RETAILERS' PROFITS

Evening Post, Volume CXVIII, Issue 94, 18 October 1934, Page 16

RETAILERS' PROFITS

LABOURER AND HIS HIRE

COMPLEX PROBLEM

"Evening Post," October 18.

"Retail Dictators" was the heading of a recent article iv "The Economist" (London), in which it was stated that retail price maintenance was but "one more example of those rigidities which are largely responsible for the present level »£ unemployment in so many Western countries." The writer expressed the', conviction that not only do "such devices as discriminating discounts, ■ blacklisting, officially assessed second-hand values prove futile, but, contrary to the belief of the proponents, they are-detrimental both to the manufacturers and the buying public." In this instance the English motor-car trade was dealt with, and comparison was made with the sale of cups of tea. It was remarked: "No one bus attempted to regulate the iinal price at which a cup of tea is sold," and that this article can be sold by anyone at from %d on a stall to Is at a luxurious hotel, aud yet the tea industry has not collapsed because ot this freedom and there has been no deterioration in the quality of the tea, while on the other hand consumption has increased. '•• The article was dealt with m a subsequent issue of "The Economist" by Mr. Paul S. Cadbury, of Bourncville, Eirmingham. He drew a sharp distinction between a cup of tea and a given make ot motor-car. Tea, he said, was not a'proprietary article except in branded packets from which it might be made. But the distributor of a cup of tea sells far more than the tea in the cup—there are milk, sugar, boiling water, and a clean cup and saucer. Whereas a make of car is the same wherever it is sold. : "There are, however," Mr. Cadbiiry. points out, "many other factors which complicate the issue. Some articles are bought on impulse-cigarettes or choco-lates-and a large number ot selling points are essential if sales are to be maintained. Price-cutting tends to limit the numbei of selling points. It is true that there are redundant selling points for some commodities, but .the pr.ce-cutter hard y affects these. He operates in the best streets and tends to eliminate the more important shops. COSTS OF SELLING. "In any trade the distributing margins generally allowed for wholesaling and retailing are determined by the nature of the product and the circumstances governin" its u«e The cost of distribution varies according to the density of population in vadous areas, for example it is; cheaper to wholesale in London than in boutn are alive to the importthdr interests are linked up with the interests of the community and such regulations as to price maintenance as they are cannot succeed as a price-cutter if you 'charge more than the lowest pi ice. FIERCE COMPETITION. ' "This results in very fierce and uneconomic competition where there is no.system "of restriction, and in several trades tlieie •hJe been a ' se ries of bankruptcies which ■quite apart from the money lost m the individual failures, have seriously dM•organised the distribution of the com.^"C adburftelieves that everyone would agree that the distributor is .Tntitled to some reward for the: undoubted service he performs. That the margin 4 8 in some cases so high that consumption '£ restricted is also probably true. In {hese cases price-cutting inevitably springs 'up Some methods of restriction may be unwise, but the problem is extremely com.plex, and varies very much from traao '^Trades' or groups of manufacturers within !the different trades have worked out methods of control to suit their own conditions. In some cases these have broken down; in other cases they have worked well for a number of years. Mr Cadbury quotes from the 1931 Report of the departmental Committee on the Restraint of Trade as follows:—"We do not regard the price maintenance system as free irom disadvantages from the public point ot view, but we are not satisfied that it a change in the law were made there is any reason to think that the interests of the public would be better served. . . . Though •the withholding from retailers of goods m which they wish to deal may cause grievances and in' some cases no doubt hardships, we do not consider that any compelling reason for a change in the law has been established."