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IT is possible to roughly classify a manufacturer as belonging either to those who "make" products to meet requirements of the market, or as belonging to those who "distribute" brands which they decide to make. The manufacturer in the first class relies upon the natural demand for his product to absorb his output. He relies upon competition among wholesalers and retailers in maintaining attractive stocks to absorb his production. The manufacturer in the second class creates a demand for his brand and forces wholesalers and retailers to buy and "stock" it. In order to market what he has decided to manufacture, he figuratively has to make water run uphill.
The business world tends to overlook the fact that even in this era of high pressure marketing, competition among buyers to secure what they need is still the greatest factor in the distribution of products. Most of the commodities we produce are bought not because producers desire to sell them, but because consumers desire to buy them. If both our price system and our distribution system, were absolutely perfect, producers and manufacturers could entirely rely upon the competition between wholesaler and wholesaler, and retailer and retailer for goods which they could resell to consumers advantageously, to absorb all that our industries are capable of producing.
Even under the abnormal conditions prevailing today, manufacturers whose factories are situated with regard to raw materials and labor conditions so as to produce economically, can rely upon brokers to hunt out their factories for the privilege of selling their products. Competition between brokers and selling agents for the right to sell the products of such manufacturers is keen. The broker's most valuable assets are his franchises entitling him to sell the products of factories which offer the market desirable products at reasonable prices.
The primary step toward profits in merchandising is intelligent buying--not skillful salesmanship. The primary requirement for success in wholesaling and retailing is that buying be at least as efficient as that of competing wholesalers and retailers.
The present day preoccupation with the idea that profits are to be made only by increasing sales volume, has tended to make business men overlook this fact. As a result, buyers today are not nearly so keen in their hunt for sources of supply as they were formerly. And manufacturers, who have found that the buyers were no longer seeking them out so aggressively, have all the more readily been persuaded to turn to high pressure distribution in order to win markets for their production.
Yet it is still a fact, and will probably always be a fact, that the factory which sells only in its natural field because that is where it can serve best, meets little sales-resistance in marketing through the normal channels of distribution. The customers of such a factory are so "close" to the manufacturer, their relations are so intimate, that buying from that factory has the force of tradition. Such a factory can make shipments promptly; it can adjust its production to the peculiarities of its territory, and it can make adjustments with its customers more intelligently than factories which are situated at a great distance. High pressure methods of distribution do not seem tempting to such a factory. They do not tempt it for the very good reason that such a factory has no problem to which high pressure distribution offers a solution.
It is the factory which has decided to produce trade-marked, uniform, packaged, individualized, and nationally advertised products, and which has to establish itself in the national market by persuading distributors to pay a higher than normal price for its brand, which has had to turn to high pressure distribution. Such a factory has a selling problem of a very different nature from that of factories which are content to sell only where and to whom they can sell most efficiently. The factory which determines to secure nation-wide distribution of its brand, and which must therefore conceal in some way the fact that it cannot sell its products with equal economy in all sections of the country, turns to high pressure distribution, because it does offer it a means for evading the consequence of its high cost of marketing.
The proponents of high pressure distribution, the advertising men and salesmanagers of the modern school, use the word "distribution" in a manner distinctive to themselves to describe the marketing problems of such manufacturers. A national advertiser, for instance, does not sell his brand in the ordinary sense of the term. He does not try to convince the trade of the merits of his product and of the reasonableness of the price which he asks for it. He subordinates discussion of the intrinsic value of his product to discussion of its resalability. Intrinsic value ceases to be the criterion by which his product is judged by wholesalers and retailers. It is replaced by the criterion of consumer demand. Thus the manufacturer does not have to "sell" his brand to wholesalers and retailers; all that he has to do is to "distribute" it; to "stock up" wholesalers and retailers with it so that consumers may be able to buy it.
"Distribution" to the national advertiser means the process of placing a brand in the hands of wholesalers so that retailers may be enabled to buy it, and of then placing it in the hands of retailers so that consumers in every section in which he advertises may be enabled to buy it. In stocking-up retailers and wholesalers he is absolved from the necessity of convincing them that his brand is good value to the extent that he is able to convince them that the consumer demand for it will insure resalability and speedy turnover.
Distribution of this sort is absolutely essential to the existence of any manufacturer who refuses to rely upon the natural demand on the part of wholesalers and retailers for the product he manufactures, and who must resort to artificial stimulation of sales to insure a profitable volume of production. High pressure marketing thus creates "sales resistance"--an acute distribution problem which otherwise would not exist. It thrusts upon the manufacturer a double task: first, that of persuading the ultimate consumer to demand his brand, and secondly, that of overcoming the resistance of wholesalers and retailers to the addition of still another brand to the brands already being stocked by them. To such a manufacturer, wholesalers and retailers do not represent opportunities for the sale of goods; they do not function as markets for products; they are mere sales-resistances to the distribution or stocking up of his brands.
Two alternative methods of solving the problem of distribution are open to the manufacturer who has to overcome wholesale or retail sales resistance because he is trying to create consumer demand for his brand. He may decide to force distribution through the regular outlets for his products by bending wholesalers and retailers to his necessities, or he may create new outlets and, so to speak, travel right around the sales-resistance of the regular outlets.
Manufacturers in some industries have successfully reduced wholesalers and retailers to slot machines which simply vend their products. They distribute through the regular outlets because the cost of creating alternative outlets would be greater than the value of the additional business they might be able to secure through. them.
Other manufacturers have either established new outlets or created new channels of distribution for their products. They passed either right around the wholesalers in order to reach retailers direct, or around both wholesalers and retailers in order to reach ultimate consumers. If wholesalers presented too formidable a sales resistance to the distribution of their products, they formed wholesale departments of their own and sold their products direct to retailers. If the opposition of both wholesalers and retailers proved to be too formidable, then they sold direct to the public, some of them through retail stores of their own, others through the United States mail, and still others through house to house canvassers.
The steady rise in prices during the past fifty years and the resulting hue and cry about the exactions of the middleman have made it very easy for any manufacturer to justify these costly methods of "direct" distribution. The manufacturer who apparently eliminated middlemen was looked upon as a public benefactor. The popular hunger for buying "direct" from the factory and cutting out middlemen's profits has furnished a fertile soil, in which new channels of distribution and new wholesale and retail outlets, created to promote the manufacturer's own interest, have multiplied and flourished. High pressure stocking-up and high pressure distribution by these manufacturers has reduced distribution to a state of anarchy, in which each factor in distribution is a law unto himself, and in which the general well being of producers, distributors, and consumers is needlessly sacrificed.