Page:EB1922 - Volume 31.djvu/892

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the case of highly perishable goods, such as fruits, where no time may be lost in effecting sales in order that they may reach the consumer before spoiling, the auction system is used. Wholesale buyers and salesmen come together at a designated place at a set time and clear their transactions. The auction is a much more widely used mechanism of trade in England and in continental Europe, where large quantities of nearly all kinds of goods are thus sold, than in America. The auction system has seemed, however, to be developing in recent years in America, particularly in lines of known standard or quality, which are bought in wholesale quantities only at certain brief seasons of the year, such as carpets, rugs, wool and furs.

Variation in marketing occurs through variations in ownership of the goods to be marketed. To illustrate, producers or local buyers usually sell outright to wholesalers all goods marketed through the wholesaler-retailer channel of distribution; but in highly perishable goods such as fruits, dressed poultry, live poultry, etc., and also in cases where the value of the goods runs very high in proportion to the value of the service rendered by the wholesale middleman, as for example, finished textiles, real estate, commercial paper and stocks and bonds, the wholesaler (or dealer who takes his place) frequently, if not usually, merely sells or buys as the agent of the owner and secures a commission or brokerage instead of a profit for his services. This arrangement in the case of perishable goods relieves the wholesale dealer of the risk from loss, and, in the case of costly goods, of the burden of carrying the financing of the goods. Such wholesalers are known variously as commission dealers and brokers.

While goods are being gathered together in wholesale quantities and made ready for distribution to the retail trade other factors in marketing frequently enter in, factors of a speculative nature. Well-standardized goods that are not readily perishable, such as grain, cotton, wool, silk, provisions, coffee, sugar and so on, are likely to be bought purely for speculative purposes. Thus a lot of grain or cotton may be bought and sold several times before being moved to consumption. It is but another step for these speculators to make their ventures in hope of gain on what they think future prices will be. Hence “selling futures” is a common occurrence on the great exchanges that deal in the commodities named. Under this system grain may be bought and sold long before it has been harvested or grown, or even before it is planted. A flour-miller may quite legitimately ensure his future supply of grain at a certain price by buying “futures.” But a great deal of opposition has been aroused at various times by speculation in the necessities of life. It has been charged that dealing in futures enables powerful speculators to combine unjustly to secure success for their ventures, in some cases tending to hold prices down and in others tending to hold prices up. As a result both producers and consumers are suspicious of such traders. The consensus of opinion among those who have studied the course of speculation on exchanges seems, however, to be that if manipulation of prices and monopoly can be kept out of the market, and if the laws of supply and demand are allowed to operate freely, the effect of speculation, particularly of dealing in futures, has a healthful balancing effect on the market. Under such conditions purchase and sale of commodities for future delivery tend to discount and equilibrate all conditions of supply and demand, so that changes of price are made much more gradually than they would be if buying and selling of such commodities were confined solely to the stock offered each day. Dealing in futures is an essential function of marketing, but it needs careful regulation to prevent unfair practices.

Ownership of Distributing Concerns.—In the matter of ownership of the various concerns which link distribution there is most interesting variation. While the ownership of a single retail or wholesale store resting in an individual, or in a partnership composed of individuals who make this business their means of livelihood, or in a group of investors in the form of a corporation, may be considered the normal unit, gradual integration is going on both from the producers' and consumers' ends of the distribution chain.

Numerous American manufacturers have established retail store outlets of their own, such as the W. L. Douglas Shoe Co., which has now more than 100 stores of its own besides hundreds of agencies scattered through the United States; the Singer Sewing Machine Co., whose retail sales branches are found in nearly every large city; and many others in such lines as hats, baked goods, gasoline, typewriters, office furniture, phonographs, sporting goods, paper novelties, corsets, gloves, etc. One of the most notable recent American ventures into the retail field by a manufacturer is that of the Winchester Repeating Arms Co. now the Winchester Co., of New Haven, Conn. This concern adopted the policy of establishing its own retail outlets in the larger cities and of forming agency relations in other cities.

Practically all chains of stores maintained by manufacturers seem to have originated, in part at least, because the producer felt that his goods were not receiving proper attention from the regular retail stores. Ownership of the retail outlets by the producer makes it possible for the producer to sell his goods in just the way that he desires. If the store is his own, he can make sure that his goods are represented by a full line, he can dictate the price at which they shall be sold and the service that shall be given. Retailers have used coöperative methods in order to make their relations with production more direct, through buying clubs organized to accomplish specific purchases, through buying organizations of a permanent character which rival jobbing houses, through capital-ownership in wholesale houses, and in a few cases through manufacturing institutions. The rapid development of chain-store systems under single ownership and control is almost certain to accelerate the growth of this kind of coöperation of retailers in their buying activities. From the other end of the distributive chain efforts are being made to unite consumers in the ownership and control of retailing and even wholesaling establishments. Coöperative stores have had a most successful development in Europe but have not done well in America. In the United States there have been successive waves of interest in coöperation. An early example was the effort of the Workingmen's Protective Union to establish coöperative stores, beginning in 1844 and falling off at the time of the Civil War; later there were the Patrons of Husbandry and their Grange stores in the 'seventies; still later the Knights of Labor; then the California Rochdale Societies; then the Right Relationship League; and more recently the coöperative movement undertaken as a part of the policies of the Non-Partisan League, a political party with a strong following in the Dakotas and other middle-western states. All these movements, with the possible exception of the last two, seem to have exhausted themselves. The reasons for the failure of coöperation in retailing in the United States are generally said to be poor business management, unwise extension of credit, poor accounting and general slump of interest in coöperation. Coöperative stores usually claim to save customers money by reducing advertising, by cutting down service, and by locating in inexpensive places. In most instances, after a period of success, their competitors, the privately owned stores, defeat them just because they do advertise, offer the service that people want, and locate at the most convenient places.

Conditions Affecting Methods of Marketing.—The precise method of marketing and the channels of distribution to be followed for any product under present conditions depend upon a number of factors. A few of these may be enumerated.

(a) Location of Producers and Size of Output.—If producers are many and small and are located far apart, it is almost certain that their products will have to be assembled by a local buyer of some kind; whereas, if the producers are able to turn out large quantities, they may be able to deal with wholesalers direct. Producers who by ingenuity or special skill produce some article of exceptional quality are usually able to sell direct to retailers or even to consumers and thus save.

(b) Location of Consumers and Demand.—If consumers use small quantities or small lots of any product at one time, it is almost certain that they must purchase from retailers. Foods, clothing and other ordinary necessities of life fall into this classification. But a large consumer for example, a chair factory using lumber would not think of buying lumber from an ordinary local lumber dealer. It would be able to buy more advantageously direct from some mill.

(c) Variability in Demand.—Whether a product is wanted regularly or only occasionally is another factor in determining how it shall be marketed. Some articles cannot be sold more than once or twice in a lifetime to a customer. If it also happens that such articles require much demonstration and explanation, then the producer is almost forced to sell direct to the consumer