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Indirect Exporting 1

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INDIRECT EXPORTING 1. Indirect exporting.—The development of for eign markets is so expensive and calls for so much preliminary study and investigation that many a man ufacturer, with goods appropriate for export and a growing need for anexport outlet, hesitates to under take the venture. This does not, of course, always mean that the products of such firms do not reach foreign consumers. Exporting may take place thru middlemen. This process is sometimes called "indi rect exporting." 2. The export merchant.—The oldest kind of mid dleman in foreign trade is the export merchant. 'Iho at present the export Merchant and the export com mission house are not as sharply distinguished as for merly, both usually performing the same services, the functions can best be understood by discussing them as if they were wholly different.

The export merchant buys and sells. He buys in the home market to sell in the foreign market, or as is frequently the case, he reverses the process and be comes an importer. As will be explained later, thc export merchant many times sells first and afterwards buys in the home market the goods to fill the orders he has taken.

3. The services rendered.—Professor Clive Day in "A History of Commerce" says that the early ex port merchants "found wares in some districts cheap and begging a market because of their abundance, which were rare and highly priced elsewhere; and they could make great profits by exchanging wares so as to put each where it was most wanted." This is es sentially the function of the export merchant, and it was an important one to society.

It is said of these early middlemen that they made "great profits." This is true, but their risks were great also. They bought the goods in one country in order to sell them in another. There was no tell ing but some other merchant might have done the same thing, and the two ships might arrive at the same port at nearly the same time. This would flood the market and their "great profits" in prospect might turn out to be a "great loss" in actuality. They also ran the risk of the goods being damaged en route, or of losing them altogether thru the perils of the sea, or thru pirates.

The risks were really enormous. There were few who dared or were able to assume them and few, too, who possessed the knowledge of foreign wants, lan guages and customs, coinage systems and market laws so necessary to avojd excessive costs.

4. Functional transportation companies began to carry goods and merchants no longer accompanied their wares from market to mar ket; as insurance companies were ready to shoulder the risk of ocean traffic; as the pirates were gradually driven off the seas by powerful navies, the export merchant lost much of his former importance. Many of the services previously performed by him gradu ally passed into the care of the "functional middle man," the transportation company, the freight for warder, the customs broker, and the insurance company.

Another reason for the decay of export merchants as a class is the growing tendency to buy by sample or from catalog. Standardization of products, greater confidence in the honesty of foreign dealers, and bet ter means of communication have made it increas ingly possible to buy goods unseen. Because of im proved banking facilities, the exporter may sell to strangers with whom he will never come face to face.

5. Export merchants still needed.—Where buying from catalog or sample is difficult or impracticable, the export or import merchant will continue to play an important role. Articles of fashion are not bought from catalog, they are sent from one country to an other by firms which may be classed as export mer chants. Countries where the unit of industry is small and capital relatively scarce need the export mer chant. He buys the products of many small estab lishments, of home industry, or of the small farmer. In some cases he supplies these small producers with raw material and sells to them on easy terms goods from foreign lands. German export merchants handled in this way much of the Russian and Bal kan trade where home industry is still predominant.

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