CASH-ORDER TRADING

Sun (Auckland), Volume II, Issue 607, 8 March 1929, Page 14

CASH-ORDER TRADING

THE SYSTEM EXPLAINED BUSINESSMEN’S VIEWS Information regarding the working of the cash-order trading was contained in the evidence of about a dozen witnesses heard by the Minister of Indus-tries, the Hon. J. G. Cobbe, in connection with the Government's inquiry into the system. A summary of the evidence has been released for publication.

The first witness said that he had conducted a cash order company over a period of IS months, and it possessed a capital of £ 3,500 and that there were 10 shareholders. His company had dealings with 55 trading concerns, mainly drapers, tailors, ironmongers, furnishers, and boot and shoe dealers. Recently dentists and opticians had been added. The traders included most of the leading firms in each section. The witness produced leaflets indicating his method of accepting or rejecting applications for orders. His company satisfied itself as to the ability of the applicants to pay the instalments and carry out the contract. For an order of £5 a charge of 5s for the service was paid, and the principal was repaid at the rate of Is in the £ every week for a period of 20 weeks, so that the total received from the applicant was 5 guineas. Ho canvassing was done for these orders, the worthiness of an applicant being judged largely by the references obtained and information which was secured by the company confidentially. Advertising to a very limited extent was indulged in. The first year's trading had resulted in a net loss due to wrong policy and insufficient knowledge of the local territoi'y. A good many bad debts were contracted, and the manager accepted personal responsibility for the loss. Two men were employed in checking over applications and estimating the reliability of prospective clients and collecting instalments due. In the general course the clients came into the office and paid instalments regularly, 80 per cent, to 85 per cent, of the amounts being paid in this way.

The orders issued on traders, explained the witness, were** so framed that it was possible for their dents to separate their purchases over any number of traders up to five. Ho limit of time was stipulated in which the order was to be negotiated. For the last half-year the firm had shown a small net profit. Some of the traders who dealt with the order system advertised extensively in the daily Press and indicated that they were prepared to give their customers . easy terms. The dealers arranged these terms by referring the suggested clients to his company, which would issue an order if the applicant were satisfactory. Many of the traders were quite satisfied to leave the matter of acceptance or rejection of the applicants to his cash order company. The witness produced definite evidence to show that the recipients of orders received ordinary marked cash prices; in fact, the traders were under signed agreement to give the best terms. NO DELAY IN BUYING It was stated that the virtues of the system were that it enabled clients to purchase their needs just when they wanted them, instead of having to wait and thereby inconvenience themselves until they had saved sufficient money to make a cash purchase. An example was quoted of a client who proposed to purchase an article of furniture on the time-payment plan. The cash price was marked £4 17s 6d. Intimating that she could only pay by instalment an extra £ 1 was charged, which means that she would have had to pay £5 17s 6d for the article. It was pointed out that the article would not be her actual property until the last shilling had been paid, whereas on receiving a cash order for £ 5 she paid the furniture house £4 17s 6d, returned the 2s 6d to the company, and with the 5s charged for the order the total cost of the furniture would have been £5 2s 6d. STRONGLY IN FAVOUR The next witness, a leading draper, stated that he was accepting orders from four cash order firms. These were individual traders: he had refused to deal with companies. His drapery firm paid 12 h per cent, to the people issuing the cash orders, and his turnover in the system averaged over £IO,OOO a year. The system enabled him to avoid bad debts and saved considerable sums in advertising. He looked upon it as an overhead charge like an advertising matter. He was strongly in favour of the system if properly conducted, and considered that the rates charged on the orders, i.e.. 5s for £5, were very reasonable. He had been trading in the business for ten years and had never had a bad account. The system was growing and was favoured by his customers. He had refused to take companies’ orders because they desired the traders to become shareholders, and it was a thing he did not favour. The people possessing the orders usually bought ordinary household articles and were very careful in their buying. The third witness, a clothier in a large way of business, expressed himself as strongly against the cash order system. His company had tried to build up a trade by establishing a strictly cash business and giving the public the goods at the lowest possible price. As the cash order companies required him to give 12 \ per cent, on all the orders cashed in his shop, he felt that it was too great a discount to give, considering the cheapness of his prices. He felt that he was forced to accept the orders because his competitors did so. The fourth witness had conducted an extensive cash order business over a period of 14 years, and his turnover had now reached considerable dimensions. He did not advertise or canvass for these orders. The business had simply grown from a small beginning to its present large dimensions by one client recommending another. He was careful to whom he issued orders, and there was very little loss through bad debts. Eighty per cent, of his clients were married women, -who signed the orders with the consent of their husbands. Ho orders were given to persons under 21 years of age, and ffio extra payment over the 5s for service was charged to those in arrears. Generally the witness claimed that the orders were of great benefit to the poorer classes and that the money was spent wisely. He dealt with only a few selected firms, who traded in necessities, and he had definite knowledge that the money was not expended on luxury goods. The Commission is now hearing evidence at Christchurch.