FAULTY METHODS

Wairarapa Times-Age, 18 October 1940, Page 6

FAULTY METHODS

PROBLEM OF DISTRIBUTION JAMMED NATIONAL ECONOMY. FERTILITY OF THE SOIL. Our engineering genius has developed a mass production machine that is capable, or can be made capable of satisfying all the materials of our 130,000,000 people, states Arthur G. Hoadley, president of the Atlantic and Pacific Tea Company, United States. But our factories never work at full production capacity simply because we have not yet devised an equally efficient method of getting these things into the hands of our citizens within the framework of our democratic economic system. We live in a vast country, the tillable area of which is great-

er and the soil far richer than that in which all the hard-pressed nations of Europe exist. Yet we are constantly struggling to suppress the fertility of the soil because our distribution methods are not capable of bringing all these foods to all the people. As an example of this fact, we have only to realise that this year, and for some years past, agriculture has been confronted with what has been called “surplus production” in various fields. The food chains have tried to contribute te the . solution of that problem by putting on special merchandise drives called “producer-consumer drives.” The growers apply to chain stores to help them to put on drives to take these great surpluses off their hands—and this in spite of the fact that we all know that at the very time the producers had great stores of food which they could not dispose of, there were millions of our citizens who would have been more than glad to have these foods. The real problem involved here is not that we are producing too much but that we are producing more than we can distribute at a price that people can afford to pay. In other words, the key log in our jammed national economy is inefficient distribution .... The job that has to be done is that of taking the products of the farm and factory and getting them into the hands of the consumer with a mini-

mum of handling and a minimum of in-between costs. The benefits to be derived from stepping up this distribution efficiency are obvious. When we lower the cost to the consumer we raise his standard of living, for it means that the dollar in his pay envelope will buy more of the things he reeds and wants. At the same time, lower retail costs mean increased consumption, for when prices are lower, people buy more. That means, in turn, that the farmer and factory producers have larger markets for their products. When George Huntington Hartford opened his first store in New York, tea was selling at one dollar a pound, and most of that dollar went to meet inbetween costs. He went directly to the producer, bought a carload of tea, and was able to sell it profitably at 50 cents a pound. As he opened other stores and built the first of the Nation’s chains, he applied the same methods to other food products. About thirty years ago we decided that there might be a great many people who would rather have more

food for theii’ money on a “cash-and-carry” basis than to continue to pay more for less by putting the grocer to the expense of credit and delivery. The new economy stores operated on this basis were immediately successful .... Of course, too. the growth of the chain store created thousands of new positions all the way from retail clerks to store managers and supervisors up to unit and division heads. It followed, too, that the pioneers of this new and better way were greatly rewarded by the millions of our people who found that they could live better on the same income because of this new and greater buying power of their dollar.

In the last five years literally thousands of better paid positions have been available in grocery retailing because of the next great forward step—the development of the super-market. Here again, the merchant said maybe the consume!’ would still like more food and less service. Millions of customers flocked to the self-service store and waited on themselves in order to have more and better food for the same money. The pessimistic believed that self-service would mean less employment, but experience has proved that it means more employment. More people employed on the farm and in the cannery and in the mill, because more was being consumed; more people in transportation because more was being shipped and more people in the warehouses because more was being handled. It created new and better jobs for store managers, and managerial positions which had not even existed before in produce and meat departments.

Forty years ago when your grandmother went into a grocery store to spend a dollar she usually got about 35 cents’ worth of food —the other 65 cents went for wholesale costs and profit, retail handling, rent, pay roll and other costs. Naturally, the family got nothing to eat for that two-thirds of the dollar. Today hundreds of millions of dollars’ worth of foodstuffs are being distributed at retail so that on a comparable basis your mother is getting 871 cents’ worth of food and payonly 121 cents to cover all wholesale and retail costs and profit. What we have done in our field, others have done in similar fields. The whole chain store industry is predicated on this theory of cutting distribution costs. But the problem is still very much with us. Even though we have improved our own methods consistently, we know that the standards of efficiency which we had achieved five years ago are inefficient compared to those we use today. It is obvious to us, therefore, even with our long experience and great achievement in the field of food distribution that there is still room for improvement. In many fields the costs of distribution still take 60 per cent or even 75 per cent of the consumer’s dollar.