 1991 achieved a turnover of 30 billion. dol. and are expected to increase to 50 billion. 90-ies. Howard Davidovich, a consultant on retail trade from New York, about the invention Price said: "This is probably the most fast-growing, most impressive venture in the retail trade over the past 20 years, and its importance is ever growing". As Sol Price, a former lawyer, was able to create the most impressive concept of a new system of retail prices in our century, and why it did not create Sears, Penniz, K-Mart or Wal-resourceful MartN

. In 1950, Sol Price has inherited warehouse and carrying out the search for a tenant accidentally put an end to the existing system of retail prices
. In anticipation of this event for 17 years, he practiced as a lawyer and had no experience in retail. He created the idea of retail discounts - Fed-Mart - which was a challenge to existing laws protecting the price at the time. Fed-Mart was a supermarket chain, which first started selling goods of national production at a discount. For 25 years turnovers Fed-Mart reached a $ 300 million. dol. and then, in 1975, he sold it zapadnogermanskomu retailer Hugo Mann and thus remain Chief Executive Officer. Less than a year, he was fired.

Sol has created 'The Price Club' in 1976, when he was sixty unemployed and hanging around the streets of San Diego in search of new opportunities of their suppressed ego. Were unemployed and his sons, but because of his imaginative quest meant a lot more for them than for himself. He began to ask small retailers, who told him what to buy goods such as candy, cigarettes, liquors through major distributors effectively. High distribution cost make ineffective the traditional two-tier structure of wholesale trade. Small retailers, being clenched framework inadequate distribution system, already went out of business. Wholesalers could no longer support the small traders, because the effort spent by them on they were not commensurate with the potential benefit. Saul describes this outdated distribution system, explaining the need for 'The Price Club' Run order for 20 cartons of cigarettes or 10 boxes of chocolates is very expensive. Artist takes orders, collect them, receives the goods, cargo it delivers and receives money for it. This is not an effective way from producer to consumer (Bragou, 1990).

Saul decided to improve the system. He opened the issue and in the spirit of true visionary innovator began looking for an elegant solution. Saul praised elements of the chain of distribution and concluded that between producers and consumers have too many links. He decided to create a system where the retailer will be able to buy branded products at wholesale prices (by 8-10 per cent below), but not to pay for shipping, can receive the goods directly to the stock. Wholesaler mark-making 20-25 percent under the old system, but from small retailers want to perform many additional functions.

. Saul offered, . to the small retailer to buy brand-name goods for cash (no bills the beneficiary or loans) and buy a larger quantity of goods (increase in discount), . cancel the collection of orders and delivery option (this will help eliminate the cost of shipping and handling) and completely destroy the function of sales and advertising, . that, . usually, . served large regional warehouses,
. This concept could work in any major market in America, where it still operated the old inefficient system of distribution of goods
. Model Sola
. To test his ideas Sol created the association called 'The Price Club' in an empty hangar for aircraft
. He was selling branded goods and reduced the price by 8-10 per cent. In his possession were a limited number of titles - 3000, unlike 60000-100000 titles, offers typical 'K-Mart'. The main contribution of Saul was in his rejection of the traditional principles of retail. He took advertising, credit cards, customer service personnel, distribyotorskie stores (shop in the warehouse) and other functions and facilities inherent to store. The idea of Sola overthrew most of the traditional rules of retail. His creative destruction confirms the findings of our studies of innovation processes. The old way was to be destroyed for the sake of a new and better ways. This was the basic economic principle was first coined by Schumpeter pointed out fifty years ago in the study of innovation processes, and Sol at the age of sixty years has embodied it.

. 'The Price Club' became the industrial sensation two years after its inception
. Why is this innovative idea was crowned with such a huge uspehomN One reason was the fundamental innovation offers high quality products at wholesale prices. This has enabled small retailers to become the primary purchasers of goods and to avoid extra charges. A surprise was the fact that this model has attracted a huge number of buyers interested in purchasing quality goods at low prices. These 'yuppies' were visible wasted, but you still want to buy these branded products, without spending extra money on all kinds of services and amenities of traditional retail. The name 'Club in wholesale prices,' was intended to attract local businessmen and retailers average. Ironically, this bait for buyers (the term 'wholesale') has become the key point that has attracted masses of people, to whom heard rumors about the incredibly cheap branded goods.

. The reason for the success of 'PriceClub', of course, hidden from the unsuspecting masses of buyers
. Specialty stores such as 'Macy' jumped on the price margin of 50 percent on most goods to cover the considerable costs of real estate and more expensive service customer service. Large retailers (Sears, Penniz, Uords) work with 35-40 per cent mark-up in much the same; reasons. Reduction of margins they work to reduce the number of services. Organizations that provide a discount, such as 'Wall-Mart' and 'K-Mart', further reducing operating costs, and accordingly the retail margin in them is only 25 - 30 percent. Sol Price decided to make its reduction to 10 percent. Advertising, he ruled, because the manufacturers have already formed a national demand through advertising campaigns. Trade with warehouses was slow because consumers have to travel a long road before them - warehouses located in remote areas, where rents were much lower, thus saving many thousands of dollars a month.

. Philosophy of pricing 'The Price Club' subordinate to two different distributors criteria
. It is consistent with the requirements of Spartan small retailers and, moreover, came to meet the requirements of small entrepreneurs and other individuals who seek to acquire high quality products at low prices. The concept of Sol Price's account of the needs of all - from wholesalers to small retailers, . - Offering a wide variety of products of national production for extremely low prices, . those buyers, . who wanted to save on services.,
. By early 90-ies 'PriceClub' has grown to seventy stores whose annual income amounted to 10 billion
. dol. Currently, annual revenue grew to 25 billion. dol. and the estimated one of New York analysts, it will reach 55 billion. dol. By all accounts, the idea of warehouse wholesale price is truly revolutionary. It is to this day has an impact on other industries, including such as the production of office equipment, computers, glasses, office supplies and vehicles.
. Personal History
. Sol Price was born in New York in 1916 and at thirteen he moved to San Diego with his parents
. It was the middle child and had the older brother and younger sister. His father Sol was a mediator of association in New York (it has formed a social consciousness Sola), when Saul was a teenager. Later the father became a distributor of women's clothing in Southern California and his case went so well that he could pay for his studies at the Faculty of Sola University of Southern California.

. Law degree Saul received in 1938 and until 1955 practiced law in San Diego
. Former friends of Saul at the university said that he was always very industrious and distinguished liberal political views (Mallik, 1988). They described Saul as a man with a strong will and firm convictions. Others found it extremely frugal. David Block, a former high school friend Sol, said: "Either he loved you or hated. He was not the most tolerant person in the world. "

Business and personal survival

Sol Price and his two sons were the main leaders of the 'Fed-Mart'. After the sale, 'Fed-March' 1974 germanskomu owner of the retail business 'Hayper March' Hugo Mann Sol Price and his two sons remained in it as the chief executives. Save jobs were part of an agreement for the sale, but the innovative temperament and autocratic style of Saul was not to the taste of a German businessman. They have not been able to work together. Hugo Mann fired him in 1975, after a year of wrangling. Saul and his sons were walking the streets of San Diego, depressed, angry, and full of thoughts about the future. This crisis was the catalyst and inspiration for creating the first 'The Price Club'.

The first shop 'The Price Club' Saul and his sons, opened in 1976 in an old hangar for the aircraft in San Diego. Sol has invested 800,000 USD. their funds from the sale of 'Fed March'. Another million he borrowed from a local businessman. Five hundred thousand dollars invested by his former employees on the 'Fed-Mart', selling their shares of this company. They wanted to continue working with him in the new company. They sold shares of the equity to local retailers for price of 25 dollars. per share. It went. In the early years of the owners and buyers gain experience. In the very first year the store was only a few buyers and a very small volume of sales. Saul refused to campaign, and in the first year the company was losing almost. Sales in that year amounted to 16 million. dol. and losses - 700000 USD. Then, the club became actively involved different segments of the public (government employees and small businessmen). Lower price for high quality products has become a major advantage, attracts those who are consciously interested in the price. People who live by trade or other adjacent businesses were the main supporters of 'The Price Club'. Price for these people, of course, was crucial and they were willing to travel long distances in order to acquire high-quality product benefits. The merit of Sol Price is in the fact that he came up with a refined and effective method of reducing tax payments. 'The Price Club' takes into account that its products will be of interest for businessmen involved in their further proliferation, and for those who buy them for personal use. Electrical appliances, food and other small goods constituted 77 percent of sales, 'The Price Club', and the buyer could purchase these consumer goods in installments.

. Success story 'The Price Club' spread throughout San Diego
. Company information dispersed among many traders, and 'The Price Club' on the verge of a takeoff. By 1981, sales reached 230 million. dol., and by 1984 exceeded a billion. Company Incorporated in 1982 and by 1990 the cost of shares, amounting to $ 1000 first. rose to 12247 USD. By this time the company had only four stores. Then came the dizzying growth and the end of 1991 'The Price Club' already owned 75 shops in the United States and Canada
. Price-King
. Innovative Sol Price's intuition was focused on the main principle of business - provide the buyer with highest quality goods at the lowest possible price
. This magic formula that made Henry Ford's hero, and the firm 'The Price Club' has led to success. The same thinking underlies the success of the Japanese, who are guided to. The same principle, clearing his path to new markets. In order to be able to sell goods at low prices, Sol eliminated many components of prices. In his view, many of the elements included in the price, were superfluous, since nothing was added to the cost of consumer goods. Other retailers have used these elements for so long that it was difficult to abandon them. "Sears' still trying to introduce these changes and to shift to a system of discounts, . but its customers do not really welcome this initiative, . as used to wait, . further verify products, . use credit cards and leisurely stroll on the trading rooms,
. Sol Price has changed all this, and, naturally, opposed himself to retailers the old model, who feared that the initiative will provide the step of Price's business as usual.

. Philosophy of pricing Sol Price was probably the only, the most important factor in the success of 'The Price Club'
. This philosophy is reflected in the analysis, which Price presented the press in 1990:

Setting the price, we must rely on the laws of supply ... The peculiarity of the goods is such that, by buying it, you are thinking, whether it is possible to buy more vygodneeN ... Other retailers are thinking about how much they can earn from selling a particular product. I ask myself, can I sell this product deshevleN

Sola pricing strategy was designed to offer the buyer all. more and more low prices and the highest, one after another, to exclude components of the price. This strategy was alien to most American leaders and has never existed in bureaucratic organizations. Traditional leaders methodically and consistently included in the price of all the terms, bringing it to the ceiling, assuming that they acted in good. This strategy proved to be true to a traditional executive managers in most organizations, because such a position suited shareholders. Such thinking is characterized by short-sighted leaders and inevitably leads to failure. Sol often philosophizing about this type of leaders who care only about short-term objectives, forget about the long-term prospects. In one interview he said, . that such thinking, . based on the principle of self-preservation, . is one of the biggest problems many retailers: Wall Street wants, . that your profits were a little higher, . so why not a little splutovatN reduce the quality and keep the same price,
. The buyer does not notice the difference (Bragou, 1990).

Traits

In Sola Price's personality is dominated by introversion and the mentality of 'assessor'. His power comes from the inner desire, and in all its manifestations, he is more closed than the sociable. The ordering - is his strength, he likes to arrange all the points above the 'i' and is constant in many things. According to the classification by David Kersh, it refers to the type of temperament of Prometheus, and, consequently, is intuitive type of thinking. This corresponds to the characteristic, detected in the majority of visionary innovators.

In a letter to the author Price wrote that the decisive factor in any innovation process considers high confidence. Among other factors of success, he calls the mental abilities, perseverance and excellent intuition. He also said he did not consider formal education was a significant factor in its success. This view is also universal for all innovators. Regarding the key determinant of commitment to innovation, he replied: "possibly need and perhaps rebellion" (letter dated 15 March 1991). Price believes that the greatest influence on his future success had a father. From his answer also shows that he does not know exactly what made him such a risky endeavor.

Saul had the same ethical system, as Tom Monagen. Decision-making was guided by the golden rule. He believes that businessmen, as well as all others, must first 'give' to then 'get'. He admires Gandhi and often quotes his philosophical sayings about obedience and humility.

Before Saul worshiped the majority of its employees. They worshiped him, literally worshiped and never allowed gossip about him. His executive heads considered him 'father' and breathy talking about him as a likeness of the Messiah: "When people talked about it, it looked as if death were talking about Zeus (Mallik, 1988). His social consciousness was legendary. He built the stores 'Fed-Mart' in Arizona Navajo Indian reservations and in ghettos in Houston. Sol intuitively sensed new opportunities, like most forward looking innovators, and said that it was his 'volitional' decision led to the success of 'The Price Club'. Saul was known that paid the highest salaries in San Diego and without external interference or organized community efforts to organize in its company union. He did not use in your business credit cards, explaining it this way: "It's against my beliefs, when people get into debt in order to buy something". In his company, described him as an idealist, who appreciated the following qualities: tenacity, frugality, a capacity for leadership, self-service.

. Saul has always sought to increase control over their enterprises and involuntarily transferred this principle of privacy
. Terrible divorce and family squabbles led to a notary's battle with his younger son, Larry. Larry talked about Sole: "My father is obsessed with control over the life of the family" (Mallik, 1988). Larry hired Marvin Mitchelson to represent him at trial, which he filed against his father and 'The Price Club', which is estimated at 100 million. dol. He sought to prevent a career of his father (Sol just engaged a new unit 'The Price Club', the bankers tires) because of his decision to divorce Woman
. Tendency to pucky
. Sol Price was known in Southern California as 'liberal crusader' for his fight with the old bins of price protection in the 50's and 60-ies
. The Government introduced these laws to protect the population during the Second World War and too slow to their removal. Saul tried to accelerate this process while working in the 'Fed-Mart'. He constantly struggled with the legal means manufactories or other government agencies and consistently tried to circumvent the laws of price protection. An attempt to secure the repeal of obsolete laws is the riskiest episode biography of Sol Price. It cost him many torments and numerous lawsuits.

Saul principle enforced by the buyer to sell high quality goods at the lowest possible price consistent with its social philosophy. The ideology of the reduced price was the main instrument in the development of industry wholesale. Sol often quoted Gandhi: "You have to give before you get". In the case of Saul, he 'gave', taking the battle lasted for years for lower shelf prices. Ultimately, he just made when he began to use these hard-won principles of pricing for a successful company 'The Price Club'. Ideology prices Sola was unheard of for traditional retailers, and never practiced-oriented career executive heads of any of the major firms. Principles for establishing the best price and does not include service charges, which eventually fell on the shoulders of the buyer, neukladyvalis in the mentality of traditional retailers. Sol Price was able to use them effectively.

One of the surprising factors of success of 'The Price Club', according to the analyst on Wall Street, Michael Eksteyna, was the appointment of the annual remuneration for the maximum number of purchases. This idea of Sola Eksteynu inspire awe and 'Wall Street Journal', he wrote: "It is inconceivable. The idea that you can attract people to shop prize (Mallik, 1988). Another iconoclastic principle of Sola often seen attacking establishment. From the outset, he strictly limited the number of SKUs in their stores. This is a significant difference between the wholesale and stores offering discounts, how was the 'K-Mart. Saul gave a short and poignant response: "essence of trade in goods - is a reasonable loss of sales. You can not be everything to everyone. "

The success of impatience

If imitation really the sincerest form of flattery, as Shakespeare said, while Solu Pryce flatter retail giant America. Wal-Mart has become a fan of the great talent Sola. Sam Walton, shortly before his death in 1992, said, 'Fortune': "I think I stole it (though I prefer the word 'borrow') so many ideas from Sol Price, as no one else in business". 'Wal-Mart' under the leadership of Sam turned into one of the largest wholesalers of America, owning a chain of three hundred stores. 'K-Mart' competed with 'Price Club' for its shops 'Pace' and 'Macro'. 'Kostka' in Seattle, was founded by former employees 'Price Club'. 'Home Club' Price's formula applied in the field hardware, . 'Sports Club' - in the field of sports goods, . 'Office Club' and 'Office Depot' - in a stationary office equipment, . 'Vizhion Works' applied the formula in the field of medical points and 'Softvea Hauc' used the idea to work in the software industry.,

. Price said that the secret of his success is that, by choosing products with which it will work, he immediately and permanently dismissed some of the products
. He never looked back and did not discuss their competing. Sol was always focus on one thing, but in all the major failures blamed dedicated employees. He acted more stick than carrot. However, the golden rule has always been his bible in business and in personal life. Ethical system Sola was part of his business philosophy. He summarized it in an interview, . This spring of 1990, . excerpt from which follows: We have learned, . that it is possible to operate effectively in the business of retail trade without fraud, . lie, . servility and high cost of advertising (Bragou, . 1990).,

. Sol Price was rewarded for his moderation and altruistic business ethics
. In 1991, the list of 400 richest citizens of America, published by Forbes, Sol Price appeared as the owner of a 335 million. dol. Saul acknowledged father of wholesale trading system and was infinitely more respect for its employees. He is considered one of the great innovators of the second half of XX century. His stormy impatience and intolerant to inaction was the reason that 'The Price Club' became the leader of the retail business in America. This former lawyer and unemployed impact on retailers face more than anyone else over the last hundred years.