Paul Henry Nystrom

“ To refer more specifically to the activities of marketing through wholesalers and retailers, there is a startling loss of the wholesale salesman's time in finding customers, in making appointments, in fruitless interviews. The time of both salesmen and buyers is lost. Probably less than a sixth of a salesman's time, averaging salesmen of all classes, is actually employed in selling or even in displaying and describing merchandise. Anything that can be done to improve this deplorable economic condition will increase efficiency and decrease costs. ”

“ Undoubtedly there are many who find their greatest satisfaction in purchasing in the stores of the self-service kind where they may look about and pick up on their own initiative whatever they may wish to buy. Institutions are built to serve people in the way that they want to be served. There is room, therefore, in the retail trade for many types of stores. Specialty shops, department stores, chain stores, and mail-order houses will all continue to exist as long as there are numbers of people who want the services each institution offers. ”

“ Every day added to the time required for transportation adds not only to the transportation charges but also directly to the cost of the goods themselves in interest charges on the capital invested in the goods, and in an additional burden of other overhead expense due to lengthening of the period of turnover. ”

“ Those engaged in distribution have been charged not only with inefficiency but also in some instances with deliberate waste to keep up prices by reducing the supply. This accusation is mentioned here, not because it is general, but rather because it shows the temper of the people towards distribution. In the main, however, the greatest criticism levelled at distribution is that it costs too much and that these costs must be paid by the consumer. It is asserted that there is a grocery store for every 80 families and that there should not be more than one for every 200 families. ”

“ 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. ”

“ 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. ”

“ Poor buying, imperfect realization of public demand, duplication of stocks of goods in too many styles, brands and makes, tying up too much capital, slowing up turnover and increasing overhead expense are causes of high costs of distribution chargeable to buyers of goods both in wholesale and retail stores. There are many who think that there are too many retail stores. ”

“ The dealer who buys for the lowest price, other things being equal, can sell for the least and yet make the same profit as his competitors. Large chain-store systems, mail-order houses and large department stores frequently purchase their goods direct from producers and secure the prices usually given wholesale purchasers. In some cases a part of these differences may be used in cutting the prices to consumers, but it would be a mistake to assume that the consumer gets all the benefit from purchases made at lower prices or that this entire difference is gained for the dealers. ”

“ Another source of loss that adds to the high level of sales expense is that the rank and file of salespeople of most classes, but more particularly in retail stores, lack interest in their work. The fundamental incentives of profit in proportion to effort expended and of self-expression in management, such as the owners or managers feel, is for the most part totally lacking. For this reason most employees give but a fraction of their ability to their work.
Advertising is or should be an invaluable aid to marketing. In the list of expenses of distribution it occupies a prominent place. ”

“ To illustrate: the modern department store gives more service in connexion with its sales than any other retailing type. It offers the purchaser the advantages of buying many kinds of merchandise under one roof. The purchaser has the benefit of elevators, restrooms, wash-rooms, free delivery, credit, large stocks from which to choose, liberal policies as to examination and trial, pleasant surroundings in which to shop, courteous attendants, and so on, but department store expense of distribution includes the cost of maintaining these services. ”

“ 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. ”

“ Unfair competition, efforts made not to increase legitimate business but to impede or even to destroy competitors, commercial bribery, “graft,” and the exercise of monopoly, all burden distribution expense far too much. A source of considerable loss is theft by employees, burglars and shoplifters. Some retail establishments count upon a fixed percentage on their sales representing losses due to this cause, a percentage that is added to the gross expenses which form part of the selling prices. ”

“ In other lines of merchandise, it is urged, there is the same oversupply of dealers, needless duplication of stores, equipment, and needless sales and delivery people, all of which must be paid out of the business. Criticism has become more pointed and perhaps more constructive as information concerning distribution and its real functions has accumulated. From such studies as have been made it seems safe to state that for most goods the costs of marketing, including transportation, run higher than those of production. ”

“ 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. ”

“ The customer must decide what he wants from the study of a catalogue or other printed matter, he must make out a written order and send it, with a remittance, by mail and await the coming of the goods; he must pay transportation charges and he must make such adjustments as are rendered necessary by the fact that he did not see the goods before purchasing. With no need for showrooms, expensive locations, salespeople and some other incidental expenses, the cost of mail-order business should normally be less than that of any other type. ”

“ No credit, no delivery and even a minimum of packing and wrapping are common policies. The policy of minimum service is in some cases carried to the extreme of having no salesmen, so-called “self-service” stores. Because the chain store gives less service it can obviously sell its goods at a lower expense. The mail-order house offers to its customers a wide range of goods to select from through a catalogue that may be studied at leisure in the home, but the mail-order house gives less personal service and requires in some ways more from the customer than any other system so far devised. ”

“ 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. ”

“ Producer Direct to Consumer.—The simplest form of marketing and the most primitive is the sale by the producer directly to the consumer. The village boy or girl who raises flowers and sells them to passing tourists, the truck gardener near cities who disposes of his vegetables and fruits by sale direct to consumers, either from house to house or at a market-place frequented both by producers and consumers, the dairyman who peddles or delivers milk direct to consumers, are illustrations. ”

“ The development of marketing relations between small producers and small consumers is a slow process that apparently cannot be forced. Again, certain specialities, complicated machines such as printing presses, power installations, made-to-order devices, and machines requiring much attention and service after the first sale, usually are sold direct by manufacturers to consumers through the medium of speciality salesmen. The salesman is the representative of the producer in the marketing transaction. ”

“ 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. ”

“ Educational service to salespeople and other workers is now commonly found in the better classes of both wholesale and retail stores. A beginning has been made also in education in distribution and marketing in American colleges and public schools. Several colleges offer courses in marketing, selling, sales management and advertising. Many high schools give similar but somewhat more elementary courses. The main drawback to a rapid development of public education in marketing seems to be a shortage of teachers who can conduct such courses rather than lack of public interest. ”

“ The county agents, agricultural educational officers appointed by the states to assist in the development of agriculture, working in hundreds of counties scattered all over the United States, help to organize buying and selling clubs and actually serve in many cases as sales and purchasing agents for such goods as seed grains, fertilizers and so on. In addition, the Federal Government shows its interest in marketing through control of transportation, weights and measures, storage plants and exchanges, and prevents adulteration and mishandling of products entering into interstate trade. ”

“ Unit Price and Distributing Markets.—The price of the product to dealers and to consumers, whether high or low, constitutes another factor governing the channels to be selected in marketing. A low-priced article with a small margin of gross profit to the seller cannot be sold in the same way as an article that offers a wide margin. A 25-cent (or shilling) article, such as a handkerchief, a magazine or a screwdriver, could scarcely be sold direct. The margin above costs of production could not possibly permit the article to be advertised and sold by itself by the mail-order method. ”

“ Buying in group at one time may secure advantages, not only in price but also in transportation and handling, sufficient to cover the added expenses incurred in buying in quantity. Thus farmers find it profitable to unite in buying a carload of fertilizers once a year. On the other hand it may be exceedingly unprofitable to buy other goods in carload lots. Large purchases would be practically out of the question on such goods as shoes, clothing and most other goods. ”

“ 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 or have his sales made by special representatives or agents. ”

“ Here, then, is a great field for reducing costs by improving present methods. The first general step towards such improvement is education. Trained minds are the means through which the improvements may be devised and trained workers are needed to carry the improvements into effect. A beginning has been made. Before 1860 the apprenticeship system was general in England and to some extent in America, in retail, wholesale and importing houses. Young men came to their life’s work through a course of experience and training well calculated to give an all-round view of the business. ”

“ Poor roads greatly increase the costs of bringing the farmers' crops and produce to market, costs that must be added to the price that consumers eventually pay. Inadequate railway transportation is another element that makes a considerable addition to the costs. Car shortages at crop-moving time, cars unsuited to the products to be hauled, excessive delays in forwarding, at terminals, on the way, and at transfer points, are common sources of expense. ”

“ For example, a manufacturer of hardware selling direct to the retail trade found that his strongest competitor's policy was to sell to every dealer who would buy and to offer no exclusive sales arrangements, while he himself made a success by offering his goods only under exclusive sales agencies. ”

“ To be of value in a comparison of selling expenses, the figures should show the cost of selling shoes, for example, by mail. All things considered, the general costs of running a large mail-order house are probably somewhat lower than those for a large department store handling similar lines and classes of goods. The mail-order establishment need not be in a shopping district, so that the rent or investment represented by its site is comparatively small; the employees who fill orders do so more rapidly and for less pay than those who sell in a store ”

“ In the aggregate, sales made in this way run into immense volume, although but a small part of the total of business. Modern business, the development of large cities, an increasing division of labour in industry, all tend to reduce this form of marketing. There are, however, variations of selling direct from producer to consumer in modern business which deserve notice. There is a considerable amount of marketing of produce, particularly butter and eggs, direct from farmers to consumers, by parcel post. ”