PREVENTION OF PROFITEERING

Evening Post, Volume CXXII, Issue 27, 31 July 1936, Page 8

PREVENTION OF PROFITEERING

(To the Editor.)

Sir, —A perusal of the report, of the discussion on the Prevention of Profiteering Bill discloses, first, that the participants in the debate are all highly qualified to deal with business matters, as most of them have had little or no experience in business. To know how to build, even a small shanty, one needs to know how to use a saw and a hammer, but that does not matter anyhow. If the shanty will not stand up you can knock it down.

There is not much in your report as to the provisions of the Bill, but reference to the Board of Trade Act may help one to find out. Any person must know that if costs rise prices will also rise. They must of necessity do so, with shorter hours and higher wages. On top of all costs there is the usual trade rate of profit, which, in certain retail trades, is 50 per cent, on cost or 33 1-3 per cent, on return, out of which you deduct wages, salaries, rent, advertising, rates, general expenses, etc. Although one-third gross profit is aimed at my experience is that 30 per cent, and less is about the average result, and that if there is 10 per cent, net profit left over it is very good indeed. I have often seen it 7-J per cent, or less. In manufacturing, the cost to buyer is wages, material, and on cost (or overhead), plus profit. There is (or was) a "Prevention of Profiteering Act" in vogue in Queensland. I asked the officer in charge of its administration (when there some years ago) a bit about it. He told me that if someone made a complaint about a price it was his duty to investigate it. That involved' a good practical knowledge of ■costing in manufacturing concerns, a big factor in which is workers' time, which in turn depends on the deftness of the worker, and so complicates matters, the fast man making more in a given time and the slow man less. He remarked incidentally that "we have to allow a fair trade profit." "How much, say, on a general drapery turnover?" I asked. "Thirty-five per cent," said he. "In that case," I remarked, "New . Zealand prices would have to rise 5 per cent, if that ratio were applied in a number of places I know."

Just here. I might state that an American investigation of departmental stores disclosed some years ago that the biggest- and best of them showed 35 per cent, gross profit, which working expenses reduced to 5.4 per cent, net profit! Mr. Forbes remarked that a small business had to have a larger profit on account of the small turnover, also that competition prevented unreasonably high prices. Competition does that also to the small business. —I am, etc., FIFTY YEARS OF BUSINESS.