PRICE-CUTTING EVIL

Sun (Auckland), Volume IV, Issue 1074, 11 September 1930, Page 8

PRICE-CUTTING EVIL

ELIMINATION OF SMALL DEALER DEPARTMENTAL REPORT “Indiscriminate and consistent price-cutting, regardless of profit or loss, is uneconomic, and can lead to only one end—the elimination of those financially least able to stand it,” says the annual report of the Department of Industries and Commerce. Provided a trader is performing a real and necessary service in connection with, the distribution of gooes from the manufacturer to the consumer, then he is entitled to a reasonable reward for his services, and pricecutting. which tends to reduce what is a reasonable reward, is illogical and uneconomic. All price competition, however, is not price-cutting, and many complaints that have been mide in this connection are entirely unjustified. What appears to be uneconomic price-cutting must in many instarces be called price competition, which can be regarded as a perfectly legitimate form of competition, due to the adoption of improved methods of distribution. Excessive numbers engaged in many lines of business keep costs at high figures relatively to turnover, and although it does not necessarily follow that the largest establishments have the lowest overhead costs, yet the experience of the last few years show> that very often, these small units aran unneessary burden upon the consumer. The channels of distribution hav changed considerably during the lasi few years, and chain stores, department stores, and similar organisationhave become an increasingly common feature. Such organisations, with lower overhead costs, reduced costs o: purchase and distribution, anu new methods of sale and delivery, have proved in many cases that reduced prices are still consistent with a reasonable margin of profit. Persistent price-cutting, however, in contradistinction to price competition, must eventually lead either to retirement from the field of commerce or to the bankruptcy court.