PRICES AND PROFITS

Dominion, Volume 13, Issue 179, 24 April 1920, Page 8

PRICES AND PROFITS

QUESTION OF REPLACEMENTS A RETAILER'S POINT OF VIEW Speaking to a Dominion reporter, a 'leading retailer stated"The figures given in your article under the above heading, particularly those under that attractive word profit, are doubtless interesting to the general reader, but unfortunately quite unconvincing to tho man or woman who has a business with rent, rates, taxes, lighting, wages upkeep, expenses, etc., usually called ■overhead charges, in addition t§ the cost of new'goods all following an arrow that points very sharply upwards. Will your ■infonnant please tell a humble inquirer where the retailer who started with /;100 capital and finished with J:200 got tUat 6econd hundred 1 from, if 'lie did not get it as the result of ordinary trading. Also, please, where is the coming from with which to pay for new goods that had previously only cost J!100. Surely it must come from tjie .£l3O for which he sold his first .£IOO worth. This leaves him <£10. Of the .£l5O selling price of his second transaction, ,£l5O goes to buy his third-parcel, leaving him On the last deal, by some mysterious ageney unknown, I fear, in the purlieus of Victoria Street, having sold his goods for .£195, ho succeeds m buying with that sum .£2OO worth, being content to forgo any anxiety a? to how he is going to pay his way, pay his staff, subscribe to the one hundred and one appeals continually coming before him, keep a roof over his head, clothe his wife, and cat. Before tho last transaction was completed, had wholesale prices fallen—and as the natural concomitant retail prices would promptly come down with a rattle—the J3200 worth might have to be sold for .£l3O, or even less if the market slumped, and where would this ingenious philanthropist have found himself? This is the menace that constantly confronts every trader working, on a rising market. No, you must follow tho market. However glowing the prospect, the rainbow path before tho amateur is strewn with tho corpses of thoso enthusiastic -idealists who havo rushed into business without a due appreciation of the Juiutal fact that tho money to buy new stock must bo got from'the consumer if they are to continue in business, and that paper profits do not pay dividends.". THE COST OP TEA OVERSEA REDUCTIiIOT FELT HERE The price of tea Ims fallen during rccent weeks in Ceylon and in Australia. Much of the Ceylon tea that comes to New Zealand is distributed from Australia, where tho wholesale prices are reflecting the decline in values at the producing centres. Thw reduction in prices has not yet benefited the New Zealand consumers, and the oxplanatiori"offoral locally is that' stocks imported at i the higher "prices have to be quitted be-1 fore the lower values prevail. Yesterday a Dominion reporter made some inquiries with tho ohject of ascertaining if tho tea prices threw any light on tho relation between prices and replacement costs. He was informed that the local prices of tea would not decline, in sympathy with Ceylon prices, until stocks held by merchants had been reduced. These stocks hod been bought at this higher prices, and some time would elapse before the cheaper tea re-achod New Zealand. "Tho theory of replacement cost cannot be applied exactly," said a merchant. "I know that the Government has been 'asked to rule that a price not higher than the price at which tho goods call bo replaced, plus tho trade profit, shall not be deemed to be unreasonably high within the meaning of the Act. If importers raised prices of stocks in sympathy with oversea prices, then obviously they ought to reduce prices on stocks when oversea prices decline. . But as a matter of fact the importers (quite apart from auy Board of Trade ruling) do not follow exact rules of this kind. An importer often will give his customers the benefit of cheap purchases, warning them'at tho same timo that they will p:)y more when his new stocks arrive from a rising market. On tho other hand, he may not reduce tho price of goods in. stock merely because tho replacement cost has declined. If lie does that he loses money by selling tho goods for less than they cost him. lie must do it sometimes, if ho happens to hold stocks when a competitor, who does not hold stocks, is importing tho samo goods at a reduced price." _