DISTRIBUTION COSTS.

Auckland Star, Volume LIX, Issue 205, 30 August 1928, Page 20

DISTRIBUTION COSTS.

A STEADY INCREASE.

NEW BUSINESS METHODS.

WHOLESALE DISAPPEARING,

(By Telegraph.—Parliamentary Reporter.)

WELLINGTON, this day.

The very decided tendency towards a change in methods and channels of distribution, more especially in regard to foodstuffs, soft goods, aiul hardware is discussed at some length in the annual report of the Department of Industries and Commerce. For some years past the costs of distribution and overhead expenses have been steadily increasing, and a general fall in prices which has taken place since 1920 has not been accompanied by an equivalent or relative reduction in the costs of doing business, as price competition has become more keen. Gross profit margins have been cut to such an extent that overhead costs now absorb a percentage so high as to leave a very small net profit. The figures of both the wholesaler and retailer have suffered alike from the difficulty of reducing costs in line with falling values. Price competition has become price "cutting." Iu an endeavour to hold trade and price cutting of their goods, some retailers have sought their salvation in chain stores, while wholesalers tend to look towards combination, both among themselves and with manufacturers, to hold their position in distribution.

The position of the wholesaler is even more difficult than that of his buyer, the retailer. The pressing necessity of buying in the cheapest market has increased the opportunities of the indent agent, and many of the larger retailers purchase considerable proportions of their overseas goods on this basis. Similar competitive forces have tended to increase dealings direct between the manufacturer and the retailer, and much business now goes past the wholesale houses, while some manufacturers continue to use the service of wholesalers for distribution of much of their output. The system under which manufacturers grant quantity discounts and accept direct business from large retail houses is increasingly in evidence. Some manufacturers have entirely abandoned the wholesaler as a distributor channel, and now employ their own sales staff in calling upon retailers throughout the Dominion. In other instances commission houses undertake the work of selling direct in specified territories on behalf of manufacturers. These factors the wholesaler to realise that his position is by no means secure. Distribution costs in New Zealand and elsewhere have outgrown their economic justification, and new methods are arising to meet altered requirements. The consolidation of the work of wholesale selling would be a step towards the elimination of a section of cost which tends at present to be higher than the trade will hear.