The Market.— The fourth and final insti tute of commerce, to be here mentioned, is the market. A market is an assembly of traders actively engaged in trade, and so limited by location, by the class of articles dealt in and by the average size of sales that the action of any one trader promptly influences the action of others. From this interdependency of ac tion there results the chief circumstance which characterizes a market, namely, that upon it a commodity has but one price at a given time. Discrepancies of price will of course result from imperfect competition, but a process of mutual value adjustment is the essence of mar ket action. What is an efficient market? To answer this question it is necessary to recall that among the essential conditions for the ef ficient purchasing and selling of commodities there are required assortments to select from, protection for perishable articles, reliable measures of quantity and quality, transporta tion facilities, fair prices and flexible credit facilities. Assortments are judged by pur chasers with reference to the market as a whole rather than as to the stock of any one firm. A city has the proper stocks only when its merchants go beyond the usual.process of stocking what is called for, and make syste matic study of the resources and requirements of the adjacent trade territory. Measurement of quality and quantity requires a variety of agencies, such as the grading rules and in spection service of produce exchanges. Effi cient transportation is secured only in cities which plan comprehensive terminal facilities. Storage calls for special types of warehouses tied into the transportation system rather than, as is usually the case, operated as an annex to the buying and selling process. The formula for fair prices is to bring to bear upon each purchase and sale transaction all possible ele ments of supply and demand which are logic ally related to it. This means to bring the past and future supply of an article to bear upon the presentprice by warehousing. It calls for bringing diverse commodities to bear upon each other in so far as they are related, either in the productive sequence as raw ma terials and manufactured derivatives or as sub stitutes. The sequence can be drawn upon in the forward direction only where the convert ing (manufacturing) interests are active. The formula requires further that the price of the use Of money for a period of time (which is interest) be brought to bear upon the prob able fluctuations of the price of goods during that period. As the price of money for brief periods is chiefly the cost of appraising the security offered, those markets have the steadi est commodity prices where loanable capital is plentiful and where there exist the grading, measuring, storing, insuring, credit reporting and other facilities which make it safe to loan on stocks of merchandise. Finally, the prices of different markets should be brought to bear upon each other by an adequate system of re porting. From all of this it is evident that a market is a complex thing. A good market is rare. It does not just grow, as Topsy did. It is the result of intelligent joint effort on the part of its members.
The Manufacturer's Price Problems.— The manufacturer has his own characteristic relation to all of the institutes of commerce. It may perhaps be said that his chief commer cial problems revolve around the subject of price. There are three of these problems which merit brief presentation. They are, first, the question of varying the price with the quantity sold; second, the effort to protect dealers' profits by charging different prices to different classes of buyers; third, the project of further protecting such profits by control ling the prices of resale or the prices charged by dealers when they sell to consumers.
Quantity It has long been a cus tom of trade to give to trade buyers who pur chase large quantities (case lots, car lots or en tire output) a lower price than is accorded to the small buyer. This is justified as a re
bate to the large buyer of a portion of the saving in agency expense, bookkeeping, collec tion expense, etc., which his large order in volves for the manufacturer. Upon this sav ing rests one of the well-known types of econ omy of production on a large scale. To take advantage of it, a variety of trading organiza tions has been developed in the United States in recent decades. In the wholesale trade the great interstate jobbers have grown up to hunt for the larger orders, leaving in tensive work with the small retailers to the local wholesalers. To equalize the competitive advantage the small wholesalers have, many of them, combined more or less loosely into buy ing groups pooling their orders in the hands of syndicate buyers. The syndicate buyer maintains buying offices in the larger markets. He either pools the orders sent to him by his patrons into large consolidated orders, or he peddles out large purchases which the finan cial embarrassments of manufacturers enable him to make at bargain prices. In the retail trade quantity prices have led to the growth of department stores which aim at local mass retail distribution. They have led, also, to the growth of mail order houses, which aim at national mass retail distribution. Finally they have led to the organization of chain store sys tems which aim to combine mass buying and local small-scale retail distribution. The re tail institutions just mentioned not only work for quantity prices but to a considerable ex tent eliminate the jobber.
The result of the appearance of these quan tity-buying, direct-purchasing institutions is that the regular trade — sometimes -called illegitimate— comprising the local whole salers and the single-line and country-store retailers - has been awakened to hostility. This hostility has taken the form of expressions of opinion on the part of associations of whole salers and retailers, and of more or less ex clusive trading arrangements of the small re tailers with those wholesale houses who do not sell to mail order houses and chain stores. It has also taken the form of discrimination against such manufacturer's goods as appear on the shelves of such stores. Inasmuch as the regular trade comprises the overwhelming ma jority of the merchandising business of the country, these hostile moves have been given respectful attention by the manufacturers. The answering policy of many manufacturers has been to charge one price to all trade buy ers, regardless of the quantity purchased. This puts the small store upon an equality, in the first cost of merchandise, with its department store neighbor. Some manufacturers have adopted very elaborate policies for the protec tion of the small dealer, and have stimulated the antagonism of the small dealer against the large one, in order to pose as a friend and get the business.
.It can be seen that excessive reductions of price for quantity tend to concentrate the buy ing function, as contrasted with the selling end of merchandising. By it buyer and sales man are forced apart. So the local store unit of the retail trade noses flexibility in assem bling such stocks as the locality requires. Its stock, as illustrated by the chain-store stock, becomes standardized and a matter of safe staples chiefly. Quantity price operates to the disadvantage of the village and the sub-cen tres in the outskirts of cities. It is to the advantage of the large stores in down-town metropolitan districts. On the other hand the opposite policy of one price, regardless of quantity, prevents the large city from enjoying the advantage its mass of business entitles it to, and prevents the capable dealer who has built up a large business on merit from enjoy ing a portion of the advantage his large pur chases give to those who supply him. It tends, therefore, to keep alive a large number of small, .incompetent establishments based upon the principle of proximity to the consumer.