Sol Price

Picture of Sol Price

Citizenship: United States

Creator Industry Wholesale

Sol Price said: "Commodity - is not a science but an art." Price lives, guided by his philosophy, and his name is associated with a very clever pricing strategy, with which he managed to beat giants trading industry. He created the industry in 1991 achieved a turnover of USD 30 ppb. and is expected to increase to 50 ppb in the 90s. Howard Davidovich, a consultant on the retail trade in New York, about the invention, Price says: "This is probably the fastest growing, most exciting venture in the retail industry over the past 20 years, and its importance is increasing all." As Sol Price, a former lawyer, was able to create the most impressive concept of a new system of retail prices in this century, and why it did not create Sears, Penniz, K-Mart or Wal-Mart resourceful?

In 1950, Sol Price inherited the warehouse and, by searching a tenant accidentally put an end to the existing system of retail prices. Anticipating 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 the existing laws to protect the price of the time. Fed-Mart was a supermarket chain, which first began to sell goods of national production at a discount. For 25 years the Fed-Mart turnover reached 300 ppm dale., And then, in 1975, he sold her West German retailer Hugo Mann and remain Chief Executive Officer. Within a year, he was fired.

Sol has created `The Price Club` in 1976, when he was sixty years unemployed and hanging around the streets of San Diego in search of a new possibility of using his repressed ego. The unemployed were his sons, but because of his imaginative quest meant much more for them than for himself. He began to ask small retailers, who told him that to buy items such as candy, cigarettes, liquors through major distributors ineffective. High price distribution made ineffective traditional two-tier structure of the wholesale trade. Small retailers are being clenched framework inadequate distribution system, are already out of business. Wholesalers could not longer support the small traders, because the effort required of it were excessive in relation to the potential benefits. Saul described the outdated distribution system, explaining the need to create `The Price Club` Run order to purchase 20 cartons of cigarettes or 10 boxes of sweets is very expensive. Artist takes orders, collect them, receives the goods, ship it delivers and receives money for it. This is not an efficient way from the producer to the consumer (Bragou, 1990).

Saul decided to improve the system. He revealed the problem and in the spirit of a true visionary innovator began looking for an elegant solution. Sol appreciated elements of the chain of distribution and concluded that between the producer and consumer is too many links. He decided to create a system where the retailer will be able to buy branded products at wholesale price (8-10 per cent lower), and not to pay for shipping, can receive the goods directly to the warehouse. Wholesaler did trade margin of 20-25 percent under the old system, but on the small retailers need to perform a variety of additional functions.

Saul offered to the small retailer to buy brand-name goods for cash (no accounts of the recipient or loans) and buy more quantity (increasing prices), to cancel the collection of orders and the function of delivery (this will help eliminate the cost of shipping and handling), and completely destroy sales and advertising functions, which are usually carried out major regional warehouses. This concept could work in any large market in America, where still functioning old inefficient system of distribution of goods.

Model Sola

To test their idea Sol Association created under the name of `The Price Club` in an empty hangar for aircraft. He traded branded goods and lowered the price by 8-10 percent. In his possession was a limited number of titles - 3000, unlike 60000-100000 names, offers typical `K-Mart`. The main contribution Sola was in his rejection of the traditional principles of retailing. He removed the ads, credit card, the customer service staff, distribyotorskie stores (shop stock) and other functions and features, inherent in the store. The idea of ??Sola overturned most of the traditional rules of retailing. His creative destruction confirms the findings of our research of innovative processes. The old way was to be destroyed for the sake of a new and better way. It was a basic economic principle was first invented by Schumpeter pointed out fifty years ago in the course of studying the innovation process, and Saul the age of sixty years has embodied it.

`The Price Club` become industrial sensation two years after its inception. Why is this innovative idea was crowned with such great success? One reason was a fundamental innovation offers high quality products at wholesale prices. This allowed small retailers to become the primary buyers of the product and avoid extra charges. The surprise was the fact that this model has attracted a huge number of buyers interested in buying quality goods at low prices. These `yappi` were conspicuous spenders, but want to purchase these branded products without having to spend extra money on all sorts of services and facilities traditional retailers. The name `` Club wholesale prices was to attract local businesses and retailers average. Ironically, this bait for buyers (the term `trade `) has become the key point that has attracted masses of the people, to whom heard rumors about the incredibly cheap branded goods.

The reason for the success of `PriceClub`, of course, hidden from unsuspecting buyers mass. Specialty stores such as Macy `` jumped on the price of the guarantee fee at a rate of 50 percent on most goods, to cover significant costs for real estate and more costly maintenance services to the customer. Large merchants (Sears, Penniz, Wards) work with 35-40 percent margin mainly for the same; reasons. Reducing margins they achieve reduction in the number of services. Organizations offering discounts, such as `` Wal-Mart and K-Mart `` further reduce operating costs, and therefore the trading margin from them is only 25 - 30 percent. Sol Price decided to achieve its reduction to 10 percent. Advertising, he ruled, because manufacturers have already formed the demand through national advertising campaigns. Trade with warehouses was slow, as buyers have to travel a long way before them - warehouse is located in remote areas, where rents were much lower, which saves many thousands of dollars a month.

Philosophy pricing `The Price Club` subject to two different distribution criteria. It is consistent with the requirements of spartan small retailers and, moreover, was to meet the requirements of small businesses and other individuals who sought to purchase high quality products at low prices. Concept Sol Price`s account of the needs of all - by wholesalers to small retailers - offering a wide variety of products of national production at the lowest possible prices for those customers who want to save money on services.

By the early `90s `PriceClub` grown to seventy stores, annual income amounted to US $ 10 ppb. Currently, annual revenue rose to 25 billion. USD., And an estimated one of New York`s analysts, it will amount to 55 billion. Dollars. 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, eyeglasses, office supplies and vehicles.

Personal history

Sol Price was born in New York in 1916 and moved to San Diego with his parents at age thirteen. He was the middle child and had an older brother and younger sister. Father Sola was the intermediary associations in New York (it forms a socially conscious Sola), when Saul was a teenager. Later, his father became a distributor of women`s clothing in Southern California and things went so well that he was able to pay for his studies at the Faculty of Sola University of Southern California.

Diploma lawyer Saul was in 1938 and until 1955 practiced law in San Diego. Former friends Sola at the university said that he was always very industrious and distinguished liberal political views (Mallik, 1988). They described Saul as a man, possessing a strong will and firm convictions. Others found it extremely frugal. David Block, a former school friend Saul, saying: "Either he loved you or hated it. It 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 of `Fed-Mart` 1974 the German owner of the retailer` Hyper Mart` Hugo Mann Sol Price and his two sons were there as leading executives. Saving jobs were part of the agreement for the sale, but the innovative temperament and autocratic style of Saul was not to the taste of the German entrepreneur. They could not work together. Hugo Mann fired him in 1975, after years of wrangling. Saul and his sons were walking through the streets of San Diego, depressed, angry, and full of thoughts about the future. The crisis has become a catalyst and inspired the creation of the first `The Price Club`.

The first store `The Price Club` Saul and his sons opened in 1976 in an old hangar for aircraft in San Diego. Sol has invested 800,000 dollars. of their funds from the sale of `` The Fed in March. Another million he borrowed from a local businessman. Five hundred thousand dollars invested by his former employees `` Fed-Mart, sold their shares of the company. They wanted to continue working with him in the new company. They sold shares of equity to local retailers at a price of 25 dollars. per share. The case has gone. In the early years of the owners and buyers gain experience. In the very first year the store was only a few customers and very small sales volume. Saul refused to campaign, and the firm was virtually unprofitable in the first year. The sales volume in this year amounted to 16 million dollars, and losses -.. 700,000 USD. Then, the club began to actively engage different segments of the public (civil servants and small entrepreneurs). Lower price for high-quality products has become a major advantage, it attracts those who consciously interested in the price. People living through trade or other adjacent businesses were the main supporters of `The Price Club`. Price for these people, of course, was of decisive importance, and they were willing to travel long distances in order to profitably purchase a high quality product. Sol Price`s merit consists in the fact that he came up with a sophisticated, effective method of reducing tax payments. `The Price Club` into account that its products will be of interest for both business engaged in their further spread, and for those who buy them for personal use. Electrical equipment, food and other small products constituted 77 per cent of sales `The Price Club`, and the buyer could purchase these consumer goods rassrochku.Istoriya success of `The Price Club` spread throughout San Diego. Information about the company dispersed among many traders, and `The Price Club` on the verge of its rise. By 1981, sales reached 230 mln. USD., And by 1984 exceeded one billion. Company Incorporated in 1982 and by 1990 the value of the shares, which amounted to $ 1,000 initially. risen to 12247 dollars. By this time the company had only four stores. This was followed by a dizzying growth and the end of 1991 `The Price Club` already owned 75 stores in the United States and Canada.

King of the Price

Innovative intuition Sol Price was focused on the main principle of business - provide the buyer with the highest quality product at the lowest possible price. This magic formula that has made Henry Ford a hero, and the firm `The Price Club` led to success. The same way of thinking is the basis of the success of the Japanese, who are guided by. The same principle, punching its way into new markets. In order to be able to sell products at low prices, Sol has eliminated a lot of the price terms. According to him, many of the elements that were included in the price, were unnecessary, since nothing is added to the cost of consumer goods. Other retailers have used these elements are so long that it was difficult to give them up. `` Sears is 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 for further check the products, use credit cards, and a leisurely stroll along the shopping halls. Sol Price changed all that, and, of course, opposed itself to retailers the old model, who feared that the initiative Pryce put the footboard of their business as usual.

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

By setting the price, it is necessary to rely on the laws of supply ... The peculiarity of the goods is such that, by buying it, you wonder whether it is possible to buy more profitable? ... Other retailers think about how much they can earn from selling a particular product . I ask myself whether it is possible to sell it cheaper?

Sola pricing strategy was designed to offer the customer all. more and more low prices and maximum, one by one, to exclude price components. 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 an extreme level, assuming that they are acting for the good. This strategy proved to be faithful to the traditional executive managers in most organizations, because such a position suited shareholders. This way of thinking characterizes the folly of the leaders, and inevitably leads to failure. Saul often philosophized about this type of leaders who care only about solving short-term problems, forget about the long-term prospects. In an interview, he said that such a way of thinking based on the principle of self-preservation, is one of the biggest challenges many retailers: Wall Street wants your profits are a little higher, so why not a little cheated? Reduce the quality and keep the same price. The buyer does not know the difference (Bragou, 1990).

Characteristics of personality

The identity Sol Price dominated the mentality of introversion and `otsenivayuschego`. His power comes from the inner urge, and in all its manifestations it is closed rather than sociable. Orderliness - that`s his strength, he loves to set the record straight and constant `i` in many things. According to the classification by David Kersh, he refers to the type of temperament of Prometheus, and, consequently, is intuitive thinking type. This corresponds to a characteristic found in most visionary innovators.

In a letter to the author Price wrote, that the decisive factor in any innovation process considers the high self-confidence. Among other factors of success, he calls mental ability, tenacity and excellent intuition. He also said he does not think formal education is an essential factor in its success. This view is also universally for all innovators. With regard to the key factor that determines the commitment to innovation, he said, "might need and can, rebelliousness" (letter dated 15 March 1991). Price believes that the greatest impact on the future success of his father had. From his answer also it implies that he does not know exactly what made him such a risky undertaking.

Saul had the same ethical system, as well as Tom Monagam. The decision was guided by the Golden Rule. He believes that business, as well as all others, must first `` give to get `` then. He admires Gandhi and often quotes his philosophical maxims of obedience and humility.

Before Saul bows down most of its employees. They worshiped him, literally worshiped and never allowed gossip about him. His executive managers considered it `` father and breathy talking about him as a likeness of the Messiah: "When people talk about it, it was as if death were talking about Zeus" (Mallik, 1988). His social consciousness was legendary. He built stores `` Fed-Mart in the Arizona Navajo Indian Reservation and in the ghetto in Houston. Saul intuitively sensed new possibilities, like most forward-thinking innovators and said that it was his decision `volevye` unsuccessful` The Price Club`. Sol was known for the fact that pay the highest salaries in San Diego, and without outside interference or organized social forces organized in the firm union. He did not use in your business credit cards, explaining it this way: "It`s against my beliefs, when people go into debt to buy something." In his company described him as an idealist, who appreciated the following traits: "perseverance, thrift, leadership ability, self-service."

Sol has always sought to increase control over the activities of their businesses and involuntarily transferred this principle of privacy. Disastrous divorce and family squabbles led to a notary`s battle with his youngest son, Larry. Larry spoke of Sole: "My father was obsessed with the idea of ??control over the life of the whole family" (Mallik, 1988). Larry Marvin Mitchelson hired to represent him at the trial, which he filed against his father, and `The Price Club`, which is estimated at about 100 ppm dollars. He tried to stop his father`s career (Saul is just doing a new division `The Price Club`, trading tires) because of his decision to divorce his wife.

Tendency to pucky

Sol Price was known in Southern California as `liberal krestonosets` for his fight with the old bins price protection in the 50s and 60s. The government introduced these laws to protect the population during the Second World War and too slow to their abolition. Saul tried to speed up the process while working in `Fed-Mart`. He constantly fought with the legal means manufactories or other government agencies and steadily tried to circumvent the laws of price protection. The attempt to abolish outdated legislation is the riskiest episode biography Sol Price. It cost him a lot of trouble, and numerous lawsuits.

Saul implement the principle of selling the customer a high quality product at the lowest possible price consistent with its social philosophy. Ideology reduced prices has become a major tool in the creation of their wholesale trade industry. Saul often quoted Gandhi: "You must give before you get." In the case of Saul, `He otdaval`, taking the battle lasted for years for reducing shelf prices. In the end, he just made, when he began to use the hard-won principles of pricing for a successful enterprise `The Price Club`. Ideology Sola was unheard of prices for traditional retail trade and never practiced oriented career executive heads of any of the large firms. The principles establish the best price and the exclusion of the service charge, which eventually went to the shoulders of the buyer, neukladyvaetsya mentality in traditional retail outlets. Sol Price was able to use them effectively.

One of the surprising success factors `The Price Club`, according to the analyst of Wall Street Michael Eckstein, was the appointment of the annual remuneration for the maximum number of purchases. This idea Sola Eckstein inspired awe and in `Wall Street Journal`, he wrote: "It is unimaginable. The idea that you can attract people to the store premium" (Mallik, 1988). Another iconoclastic principle of Sola often seen attacking the establishment. From the outset, it is strictly limited the number of items of goods in their stores. This is the essential difference between the wholesale shops and stores that provide discounts, what was the `K-Mart. Sol gave it a brief and poignant response: "The essence of the trade - a reasonable loss of sales, you can not be everything to everyone.".

impatience success

If imitation really is the sincerest form of flattery, in the words of Shakespeare, while Saul Pryce flatter retail giant America. Wal-Mart becomes a fan of great talent Sola. Sam Walton, shortly before his death in 1992, said, `` Fortune: "I think that I`ve stolen (though I prefer the word` `borrowed) so many ideas from Sol Price as no one else in the business." `` Wal-Mart under the direction of Sam became one of the largest wholesale companies of America, which owns a network of three hundred stores. `K-Mart` competed with` Price Klab` its shops and `` Peys` Makro`. `Kostko` in Seattle was founded by former employees` Price Klab`. `Home Club` applied formula Price in hardware, `Sport Club` - in the field of sporting goods, `Office Club `and` Office Depot `- in the field of stationary office equipment,` Vision Works `apply the formula in the field of therapeutic 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, it is immediately and permanently dismissed some products. He never looked back and never discussed his competition. Sol has always been focused on chem-to one and all major failures blamed dedicated employees. He acted more stick than carrot. However, the golden rule has always been his Bible both in business and in personal life. Ethical Sol system was part of his business philosophy. He summarized it in an interview in the spring of 1990, an excerpt of which is shown below: We have learned that it is possible to act effectively in the business of retail trade without cheating, deceit, servility and the high cost of advertising (Bragou, 1990).

Sol Price was rewarded for his moderation and altruistic business ethics. In 1991, in the list of 400 richest people of America, Forbes published `` Sol Price figured as the owner of the state to 335 ppm dollars. Saul recognized as the father of the wholesale trade system and was infinitely respected by his employees. He is considered one of the great innovators of the second half of the XX century. His stormy impatience and intolerance to inaction were the reason that `The Price Club` became the leader of the retail business in America. This former lawyer and unemployed affected the appearance of the retail trade more than anyone else in the last hundred years.