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PART I
THE COST OF DISTRIBUTION

 

I

THE DISTRIBUTION AGE

     THE day is gone when the recipe for fabulous profit was simply "production; more production; still more production!"   

     The golden age of production is past. The age of distribution is upon us.   

     If it is an exaggeration to say that the World War ended the one era--it is no exaggeration to say that it thrust us into the new one.   

     Under the stimulus of war, American industry discovered that its facilities for production, laboriously improved during the half century since mass and standardized production started during the Civil War, are really capable of producing in endless quantities.   

     The old machinery, by speeding up, by day-and-night operation, has developed astoundingly greater production capacity. The looms weave cloth more rapidly than we can wear it out. The farmers produce food in greater abundance than we can eat it. The lathes, drills, and punches produce things faster than we can consume them.   

     New machinery, in unlimited quantities, often to be purchased on a "shoe string"--producing much more than the old, and more and more automatic--is still further multiplying the capacities of our factories.   

     The problem which industry today is trying to solve is no longer how to produce, but how to market profitably what it can produce.   

     When farmers regularly grow "bumper" crops, and discover that the very fact that they have produced superabundantly results in loss rather than profit for them; when manufacturers have to turn to "high pressure" selling in an effort to keep their factories operating at a large enough percentage of their capacities to meet their fixed costs; when retailers and wholesalers find it necessary to buy from "hand to mouth," and carry smaller stocks to speed turnover to the point which enables them to survive--every part of our economic structure is being strained by the strenuous effort to market profitably what modern industry can produce.   

     To solve this problem, we have literally nothing in the way of clear principles, and less in the way of sound practice. Every factor in distribution is a law unto itself. Every producer fashions methods of distribution to suit himself, quite without regard to their effect upon distribution as a whole.   

     To the man who looks beyond the immediate moment, who is concerned with the condition which will face society five, ten, and fifteen years from now, it is essential that the principles involved should be clarified.   

     The need for doing this is imperative.   

     We have a large and constantly growing body of public opinion, which insists that the cost of distribution is too high, that unnecessary distributors must be eliminated, and that more economical methods must be introduced into distribution.   

     On the other side, we have the most powerful and influential manufacturers in many lines constantly developing the agencies for selling and perfecting the mediums for advertising on the theory that the solution of the problem requires more and more selling and more and more advertising.   

     If the retailers and wholesalers of the country continue to be passive factors in the solution of this problem--if they fail to assume the leadership in molding distribution methods and distribution channels, then they will fail to properly serve society, and will earn the inevitable reward of failure--a shrinking return from their business and a lessening influence upon our economic life.   

     If the manufacturers, who are today the dominant element in the development of marketing and merchandising methods, are permitted to maintain their leadership in distribution, then we shall see a development of brand specification, high pressure selling, and national advertising in the next fifty years by comparison to which existing methods and practices will seem infantile. We shall see a complete transformation of manufacturing, and the great assets of our manufacturing establishments will no longer be their production facilities, but their marketing organizations and the goodwill of their brands. Distribution costs will continue to rise. Marketing methods will become more than ever a reflection of the individual necessities of various manufacturers, and even less than today, a reflection of the needs of society. Retailers and wholesalers will become mere slot machines. The public will continue to complain about the profiteering middleman. The high cost of distribution will become the subject of more and more heated debate by congresses and conferences. The ultimate producer and the ultimate consumer may turn in earnest to cooperatives, and cooperation failing, may turn to various forms of governmental distribution.   

     There is no reason why retailers and wholesalers should reject the opportunity to lead in the solution of this problem. Theirs is the strategic position. They have the necessary organizations--they have even the necessary leaders. What is needed is a greater appreciation and understanding of the underlying economic basis for the rise in the cost of distribution.   

     It is in the hope that I may be able to contribute something to this aspect of the matter that this book is being written.   


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