DISTRIBUTION COSTS

Hokitika Guardian, 31 August 1928, Page 4

DISTRIBUTION COSTS

A STEADY INCREASE. NEW BUSINESS METHODS. WELLINGTON, Aug. 29. I lie very decided tendency towards a. change in methods and channels of distribution, more especially in regard to food stuffs, soft golds and hardware is discussed at some length in the annual report of the Department of Industries and Commerce, For tome years past, costs of distribution and overhead expenses have been steadily increasing and the general fall in prices which has taken place since 1920 has not been accompanied by an equivalent or relative reduction in the costs of doing business. As price competition has become more keen, gross profit margins have been cut to such nil extent that overhead costnow absorb percentages so high us to leave very small net profit figures. Both wholesaler and retailer have suffered alike from the difficulty of reducing costs in line with falling values Brice competition has become “price cutting” in an endeavour to hold trade, and price cutting has created a demand for “price maintenance,” or the fixation by manufacturers of the resale prices of their goods. Some retailers have sought their salvation in chain stores, while wholesalers tend to look towards combination, both among themselves and with manufacturers, to hold their position in distribution.

The position iif the wholesaler is even more difficult than that of his buyer, the retailer. The pressing necessity of buying in the cheapest mar Icet has increased the opportunities of the indent agent, and many of the larger retailers purchase considerable proportions of their overseas goods on this basis. Similar competitive forces have tended to increase dealings direct between the manufacturer and the retailer, and much business now goes past the wholesale houses. While some manufacturers continue to use the services of wholesalers for the distribution of much of their output, the system, iundcr which manufacturers grant quantity discounts and accept direct business from large retail house' is increasingly in evidence. Some manufacturers have entirely abandoned Rewholesaler as a distributive channel and now employ their own sales staff in calling upon retailers throughout the Dominion. Tn other instance' commission houses undertake the work of selling direct in specified territories on behalf of manufacturers. Those factors force the wholesaler to realise that his position is by no means secure. Distribution costs in Now Zealand and elsewhere have outgrown. their economic justification, and new methods are arising to meet altered requirements. The consolidation of the work of wholesale selling would be a step towards elimination of a section of cost which tends at present to he higher than the trade will bear.