MANUFACTURERS' AND PRODUCERS' METHODS The Wholesaling System.—Most products of common use such as foods, clothing, footwear, house furnishings, lumber, fuel and so on, are marketed through middlemen. The manufac turer of men's clothing or of shoes usually sells his product to retailers scattered over the country, who in turn sell to con sumers. Manufactured food products, dry goods, drugs, hard ware and house furnishings are generally sold first to wholesalers, who in turn sell to retailers. Farmers' produce, fruits, vegetables, butter and eggs, are commonly marketed through local buyers, then to wholesalers or wholesale distributors, to jobbers, then to retailers and lastly to consumers.
In the case of highly perishable goods, such as fruits, where no time may be lost in effecting sales in order that they may reach the consumer before spoiling, the auction system is used. Wholesale buyers and salesmen come together at a designated place at a set time and clear their trans actions. The auction is used also for known standards or qualities, which are bought and sold in wholesale quantities at certain dates each year, as carpets, rugs, wool, furs and fruits, and in marketing second-hand goods, works of art, antiques and even real estate.
Variation in mar keting occurs through variation in ownership of the goods to be marketed. To illustrate : producers or local buyers usually sell outright to wholesalers all goods marketed through the whole saler-retailer channel of distribution; but in highly perishable goods, such as fruits, dressed poultry, live poultry, etc., and also in cases where the value of the goods runs very high in propor tion to the value of the service rendered by the wholesale middle man—as, for example, finished textiles, real estate, commercial paper and stocks and bonds—the wholesaler (or dealer who takes his place) frequently, if not usually, merely sells or buys as the agent of the owner and secures a commission or brokerage in stead of a profit for his services. This arrangement in the case of perishable goods relieves the wholesale dealer of the risk from loss, and, in the case of costly goods, of the burden of financing the goods. Such wholesalers are known variously as commission dealers and brokers.
While goods are being gathered to gether in wholesale quantities and made ready for distribution to the retail trade other factors in marketing frequently enter in, factors of a speculative nature. Standardized goods that are not readily perishable, such as grain, cotton, wool, silk, provisions, coffee, sugar and so on, are likely to be bought purely for specu lative purposes. Thus a lot of grain or cotton may be bought and sold several times before being moved to consumption. It is but
another step for these speculators to make their ventures in hope of gain on what they think future prices will be. Hence "selling futures" is a common occurrence on the great exchanges that deal in the commodities named. Dealing in futures is an essential function of marketing, but it needs careful regulation to prevent unfair practices.
If producers are many and small, and are located far apart, it is almost certain that their products will have to be assembled by a local buyer of some kind ; whereas if the producers are able to turn out large quanti ties they may be able to deal with wholesalers directly. If con sumers use small quantities or small lots of any product at one time it is almost certain that they must purchase from retailers. But a large consumer would be able to buy more advantageously direct from the producer.
Time is a very important element in the marketing of perish able goods. There must be no delay, and little time can be given to the sale of any particular unit. An illustration of a perishable article is the daily paper, the weekly or monthly magazine. Timeliness is the essence of their value. This makes necessary a highly specialized marketing organization to carry papers or magazines over the country and, in the case of magazines, to place them on sale everywhere at the same time. Such specialized handling calls for expense not incurred in goods not perishable.
A low-priced article with a small margin of gross profit to the seller cannot be sold in the same way as an article that offers a wide margin. Where the margin above costs of production is not sufficient to permit the article to be sold direct or to be advertised and sold by itself by the mail-order method, it must take its way to the consumer through the channels of trade followed by thou sands of other similar articles.
The competition in the sales field of any ar ticle may readily determine the channel of distribution that is taken. Certain manufacturers of soaps, perfumes and toilet goods have found it so difficult to place their products advantageously in drug-stores and similar retail outlets because of the num ber of competing lines that they have found it advisable to sell, especially in country districts or small towns, direct to con sumers by means of agents and canvassers working on a commis sion basis. A motor-car tire maker found it so difficult to break into the market through automobile dealers and garages that he sold his product to a mail-order house. A new product must as a rule be sold through specialized marketing systems which may be abandoned after the public has begun to know and to demand the article.