SUBSTITUTES FOR THE MIDDLEMAN 1. Modern tendency.—In the preceding chapters we have noted the present tendency in marketing, for manufacturers to get as close as possible to their ultimate market, and to pare down the system of dis tributing thru middlemen as far as is consistent with economical selling. This tendency is illustrated by the g,rowing practice among manufacturers of going over the head of the jobber and selling direct to the retailer, and, in some instances, of selling direct to the consumer by mail, by salesmen calling on con sumers, or by means of chain-store systems owned by the manufacturers. Some middlemen, moreover, are doing their part to disrupt the traditional methods of marketing; retailers are more and more asking manufacturers to omit the jobber from their selling schemes and to make sales direct to retail stores.
This tendency on the part of manufacturers and retailers is matched by the movement among consum ers to find some substitute for all middlemen, with the aim of reducing selling expenses and profits and getting goods to consumers at a minimum price. We are to consider in this chapter some of the more important schemes used by consumers, retailers and manufacturers in the attempt to lessen the chain of distribution.
2. Cooperative activities of consamers.—Substi tutes for the middleman which have their start in con sumer initiative are chiefly of two kinds: First, there are cooperative stores, owned and operated by consumers cooperatively, which perform many of the functions of independently owned stores; and second, there are buying groups, which establish no stores but which attempt to get for their members the ad vantages of quantity prices by pooling their pur chases. The first claSs is the more important be cause it is the historical method of consumer coopera tion, and because it is the more common.
3. Cooperative stores in the United States.—Co operative stores started on a large scale in this coun try with the Patrons of Husbandry movement in the seventies. This movement was exclusively an agri cultural one; farmers only participated in it. There had been cooperative stores in the United States before that time, but they were few in number and not gen erally successful. The Grange stores (as the stores
of the Patrons of Husbandry were called) spread rapidly,. and seemed to have a firm hold on the coun try. They were not as a rule successful. Some of the reasons for their failure were that they sold on credit, they sold at cost prices, and they restricted membership in the cooperative groups to a single class.
A few of these stores have survived and prospered.
but only a few. The cooperative stores in the United States today, perhaps a thousand in number, are rel atively new; few of them are more than ten years old. Many of them have not secured a solid footing, and few of them are old enough to demonstrate the possi bilities of cooperative retailing. The cooperative store is so much a rarity in the United States that its possible effect on the manufacturer and on other dis tributors has received little study.
4. Cooperative stores abroad.—The cooperative store idea probably started in Rochdale, England, in 1844. Twenty weavers banded together to run their own grocery store. The beginnings were small, but they were successful. From this tiny start has developed the great cooperative movement in Great Britain; the stores of the various cooperative systems there have a membership of 3,000,000; in 1915 the total business of the cooperative societies was $480, 000,000, and the net profits $70,000,000. One family in every four in England is said to be represented in the cooperatives. On the continent, too, the coopera tive idea has a firm hold. Germany, Austria and Belgium have notably successful cooperative societies, and the movement has spread to other countries.
With a few exceptions the cooperative buying movement in America has aimed chiefly at cutting out the middleman: In Great Britain and on the European continent the more successful cooperatives have gone much farther; not content to supply a sub stitute for the middleman, they have invaded the manufacturer's field as well. Some of the societies own their own mills, their own factories, and a few control their own sources of raw materials. It is this far-reaching possibility in the cooperative idea which gives it its chief significance for the business man.